The Australian Energy Regulator (AER) has reversed its draft decision to reject an application to convert Basslink into a Transmission Network Service Provider (TNSP), with the interconnector now set to hit the electricity spot market.
Announcing its final decision to approve the Basslink conversion, the AER said it was guided by the National Electricity Objective (NEO) and determined that the conversion is more likely to promote efficient investment in, and efficient operation and use of, electricity services for the long-term interests of consumers.
The 500MW undersea transmission cable links Loy Yang in Victoria to George Town in Tasmania and is currently the only electricity interconnector between Victoria and Tasmania.
According to the AER, a fully regulated Basslink will ensure that the interconnector operates as an open link, enabling the market and consumers to benefit from generation in both the Tasmanian and mainland regions of the National Electricity Market (NEM).
AER Chair, Clare Savage, said the final decision was informed by extensive consultation and engagement with stakeholders, as well as market modelling and analysis on the likely impact of conversion on the energy market and consumers.
Since making a draft decision in December 2024 to reject the application, the AER said it undertook further analysis based on stakeholder submissions, expert advice as well as information provided in response to compulsory information notices issued to APA and Hydro Tasmania.
Scenarios on the timing and size of the proposed Marinus Link interconnector and how Basslink would be operated if it were not converted were considered as part of both the final and draft decisions.
“The change between draft and final decisions reflects the finely balanced nature of the decision and further analysis of the benefits of conversion against different scenarios,” Ms Savage said.
“When we released our draft determination, we highlighted the need for the AER to very carefully weigh the benefits from a range of potential outcomes and potential future states against the cost and risks for consumers.”
Having made the decision to convert the service, the AER will now consult on the revenue Basslink would be entitled to earn as a regulated transmission service.
A paper setting out the proposed process and timeline for a revenue determination has been released for consultation alongside the final decision.
Subject to stakeholder views, under the proposed revised timeline the AER intends to publish a draft revenue determination for consultation in September 2025, before finalising that determination in February 2026.
This timetable would enable Basslink to become a regulated service on 1 July 2026. If Basslink does not reclassify its registration with AEMO before 1 July 2026, the final conversion decision will lapse and Basslink will remain an unregulated market network service provider.
APA Group CEO and Managing Director, Adam Watson, welcomed the AER’s decision.
“While regulation is not right for every asset, we believe this decision will ensure Basslink can operate sustainably for the benefit of Tasmanian and Victorian households and businesses over the long-term,” Mr Watson said.
“Basslink supports energy security in both Victoria and Tasmania. A regulated Basslink will also provide greater certainty for consumers, ensuring prices will remain stable and not subject to daily movements in the electricity spot market.”
APA expects that Basslink will operate as a regulated asset from July 2026. In the interim, APA will trade Basslink on the electricity spot market from 1 July 2025 following the expiration of the Basslink Hydro Tasmania contract on 30 June 2025.
APA said its decision to pursue regulatory conversion was the result of an agreement with the Tasmanian Government during the 2022 acquisition process to use best endeavours to apply for Basslink to operate as a regulated asset. As part of the sale transaction, APA also entered into a network services agreement with Hydro Tasmania to ensure the asset could operate safely and reliably during the AER consultation process.
Operation as a regulated asset remains subject to the AER’s determination of an acceptable Regulated Asset Base (RAB). In the event the outcome of the RAB determination process does not deliver a reasonable return for APA securityholders, APA retains the option to trade the asset on the spot market or contract with a third party who would trade the asset.
