The Australian Competition and Consumer Commission today issued its final decision on the review of the electricity regulatory test. The regulatory test is a cost-benefit test used by transmission and distribution businesses to assess interconnectors and other network investments.
"The amendments promote further interconnection between states", an ACCC Commissioner, Mr Ed Willett, said. "The final decision has been issued following extensive consultation and discussion with the market place".
The main focus of the ACCC's review has been on competition benefits.
"Increased interconnection increases competition between generators in different states", Mr Willett said. "This decision will allow these competition benefits to be recognised by transmission businesses.
"The decision outlines a workable methodology for the inclusion of competition benefits in the regulatory test. However, the calculation of competition benefits is only an optional add-on which transmission network service providers can choose to pursue if they wish.
"While it has gone some way to setting out how to calculate competition benefits, the ACCC will continue its work on developing a robust methodology following the issuing of this decision. However, the ACCC does not see this work affecting the principles of the regulatory test which are outlined in final decision.
"Otherwise, the regulatory test is largely unchanged from the previous version", Mr Willett said.
The final decision outlines amendments to the regulatory test to ensure consistency between it and the National Electricity Code and provides greater guidance on what should be included as a cost and a benefit. The final decision also defines and clarifies elements of the regulatory test which will ensure a nationally consistent application.
The amendments to the regulatory test build on the foundations of earlier work undertaken by the ACCC and take into account the findings of the National Electricity Tribunal and Victorian Supreme Court in relation to the SNI regulatory test appeal.
The regulatory test forms part of a package which aims to improve investment outcomes in the NEM. Other elements of the package include:
- the Draft Statement of Principles for the Regulation of Electricity Transmission Revenues
- new Service Standards measures
- the Electricity Regulatory Report for 2002-03.