Nexa Advisory submission – AEMC cost recovery for network augmentations

While data-centre growth has prompted the review, the framework should apply to all large loads according to their location, demand, timing and network requirements. Growing demand should not automatically justify new network investment. Networks must demonstrate that augmentation is efficient, having considered existing capacity, staged investment, flexible connections and non-network alternatives.

Cost recovery must consider upfront contributions and ongoing network charges together. New customers should contribute appropriately to the efficient costs they create, without paying costs attributable to others or funding the same expenditure twice. Networks must remain accountable for investment decisions and risks they can manage.

Key recommendations to the AEMC:

• Maintain investment scrutiny: Customer-funded works must remain subject to appropriate efficiency checks and consideration of alternatives.
• Address upstream cost-recovery gaps: Address transmission costs caused by distribution-connected large loads, with transparent cost allocation, safeguards against double recovery and appropriate two-way cost reconciliation.
• Strengthen network risk management: Examine existing incentives and financial protections before imposing additional customer guarantees. Avoid shifting preventable customer-specific losses onto other consumers.
• Support first movers: Clarify arrangements for customer-funded shared transmission works and contributions from subsequent users, without guaranteeing reimbursement if future demand does not materialise.
• Improve demand information: Standardise large-load project information and establish national reconciliation through AEMO to identify duplicate enquiries and changing forecasts, while protecting commercial confidentiality.
• Require greater network transparency and flexibility: Improve disclosure of capacity, constraints, connection costs and timeframes, and ensure charging supports flexible connections and efficient non-network solutions.
• Enable appropriate scheme-cost recovery: Allow jurisdictions to extend relevant scheme charges to directly transmission-connected customers, with scheme-specific justification and safeguards against duplicate or cross-border recovery.

The central test is whether reforms improve investment, connections and network use—not simply whether they make cost recovery easier or change who pays.