The Australian Energy Market Commission (AEMC) has released its final determination on a rule change that will enable greater flexibility in allocating costs for critical interconnector projects across the National Electricity Market (NEM).
The rule change was proposed jointly by the Federal Minister for Climate Change and Energy, Chris Bowen, the Victorian Minister for Energy and Resources, Lily D’Ambrosio, and the Tasmanian Minister for Energy and Renewables, Nick Duigan.
AEMC Chair, Anna Collyer, said the final rule would help facilitate the transition to net zero by enabling critical transmission infrastructure to be built that may otherwise face roadblocks.
“Improving the connectivity between states and territories who participate in the NEM is an important component of Australia transitioning to net zero.
“This rule change request from Ministers proposed providing more flexibility to ensure these critical projects can proceed for the benefit of consumers,” Ms Collyer said.
The AEMC’s final rule provides a new pathway for jurisdictions to agree on cost-sharing for new or materially upgraded interconnectors, removing potential barriers to the timely delivery of net beneficial transmission infrastructure.
“The energy transition requires a strategic, modern transmission network. This rule we have made forges a pathway for governments to collaborate on cost-sharing for interconnector projects that deliver long-term benefits to consumers and which would otherwise be at risk of not proceeding,” Ms Collyer said.
The final rule gives governments the option to decide how to share the costs of new interconnectors. It allows them to reach agreements that could help critical projects move forward, especially when the current cost-sharing arrangements might cause a roadblock.
This new approach works alongside existing processes for determining interconnector cost allocation.
The AEMC said it has built transparency safeguards into the new rule.
“Our final rule requires any agreement to be published and meet specific criteria. We also expect Ministers using this new pathway to communicate the benefits of any agreement to consumers promptly. These measures ensure transparency while allowing for necessary flexibility,” Ms Collyer said.
“We believe this final rule strikes an appropriate balance between ensuring transparency for stakeholders and providing jurisdictions sufficient flexibility to progress net beneficial interconnector projects.”
The AEMC said that projects would still need to pass the Regulatory Investment Test for Transmission and AEMO’s feedback loop to ensure they generate net benefits for the NEM. There will be no change to total transmission revenues, which will continue to be set by the Australian Energy Regulator.
The final rule will commence on 3 July 2025, allowing for its application in the 2026–27 financial year as the first year under the new agreement framework.
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