Treasury argues for removal of hurdle to electricity network augmentation

Frontier (Melbourne) prepared a submission on behalf of the NSW Treasury to the Australian Competition and Consumer Commission (ACCC) on the regulatory test for new electricity interconnectors and augmentations (Regulatory Test). At present, operators of new network assets are only assured of a regulatory return on their investment if there has been time for a market solution to emerge and the investment maximises net market benefits compared to a range of alternative options. Frontier suggested that this second step should be simplified to require only that a proposed augmentation be likely to create a net market benefit - the requirement to compare the proposed augmentation against alternatives is an unnecessarily bureaucratic element of the process with the Regulatory Test already providing a sufficient opportunity for a market solution to emerge. If accepted, this proposal should reduce the time taken to approve new investments and therefore reduce the risk of supply failures or excessive electricity prices resulting from inadequate transmission capacity.