New framework for designated network assets

What you need to know

• The AEMC's final rule and determination in its Connection to dedicated connection assets rule change was published on 8 July 2021.
• The rule creates a new 'designated network asset' category applying to ‘material additions to the network’ (ie. transmission lines of 30 kilometres or longer that send power to the shared network), replacing the existing concept of 'large dedicated connection assets'. 
• Designated network assets will be treated as part of the transmission network, rather than as connection assets. 
• This new concept removes the issue of more than one party not being able to connect to a dedicated connection asset, due to the inability for obligations and processes under the NER to apply to multiple parties at a single transmission network connection point. 
• The concept of 'small dedicated connection assets' (i.e. those under 30 kilometres in length) will remain, however owners of small dedicated connection assets can opt-in to the new category. 
• The new rule comes into effect on 22 July 2021.

What you need to do

• Project proponents should be aware of the transitional arrangements under the new rules.  In particular, for large DCAs:
  • proponents that have not yet submitted a connection enquiry for large DCAs will be subject to the new DNA framework; and
  •  existing connection processes underway will be subject to the connection rules under the "Transmission Connection and Planning Arrangements" framework (introduced in 2017), but can elect to use the new DNA framework.
• Investors in DNA assets should be aware of their responsibilities for administering access under the new framework.
• Investors in assets less than 30 kilometres long may opt into the new framework.

Final determination and rule

On 8 July 2021, the AEMC published its final rule and final determination in its Connection to dedicated connection assets rule change.

The new framework clarifies arrangements for the sharing of transmission assets built to connect generation to the shared network and provides more effective protections for parties investing in those assets.

The framework applies only to transmission networks and therefore connections to a distribution network will not be able to take advantage of the reforms.

Existing arrangements

A dedicated connection asset (DCA) is a connection asset which connects one or more generators and/or large loads (an 'identified user group')  to the shared transmission network at a single transmission network connection point (TNCP). 

The party who owned, operated or controlled a DCA was required to register as a Dedicated Connection Asset Service Provider (DCASP). A DCASP was required to classify its DCA as either 'large' (30km or more) or 'small' (less than 30km). As DCAs did not form part of the shared network, they were not subject to the NEM's open access regime, but rather had a separate access policy in place for those who wanted to obtain access to large DCA services.  An access regime was not required for small DCAs.

On 3 January 2020, AEMO proposed a rule change to the NER as it considered the DCA framework under the existing NER to be "unintentionally unworkable" in cases where multiple generators or market customers sought to connect to the same DCA. This lack of workability resulted from the NER not identifying how key requirements would apply to more than one proponent in an identified user group connected to the same DCA. Further, in circumstances of non-compliance with obligations at the single TNCP, only disconnection of all connected parties is possible. In effect, these arrangements under the NER would prevent multiple parties from being able to connect to a DCA.

Draft rule change

The AEMC published its draft rule and draft determination on 26 November 2020. The draft rule proposed numerous changes to relevant NER provisions. Key changes included establishment of 'designated network assets', removal of registration requirements for small DCAs, and establishment of individual TNCPs for each connection point between a facility and a designated network asset.

The final rule has been enacted on similar terms to the draft rule and determination.

Final rule change

The final rule creates a new regime for 'designated network assets' (DNAs).  This replaces the concept of 'large DCAs' and treats material additions to the transmission system (i.e. those including transmission lines with a total route length of 30km or longer) as part of the transmission network, rather than as connection assets. 

Only 'small DCAs' will continue to be treated as connection assets under the new framework (unless small DCAs opt-in to the DNA scheme). The current arrangements in relation to small DCAs remain unchanged – small DCAs are not subject to any prescribed access regime, and any third party access is subject to negotiations between the parties involved. However where DCA owners opt-in to the new DNA framework, this would then trigger application of an access regime.

The final rule also removes  the registered participant category of DCASP and therefore, the requirement for parties who own or operate small DCAs to register. Under the final rule, the AER must publish on its website a register of DNAs for the purpose of facilitating access to interested parties.

The following are the further key features of the final rule.

Individual transmission network connection points

DNAs will form part of the transmission network, operated by a Primary Transmission Network Service Provider (the Transmission Network Service Provider who operates the largest transmission network in a participating jurisdiction, not including a Transmission Network Service Provider for a declared transmission system) (Primary TNSP). As such, the point where an individual facility connects to the DNA will be a TNCP. Existing NER arrangements would apply to individual TNCPs where each facility connects to a DNA (e.g. settlement, establishment of performance standards and calculation of loss factors at a TNCP).

Application of a special third-party access regime

The final rule makes the DNA owner (being the party that made the investment and funded the asset) responsible for administering third party access to its DNA, rather than DNAs being subject to the open access regime that applies elsewhere on the transmission network. This special access arrangement is intended to encourage investment from 'first movers', however is limited to assets that are radial extensions of the network - they cannot be looped or meshed.

Slight reduction of contestability

The AEMC considers one consequence of the rule change is a reduction in contestability as compared to existing arrangements for DCAs. Currently, all DCA services (large or small) can be provided on a fully contestable basis (including design, construction, ownership, operation and maintenance). Under the new framework, as DNAs are designated as part of a Primary TNSP’s network, the Primary TNSP is responsible for operation, maintenance and setting the functional specifications of DNAs.  However, DNAs can be contestably designed, constructed and owned; for example, a party whose facility is connected to a DNA is not prevented from also owning that DNA, and the DNA owner will be responsible for facilitating and controlling DNA access. 

Opt-in process

Relevant connection assets which are less than 30km (i.e. DCAs under the final rule determination or currently, 'small DCAs') can be a designated network asset if the owner of the connection asset decides to voluntarily opt-in the new framework by entering into a network operating agreement with the Primary TNSP.

Authors: Paul Newman, Partner and Andre Dauwalder, Senior Associate