This bulletin is part of our EIR Insights series from our Energy, Infrastructure and Resources team. Stay tuned for regular updates and commentary on topical issues across the sector.
On 8 April 2021, the Australian Energy Markets Commission (AEMC) announced that it will review its plans to ensure much-needed electricity network upgrades get built.
This was announced as part of a final rule determination to reject a bid by TransGrid and ElectraNet – the NSW and South Australian transmission network operators – to amend the National Electricity Rules to bring forward cash flows for their share of current and future actionable Integrated System Plan (ISP) projects. Such a rule change would have effectively allowed them to charge customers earlier than the current rules allow to service the debt needed for multibillion-dollar network upgrades.
The operators had argued that the current rules are a barrier to raising the necessary finance for their share of ISP projects and that they would suffer significant credit rating downgrades due to the amount of debt they would need to borrow to finance the stream of network projects in the next decade to allow more renewable energy to be connected.
In its determination, AEMC accepted that the rule change request had raised some significant issues in respect of the ISP framework, particularly in relation to the timely and efficient delivery of large transmission projects in the National Electricity Market. AEMC was of the view that the issues raised are broader in their scope than could be addressed in the requested rule change and that options to support the timely and efficient delivery of large transmission projects are most appropriately explored in a review outside of the rule change process. AEMC said that it would undertake a wider review of arrangements to support the construction of new infrastructure and to address issues of financeability.
We at Hamilton Locke are assisting clients in navigating this evolving, challenging and uncertain regulatory landscape, particularly in the context of dispatchable renewables and the inherent benefits they provide to the grid.
We will be considering the implications of this determination in greater detail in the broader context of renewables and the grid in an upcoming article.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
