The Contingent Project Application for the second stage of Transgrid’s HumeLink project has been approved by the Australian Energy Regulator (AER), subject to reduced costs.
To make the decision, AER Chair, Clare Savage, said that the AER had undertaken a rigorous assessment of proposed costs to ensure consumers don’t pay more than necessary for delivery of the project.
As a result, the AER accepted project costs that were $314.4 million less than what was originally proposed by Transgrid in its application, approving $3.964 billion in capital expenditure compared with Transgrid’s proposed capital expenditure of $4.279 billion (later revised to $4.173 billion after accounting for new information).
HumeLink is a proposed 500kV transmission line that will expand the transmission network in New South Wales, and is an actionable project under the Integrated System Plan (ISP). The project aims to reinforce the grid and provide electricity customers with increased access to generation and storage opportunities in southern and southwestern New South Wales.
“While HumeLink is a complex project of national significance, we recognise that it affects landholders and local communities on the transmission route and impacts electricity bills,” Ms Savage said.
“There has been considerable stakeholder interest in this project and a diverse range of views were put forward throughout our consultation process. We valued the input of all stakeholders and sought to balance the breadth of interests and feedback in our decision-making.
“We are conscious that this decision comes at a difficult time for energy consumers, with many customers facing challenges to absorb higher electricity prices in the current economic climate.”
The AER noted in its decision that it was critical for Transgrid to continue to engage with communities to achieve and maintain their support in delivering the HumeLink project.
“We expect Transgrid to build and maintain social licence throughout the life of this project and respond to community feedback.
“This includes undertaking meaningful and high-quality engagement, as well as providing communities with additional benefits and activities to recognise the impact and costs borne by local communities as the project progresses,” Ms Savage said.
The AER accepted all of Transgrid’s proposed costs for engagement and social licence activities.
In conducting a review of Transgrid’s Material Change in Circumstances assessment, the AER examined Transgrid’s analysis, considered stakeholder concerns, commissioned independent market modelling and considered alternative cost assumptions. As the preferred investment option did not change, the AER found that Transgrid’s opinion was not unreasonable.
Following the AER’s decision to approve reduced costs for Stage 2 of HumeLink, Transgrid will be able to deliver the remainder of the HumeLink project.
The AER is required by the National Electricity Rules to assess a contingent project application from the network business and decide on the efficient costs for the project to ensure consumers don’t pay more than necessary.
Transgrid submitted its Stage 2 Contingent Project Application for $4.279 billion ($2022–23) in capital expenditure and $28.5 million of incremental operating expenditure on 22 December 2023.
During the AER’s assessment, Transgrid provided updated cost estimates for some types of capital expenditure, including tendered works, risk costs and biodiversity offset costs. This reduced its proposed capital expenditure to $4.173 billion.
This followed the AER’s decisions on the early works component of the HumeLink Contingent Project Application in 2022 (part one) and 2023 (part two), and was the final step in Transgrid’s application on the costs and revenues required to construct HumeLink.
For more information on the HumeLink project, visit www.transgrid.com.au/projects-innovation/humelink
Featured image: Transgrid
