AER sets cost to customers of Basslink, as troubled interconnector transitions to regulated asset

As early works – and a legal challenge – get underway for the Marinus Link subsea cable that will link the electricity grids of Tasmania and Victoria, the cost to consumers of the existing interconnector, Basslink, has been determined for its first term as a regulated asset.

The Australian Energy Regular (AER) on Friday published its final decision on the revenue that Basslink can recover between 2026 and 2030, following the mid-2025 decision to allow a portion of the costs of the privately owned transmission line to be paid for by customers.

The AER has determined that Basslink can recover $459.5 million in revenue from its customers over the four-year period – $1.7 million less than the interconnector’s owner, APA Group, had pitched for in its revised proposal of $461.2 million.

For Basslink’s customers, the decision stands to add around $10 to residential electricity bills in Victoria and $25 in Tasmania in 2026-27, followed by a $1 annual increase for Tasmanian residential customers out to 2030. This, says the AER, is based on a proposed cost-sharing allocation of 75:25.

Basslink, which allows for up to 500 megawatts (MW) of electricity to be transferred between Loy Yang in Victoria and Georgetown in Tasmania, was acquired by gas network giant APA Group for $773 million in 2022, after it ran into financial troubles triggered by a prolonged outage in 2015.

As Renew Economy reported at the time, the interconnector failure cut off a crucial supply of power from the Australian mainland at a time when Tasmania’s majority hydropower energy supply was significantly depleted by drought, and the state’s only gas generator was also offline.

As a consequence of the outage, Basslink owed utility Hydro Tasmania around $40 million in damages, which led to Basslink’s former owners, Singapore based Keppel Infrastructure Trust, putting it into administration while its future was resolved.

In its decision to convert Basslink to a regulated asset, the AER said last year that this would ensure the interconnector operated as an open link, enabling the market and consumers to benefit from generation in both the Tasmanian and mainland regions of the National Electricity Market (NEM).

In its determination this week, the regulator reiterated this line of reasoning, and said the revenue decision centred on ensuring the continued reliability of the troubled interconnector, which would require a control and protection system upgrade and a repair vessel fit out cost pass through.

“The benefits of a regulated Basslink depend on its reliability,” AER chair Clare Savage said in a statement on Friday. “We have included adequate revenue in today’s final decision to support that reliability for energy consumers.

“We have closely examined the value of the opening regulatory asset base and its capital and operating expenditure to ensure the revenue approved is prudent and efficient.”

The AER says that for its revenue decision to apply, APA Group must exercise the option to reclassify Basslink’s registration with the Australian Energy Market Operator from a market network service provider to a transmission network service provider.

The decision on Basslink comes just weeks after the AER’s final determination on the cost to consumers of building the first stage of Marinus Link at $4.3 billion, including $3.4 billion for the construction of a new, 750 MW cable across the Bass Strait.

The cost to consumers of Marinus Link – it is owned by the Tasmania, Victoria and federal governments, at shares of 17.7%, 33.3% and 49%, respectively – is yet to be determined, but will likely not start appearing on electricity bills in until 2031.

The cost of the massive project has been a major point of contention – it was first proposed as two cables with a combined capacity of 1500 megawatts (MW), but was cut in half in late 2023, in response to ballooning costs.

In Tasmania, there has also been strong community concern about the environmental impacts of the new link, including from the required grid infrastructure upgrades and the major new renewables projects that are expected to follow in its wake.

Just last week, a group of north-west Tasmanian locals backed a late stage planning tribunal appeal to stop the on-land sections of the Marinus Link project from going ahead, including planning permits for the two converter stations and a switching station in Heybridge.

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