Submission to AER Review of the cost benefit analysis guidelines and RIT application guidelines

PIAC made a submission to the Australian Energy Regulator’s (AER) review of the cost benefit analysis (CBA) guidelines and the Regulated Investment Test for Transmission and Distribution (RIT-T and RIT-D) application guidelines.

The review brought together a number of workstreams that PIAC has been engaging with over recent months and years, covering how to incorporate the new value of emissions reduction into the CBAs, guidance to network businesses on what spending on activities pertaining to the attainment of social licence, how the AER should treat concessional finance agreements, improving the workability of the feedback loop, and changing the rules around spending on early works.

We argued that the intent of the legislators who added emissions reduction to the National Electricity and Gas Objectives was that the energy sector would be a driver of decarbonisation of the wider Australian economy. This has important implications. First, the Australian Energy Market Operator (AEMO), as the national energy market planner, should respond to a slower than anticipated decarbonisation of the wider economy with faster transitioning of the energy sector, not slower, as has been assumed in every integrated system plan up to now. Second, that both AEMO and the AER should consider scope 1, 2, and 3 emissions in the all their decision-making powers. To do otherwise would contravene this direction to take the wider economy as the referent object in the energy sector’s transition.