AUSTRALIA Law and Practice Contributed by: Alexander Danne, Roy Groom, Rohit Venkat and Georgia Summerhill, Clayton Utz
with compulsory powers used as a last resort. Native title considerations apply as described in 3.4 Eminent Domain, Condemnation and Expropriation Rights to Construct and Operate Generation Facilities . 4.5 Monopoly Rights to Provide Transmission Services Transmission entities in Australia generally hold geo- graphic monopoly rights over their transmission net- works. Each TNSP is the sole owner and operator of the shared transmission network within its defined service territory, with no competing entity permitted to construct parallel transmission infrastructure within that area to offer equivalent services. Establishment of Exclusive Rights These monopoly rights are established through a combination of: • state electricity legislation that grants transmission licences to specific entities within defined geo- graphic areas; • historical licence boundaries that evolved from the original structure of state-owned electricity com- missions prior to disaggregation and reform; and • AER revenue determinations under NER Chapter 6A, which regulate the monopoly TNSP’s revenue on the basis that it is the sole provider of pre- scribed transmission services in its area. Economic Regulation of the Monopoly Because TNSPs face no direct competition, the AER regulates their revenue through five-yearly revenue determinations using the building block model. This framework is designed to ensure that the absence of competition does not result in excessive charges to network users, while providing sufficient returns to incentivise efficient investment and maintenance. Contestability Reforms Notwithstanding the geographic monopoly, some jurisdictions have introduced contestable frameworks for the construction of new transmission assets. In NSW, certain ISP projects may be delivered through competitive tender processes rather than automatical- ly by the incumbent TNSP. Victoria has also explored contestability for new transmission infrastructure. These reforms separate the monopoly over existing
network operation from the right to construct new assets, introducing competitive tension into the deliv- ery of major projects. Private or merchant interconnectors (such as Basslink between Victoria and Tasmania) also operate along- side regulated monopoly networks, though they do not provide shared network services within a TNSP’s territory. In Western Australia, Western Power holds the trans- mission monopoly within the SWIS under the Electric- ity Networks Access Code 2004, with the Economic Regulation Authority overseeing access and pricing. 4.6 Transmission Charges and Terms of Service Transmission charges in the NEM are established through a regulated revenue determination process administered by the AER under NER Chapter 6A. Each TNSP submits a revenue proposal to the AER, typical- ly every five years, setting out the revenue it requires to provide prescribed transmission services. The AER assesses this proposal and determines a maximum allowed revenue (MAR) using a building block meth- odology comprising a return on the regulated asset base (RAB) calculated by reference to a regulatory rate of return (WACC), depreciation of the RAB, efficient operating expenditure, and a taxation allowance. The MAR is then converted into transmission use of system (TUOS) charges through a pricing methodol- ogy that allocates costs among network users – prin- cipally distribution businesses and large customers directly connected to the transmission network. Pric- ing methodologies typically incorporate both location- al and postage stamp (non-locational) components, reflecting the shared and connection-specific costs of providing transmission services. In Victoria, a distinct arrangement applies whereby VicGrid, as the coordinating network service provider, calculates the TUOS revenue requirement on a full- cost recovery, non-profit basis, and recovers the AER- regulated revenues of declared transmission system operators (including AusNet Services, Murraylink and Basslink) together with its own prescribed non-regu- lated and other function costs.
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