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Powerlink, TransGrid, ElectraNet and Transpower are Transmission Network Service Providers subject to a regulatory regime that sets their allowable revenue on a five year cycle. Advisian provided assistance to these organisations in quantifying the risk implicit in estimating projects many years in advance of their construction.
Transmission Network Service Providers (TNSPs) operating in the National Electricity Market such as Powerlink, TransGrid and ElectraNet are subject to five year revenue determinations set by the Australian Energy Regulator. Their submissions in support of their revenue allowances must include a costed capital program that includes projects up to seven years in advance. Consequently, some projects have been subject to limited design assessment.
Through a combination of ‘look back’ analysis that takes into account the historical performance of project delivery against regulatory budget, and a look forward analysis based on assessing the risks inherent in projects, we assisted the TNSPs to quantify an appropriate risk allowance that could be included in their budgets at a portfolio level to achieve an equal likelihood of a cost overrun and cost underrun. This position targets an equal sharing of risks between the TNSPs and their customers. TransPower (NZ) has traditionally operated under a two year regulatory cycle overseen by the Commerce Commission, but is moving to a five year cycle. As a result, learnings from Australian are being transferred into that regulatory environment.