The JEC made a submission to the Australian Energy Market Commission’s draft determination on a rule change proposing changes to the settlement arrangements of inter-regional residues forming as a result of transmission loops.
The JEC does not support the rule change as proposed as it does not conform to the beneficiary pays rule change. The rule, which would smear costs relatively simplistically over New South Wales, South Australian, and Victorian consumers would apportion costs to NSW consumers at a much higher rate than the benefits they receive from the transmission assets involved in the loop. This would, in fact, double down on a misallocation of costs from benefits from the transmission assets as the base costs for them are allocated on a geographic- rather than benefits-basis. As NSW is at the centre of the NEM geographically and consumes the most energy of any region, cost allocations based on geography or overall demand, like this one, are likely to result on cross subsidies paid by NSW consumers to consumers in other states.
We propose that the existing arrangement are kept in place until some data about the production of the inter-regional residues are produced from this new situation – the transmission loop created by the opening of Project Energy Connect. A solution should then be developed, based on an improved understanding of the issue and the principle of beneficiary pays.
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