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Australian regulator rejects Transgrid bid to pass cost blowout to consumers

Australian regulator rejects Transgrid bid to pass cost blowout to consumers

Rule Changes

Preliminary ruling finds the A$1.2 billion Project Energy Connect overrun was foreseeable and the grid will not fail without it

September 1st, 2026: AER rejects Transgrid's recovery bid

Overview

Updated Sep 2

Transgrid's plan would have added about A$18 to the average household power bill in 2027-28 to cover overruns on Project Energy Connect. Australia's energy regulator said no on September 1, provisionally rejecting the A$1.2 billion recovery bid.

The preliminary ruling says the blowout was foreseeable and the grid will not fail without the project. At stake is who pays when nation-critical energy infrastructure costs spiral. The rejection pushes the cost onto Transgrid's owners, for now.

The Australian Energy Regulator's position is not final. Transgrid can still seek to recover the overspend in the 2028-33 revenue review, where spending judged 'prudent and efficient' can enter its asset base. Memery, a consumer advocate, said approval would have opened the door to shifting project risk from businesses onto households.

Why it matters

The ruling decides whether households or shareholders pay for cost blowouts on the transmission lines Australia's renewable transition depends on.

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Key Indicators

A$1.2B
Amount Transgrid sought to recover
Claimed from consumers through its 2023-28 revenue determination.
A$3.6B
New estimated project cost
Up from about A$2.3 billion when the spending plan was approved.
A$1.5B
Total cost overrun on Transgrid's section
Shareholders face about A$130 million in losses even if relief had been approved.
2 of 7
Reopen criteria Transgrid failed
The AER was not satisfied on unforeseeability or grid-security grounds.
A$18
Bill impact if the bid had been approved
Estimated average residential power bill increase in 2027-28.
900 km
Length of Project Energy Connect
The interconnector is meant to unlock 3.5 GW of renewable capacity.

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People Involved

Memery
Memery
Consumer advocate
Welcomed the AER's preliminary rejection

Organizations Involved

Transgrid
Transgrid
Transmission network operator
Bid to recover A$1.2 billion provisionally rejected

Transgrid operates New South Wales' high-voltage transmission network and is building the NSW section of Project Energy Connect.
Australian Energy Regulator (AER)
Australian Energy Regulator (AER)
Federal economic regulator
Holding a preliminary position against Transgrid's application; final decision pending

Australia's independent regulator of electricity and gas network revenues.
ElectraNet
ElectraNet
Transmission network operator
Completed its section of Project Energy Connect on time and on budget

South Australia's high-voltage transmission network operator.
SE
Secure Energy Joint Venture (SEJV)
Construction consortium
Contract failure at the center of Transgrid's cost claim

The Clough-Elecnor consortium hired to build Transgrid's section of Project Energy Connect.
AGL
AGL
Energy retailer and generator
Opposed Transgrid's application

One of Australia's largest energy retailers and generators.

Timeline

December 2022 September 2026

6 events Latest: September 1st, 2026 · 1 week ago
Tap a bar to jump to that date

  1. AER rejects Transgrid's recovery bid

    Latest Regulatory decision

    Preliminary position says the blowout was foreseeable and the grid will not fail without it.

  2. Blowout details made public

    Revelation

    The AER publishes Transgrid's 38-page application, exposing the contractor failure and A$130 million shareholder losses.

  3. AER opens consultation

    Regulatory

    The regulator seeks submissions on whether the blowout meets the reopen criteria in the National Electricity Rules.

  4. Transgrid applies for recovery

    Filing

    Transgrid asks the AER to reopen its 2023-28 revenue deal and recover A$1.2 billion from consumers.

  5. ElectraNet finishes SA leg

    Milestone

    ElectraNet completes the 206 km South Australian section on time and on budget.

  6. Clough enters insolvency

    Contract

    Australian contractor Clough collapses, disrupting the Secure Energy Joint Venture building Transgrid's line.

Scenarios

1

AER makes rejection final

Likely Resolves by Q1 2027

Discussed by: Consumer advocates, AGL, and the AER's own six-month review

The AER converts its preliminary position into a final decision after weighing submissions from Transgrid and other stakeholders. Transgrid cannot recover the overrun through its current revenue deal, but it can still argue before the 2028-33 revenue review that the spending was 'prudent and efficient' and should enter its regulated asset base. That review becomes the next forum for deciding who pays.

2

AER reverses course after new submissions

Possible Resolves by Q1 2027

Discussed by: Transgrid, which stressed the preliminary position is not the final word; the AER, which left room to reassess

Transgrid submits new evidence in the consultation, arguing the contractor failure was unforeseeable and that delays would threaten grid reliability. The AER revises its preliminary view and approves all or part of the A$1.2 billion recovery. Consumer bills rise by up to A$18 in 2027-28.

3

Transgrid challenges the ruling in court

Possible Resolves by End of 2027

Discussed by: Merits review rights under the National Electricity Rules; Transgrid's stated intent to weigh its options

After a final rejection, Transgrid applies for merits review before the Australian Competition Tribunal or challenges the decision in the Federal Court. The case runs into 2027, delaying any final allocation of the overrun and raising the possibility of a settlement before the 2028-33 determination.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

July 2017

V.C. Summer nuclear cancellation (2017)

South Carolina utilities abandoned a two-reactor nuclear expansion at the V.C. Summer plant after costs ballooned and contractor Westinghouse filed for bankruptcy. About US$9 billion had been spent on a project that never produced power.

Then

Customers who funded construction through monthly surcharges were left paying for a cancelled plant, and the utilities' owners took large write-downs.

Now

The failure became a national lesson on construction risk in regulated energy infrastructure and the limits of cost recovery.

Why this matters now

Like Project Energy Connect, it combined a contractor collapse, spiraling costs, and a fight over whether customers or owners absorb the loss.

January 2018

Carillion collapse (2018)

UK construction giant Carillion collapsed into liquidation in January 2018, leaving dozens of public projects unfinished. Taxpayers absorbed the cost of completing hospitals, roads and schools.

Then

The government stepped in to finish critical projects and tightened rules on outsourcing and risk transfer.

Now

Carillion became the reference point for contractor insolvency and the question of who holds project risk.

Why this matters now

Clough's insolvency is the same pattern. Transgrid called it unforeseeable; the AER was not persuaded.

2019–2025

Snowy 2.0 cost blowout (2019– )

Australia's Snowy 2.0 pumped-hydro project was approved at A$4.1 billion in 2019. Estimates have since climbed above A$12 billion, with completion pushed back to 2028-29.

Then

The federal government, which owns Snowy Hydro, has absorbed the increases through repeated capital top-ups, shielding consumers so far.

Now

The project shows how Australia's energy transition infrastructure has routinely blown its budgets.

Why this matters now

Project Energy Connect is the transmission-side version of the same pattern. The AER decision tests whether the cost lands on consumer bills.

Sources

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afr.com reneweconomy.com.au abc.net.au newsdive.net grafa.com newsbeep.com reneweconomy.com.au reneweconomy.com.au abc.net.au reneweconomy.com.au