AER Opens Consultation on Transgrid System Strength Project Hybrid Revenue Proposal

Consultation opens on the System Strength Project hybrid revenue proposal

Type Communications Sector Electricity Segment REZ Transmission Issue date

24 April 2026

AER reference AER24010395 Contacts General enquiries - REZ Today, we are commencing consultation on Transgrid’s hybrid revenue proposal for the System Strength Project for the 2026–31 regulatory period.

This is a Priority Network Infrastructure Project, under the NSW Electricity Infrastructure Investment Act 2020 (EII Act), and will deliver 10 synchronous condensers across 5 locations in NSW to meet system strength needs.

It’s the first time under the EII Regulation that we are making revenue determinations for infrastructure projects that combine both contestable and non-contestable components in one revenue determination. We refer to these as hybrid revenue determinations.

Transgrid’s revenue proposal contains three main elements: the provision of synchronous condensers; associated works enabling the installation and connection of the synchronous condensers, and Transgrid integration works. For this project, it proposes total operating expenditure of $60.1 million ($September 2026) over the 2026-31 regulatory period and total project capital expenditure of $1,185 million ($September 2026). To fund this project, Transgrid proposes to recover revenues of $400.8 million ($nominal) from consumers over the 2026-31 regulatory period.

Our role is to ensure that Transgrid only recovers the prudent, efficient, and reasonable costs for undertaking the network project. We do not have a role in relation to the scope or timing of the project.

In line with our Revenue determination guideline for NSW non-contestable projects, we are taking a staged approach in making a determination for this proposal.

This first round of consultation will help identify focus issues for our preliminary position paper, which will be published in June for further stakeholder feedback. We then have 126 business days to make a revenue determination.

We expect to make our final decision by 21 October 2026.

Have your say

Consumer engagement and submissions are a valuable input to our decision.

Help us identify focus issues for further consideration in our preliminary position paper on Transgrid's System Strength Project revenue proposal by emailing your submission by 18 May 2026 with the subject line 'Submission on System Strength revenue proposal'.

Email your submission to REZ@aer.gov.au

More information about the revenue proposal and submission process.

Background

The NSW Department of Climate Change, Energy, the Environment and Water are the Infrastructure Planner for this project and are responsible for recommending the scope and timing of the project for direction by the NSW Energy Minister. In September 2025, the NSW Energy Minister directed Transgrid to undertake the System Strength Project by designating it a Priority Network Infrastructure Project.

In December 2025 and March 2026, we found the tenders undertaken by Transgrid for the Synchronous Condenser and Associated Works contestable works packages, were genuine and appropriate processes.

Under Section 45(6) of the EII Regulation, we must accept the outcomes from these tender processes as prudent, efficient and reasonable in our revenue determination. Transgrid’s hybrid revenue proposal combines the contestable works packages with project elements that have not been contestably determined, because only Transgrid, as the monopoly network service provider, can deliver these services.