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Energy Regulator Rejects Transgrid’s Bid to Pass Billion-Dollar Cost Overrun to Consumers
🇦🇺 Australia /Energy & Infrastructure

Energy Regulator Rejects Transgrid’s Bid to Pass Billion-Dollar Cost Overrun to Consumers

From ABC Australia · () English

Translated from English and summarized by DistantNews. Read the original for the full story.

At a glance

News Named sources Ongoing story
  • The Australian Energy Regulator issued a preliminary position rejecting Transgrid’s request to recover a large cost overrun on its part of the $3.6 billion Project Energy Connect.
  • The regulator said Transgrid had not shown that the events behind the overrun were unforeseeable or that the national electricity grid would be imperilled without the project.
  • Consumer advocates welcomed the decision because approved additional costs would have been passed on through electricity bills for decades.

Australia’s biggest electricity transmission company has been blocked, at least provisionally, from passing a billion-dollar project blowout on to consumers. The Australian Energy Regulator said it was not satisfied that Transgrid’s claims met the threshold for reopening its regulated revenue deal.

The dispute concerns Project Energy Connect, a $3.6 billion transmission line linking South Australia and New South Wales. When regulators approved the spending plan, Transgrid’s share was expected to cost almost $1.9 billion. Its portion is now estimated at more than $3 billion, while ElectraNet completed its South Australian section in December 2023 on time and on budget.

At the end of the day, it is about whether companies pay for their mistakes.

— Craig MemeryThe consumer advocate described the principle behind the regulator’s decision.

Transgrid argued that it could not have anticipated the failure of its contract with Clough and Spanish engineering company Elecnor. It also pointed to flooding, COVID-19 and extreme inflation as setbacks outside its control. The company warned that delaying completion could threaten the security of the national electricity system.

It's also about who carries what risk.

— Craig MemeryMemery said the case concerned how project risks should be allocated.

The regulator rejected those arguments in a preliminary position published after a six-month review. It questioned whether the events leading to the contract failure were truly beyond Transgrid’s control and dismissed the claim that the grid would be at risk without the project.

Craig Memery of the Justice and Equity Centre welcomed the decision. He said it drew a line between legitimate claims and superficial ones, while forcing a clearer answer to the question of whether companies or consumers should carry the risk of mistakes. Under Australia’s energy laws, transmission companies operate under five-year arrangements that guarantee revenue and set the prices they can charge. Transgrid had sought to reopen the arrangement covering 2023 to 2028.

We would argue that some of what has happened here is Transgrid has erroneously misjudged risk.

— Craig MemeryHe argued that Transgrid had miscalculated some of the project’s risks.
About this summary

Originally published by ABC Australia in English. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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