Regulated Revenue Determination

VNI WEST DRAFT STAGE 1 CONTINGENT PROJECT APPLICATION

We are pleased to provide our draft Contingent Project Application for early works  for the Victorian to New South Wales (NSW) Interconnector West (VNI West or the Project) (draft Stage 1 Application). 

Stakeholder engagement on our draft Stage 1 Application is important due to the significant costs involved. Please refer to the following document for further details:

• VNI West Draft CPA-1 Principal Application - This document sets out sets out our proposed expenditure, the associated incremental revenue requirement and the indicative customer bill impacts for Stage 1 activities. 
• VNI West Draft CPA-1 Direct Capex Forecast Method – This document explains and justifies our Stage 1 direct capex forecast
• VNI West Draft CPA-1 Labour & Indirect Capex Forecast Method – This document explains the bottom-up forecast of labour and indirect support costs required for the development and approvals work, management of the early works program, and overall project management

We invite feedback from the AER, our customers and other stakeholders on this draft Application to inform our final Stage 1 Application.

Please share with us your views and position on this draft Stage 1 Application by email at: regulatory.consultation@transgrid.com.au by 22 September 2023. This will allow us to reflect the feedback we receive into our formal Stage 1 Application, which we will submit to the AER following feedback loop confirmation from AEMO.

The process for setting revenue is referred to as the Transmission Revenue Reset and takes place every five years.

Transmission Revenue Reset Process

We are the only provider of prescribed transmission services in our service area.

The prices that we charge as a transmission network service provider (TNSP) are therefore regulated by the Australian Energy Regulator (AER) under the National Electricity Rules (NER). This ensures that the revenue we can recover from our customers for providing our transmission services is efficient.

We are required to lodge a Revenue Proposal with the AER every five years so that it can set the revenue we can recover from our customers for providing transmission services. The AER’s determination approves the levels of capital investment, operating cost and overall funding required to complete our program of work.

Our 2023-28 Revised Revenue Proposal 

On 2 December 2022, we submitted our Revised Revenue Proposal to the AER for the next regulatory period, which commences on 1 July 2023 and ends on 30 June 2028 (2023-28 period). This responds to the September 2022 Draft Decision by the AER on our initial Revenue Proposal and supporting documentation, which we submitted on 31 January 2022.

This Revised Revenue Proposal reflects the valuable feedback received from our customers and other stakeholders since submitting our initial Revenue Proposal. We continued to engage actively with our customer representatives through the Phase 2 (post-lodgement) period.

The 2023–28 regulatory period will be one of profound change in the Australian energy market. The energy transition will be monumental in its impact across all sectors of our economy and community.

As Australia’s largest electricity transmission network, our infrastructure is vital to Australia’s successful energy transition and achieving the NSW and ACT Governments’ goals of net zero emissions by 2050, or sooner. We are strongly focused on delivering the full benefits of the energy transition to customers, including by providing greater access to low-cost renewable energy.

We are delivering vital upgrades and expansions to NSW’s interconnectors to Queensland, Victoria and South Australia, which will enable low-cost renewables to enter the market, delivering both environmental benefits and savings to our customers. Subject to regulatory approvals, we will also deliver the Victoria to New South Wales Interconnector (VNI) West, HumeLink, other Integrated System Plan projects and the NSW Renewable Energy Zones (REZs).

Our initial Revenue Proposal identified five customer priorities through our extensive consultation and engagement with our customers and the Transgrid Advisory Council (TAC). New customer research conducted for this revised proposal confirms that the five priority customer outcomes identified in our initial Revenue Proposal remain valid for the 2023-28 period:

• Affordability – Since our initial Revenue Proposal, we have identified further capex and opex savings over the 2023-28 period of more than $1,560 million through efficiencies, technology and innovation
• Safety, security and reliability - All three are being challenged by the operational complexity of the rapid energy transformation and the growing threat of cyber risks. In response, our proposal largely maintains our initial expenditure forecasts and provides additional evidence to their prudence and necessity.
• Serving rapid localised demand growth - We are committed to meeting residential and business customers’ needs as new development across Sydney and regional NSW drives demand growth. Our revised proposal includes new projects to meet load growth and address major constraints while managing system security and reliability.
• Supporting the energy transition - We are already delivering projects in accordance with the Australian Energy Market Operator’s Integrated System Plan and the NSW Electricity Infrastructure Roadmap. This proposal includes new projects to facilitate the energy transition and lower emissions.
• Supporting technology and innovation - Where possible, this revised proposal makes use of non-network components that harness innovative technologies to either replace or defer network investment and drive down costs to customers, further supporting affordability.

We are grateful to our Transgrid Advisory Council, customers, and other stakeholders for actively participating in this Revised Revenue Proposal.

We believe our revised forecast revenue and price path is a prudent response that will meet our customers’ needs and maintain the reliability, security and safety of our transmission network, while supporting the energy transition.

You can read our 2023-28 Revised Revenue Proposal here:

Revised Revenue Proposal 2023-28

You can read our 2023-28 initial Revenue Proposal and Overview here:

Revenue Proposal 2023-28

Revenue Proposal 2023-28 Overview

AER decision milestones

Preliminary Revenue Proposal

On 5 October 2021, we published our Preliminary Revenue Proposal, which set out our draft positions and proposals and invited feedback from our customers and other stakeholders to inform our Revenue Proposal. 

We met with the TAC on 5 October 2021 to discuss our Preliminary Revenue Proposal and then again on 2 November 2021 to receive members’ considered views and positions.  We also received feedback on our Preliminary Revenue Proposal through our customer engagement program led by Forethought, which occurred in late October and early November 2021.

Download our Preliminary Revenue Proposal.

Our 2023-28 Revenue Proposal pre-lodgement milestones

The documents referred to above can be found on the AER website:

• Request Framework and Approach
• AER notice on need for Framework and Approach
• Expenditure Forecasting Methodology
• Final Framework and Approach

Stakeholder engagement

Engagement is integral to our business. Ongoing dialogue with our customers and other stakeholders is essential to ensure we continue to provide services tailored to suit our customers and other stakeholders’ needs in a rapidly changing energy system.

Input from our customers and other stakeholders was critical to the development of our Revenue Proposal. We developed a Stakeholder Engagement Plan that provided a high-level overview of our proposed consultation approach on our 2023-28 Revenue Proposal including the proposed engagement channels. These include the Transgrid Advisory Council (TAC) (including deep dives on specific topics), as well as customer research and a stakeholder perception survey.

Download our Stakeholder Engagement Plan

Transgrid Advisory Council

The Transgrid Advisory Council (TAC) is a primary channel for our reset engagement. We have temporarily expanded our TAC’s membership to include a broader range of stakeholder organisations to facilitate more balanced and independent views.

Members of the TAC represent customer groups, business, finance, academia as well as the energy industry:

Customer research

In partnership with Forethought, we carried out research to confirm customer priorities and preferences. Our research was designed to uncover key customer current concerns and priorities as well as customer preferences for the future of Australia’s energy system.

Understanding the energy future our customers want will help us to make the right choices to facilitate the changes taking place in Australia’s energy market.  

Stakeholder perception survey

We carry out a stakeholder perception survey each year which is used to shape our ongoing engagement and identify areas for further work.

The stakeholder perception surveys have helped to shape our engagement approach for the regulatory reset.

Contact us

We would like to hear from you. Contact us and have your say by emailing revenue.reset@transgrid.com.au