The Australian Energy Regulator (AER) has approved the final element of the Queensland-New South Wales Interconnector (QNI) regulatory process.
Among the key reasons behind the AER’s decision was its desire to support NSW businesses and households avoid energy bill increases due to the closure of Liddell.
The TransGrid project, with input from Powerlink, involves upgrades to substations, transmission towers and lines between Queensland and NSW, and is expected to provide net benefits of $170 million to electricity customers and create 150 jobs during construction.
The AER has determined that TransGrid can recover the efficient costs of upgrading the QNI from customers.
The AER estimates TransGrid will incur $218 million in capital costs to deliver the project.
AER Chair, Clare Savage, said, “Consumers will get value for money from this investment, including wholesale market cost savings.”
The AER’s decision allows TransGrid to recover an additional $28.2 million from customers over 2021-22 and 2022-23 to account for the costs of delivering this project.
This is slightly lower than the $30.3 million proposed by TransGrid, due to the AER’s assessment of the cost of overheads for the project.
This will increase annual transmission charges by 1.7 per cent per year in 2021-22 and 2022-23. This is an indicative increase of $2 per year in residential electricity bills in NSW.
The AER has fast tracked its consideration to support the timely completion of this significant project. Early works on the project have already commenced, with delivery and completion of inter-network testing expected by June 2022.
Ms Savage said the timely completion of regulatory processes is a significant factor in the success of major infrastructure projects.
“Our job is to assess projects and make sure they represent the long term interests of consumers. It is also important that we do so in a thorough and efficient manner,” she said.
“We made our determination on the Regulatory Investment Test – Transmission element less than a month ago and our determination today ends the AER’s involvement in the process.”
The AER approved the Regulatory Investment Test – Transmission phase of the project in March 2020. The RIT-T is a cost benefit assessment of the proposed interconnector expansion.
“We tested the reasonableness of TransGrid and Powerlink’s inputs and assumptions across a range of scenarios and found that the project is robust and will deliver a net economic benefit to Australian energy consumers,” Ms Savage said.
“The investment is expected to deliver $170 million in net benefits to consumers and producers of electricity and to support the ongoing energy market transition. The cumulative benefits are expected to exceed the investment cost within seven years.”
Energy Networks Australia has welcomed the AER’s approval of the interconnector project’s final stage.
Energy Networks Australia CEO, Andrew Dillon, said the project would increase the efficiency and capacity of electricity transmission lines between NSW and Queensland.
“A more efficient transmission system can deliver benefits to the entire National Electricity Market. Increased grid capacity creates the opportunity to move cheaper electricity around the country, helping keep household bills down,” Mr Dillon said.
“We have already seen a significant drop in wholesale electricity prices in recent months, with networks continuing to deliver an efficient system with stable prices.
“Customers need bill relief now more than ever, so it is important these wholesale price reductions are passed through without delay.
“A more interconnected system is a more stable, reliable and efficient system.”