The JEC made a submission to the Australian Energy Market Commission’s (AEMC) draft determination on the rule change proposal aimed at improving the cost recovery arrangements for transmission non-network options.
We do not believe the rule change will result in the stated aim of increasing the take-up of network alternative non-network options (NNOs). It does not alter the fundamental dynamic that transmission network service providers (TNSP) earn interest on network investments and do not on non-network investments.
We argue that if the cost recovery arrangements are to be made as proposed, the Australian Energy Regulator’s (AER) powers to review costs ex post should be symmetrical. That is, if the AEWR is able to approve extra spending on NNOs after the fact (when this is appropriate), it should also be able to reclaim monies on behalf of consumers when forecast costs turn out to have been overestimated. Without this power, TNSPs not only have no incentive to drive down costs for these projects (which are ultimately paid by consumers, they may have a positive incentive to inflate them.
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