Transgrid seeks $1.1 billion in extra transmission costs for interstate interconnector

Transgrid is asking the regulator to make Australians pay for almost all of the $1.5 billion cost blowout from building the interconnector between South Australia and New South Wales (NSW).

The company says given the EnergyConnect project will give Australians net benefits of $964 million after costs, asking them rather than its own shareholders to shoulder $1.1 billion of the bill is fair. 

It’s asking the Australian Energy Regulator (AER) to re-open the approved costs for the project and add in the extra, so far unapproved, expenses.

“Our shareholders have invested significant additional equity to keep this nation-critical project on track to strengthen the National Electricity Market and deliver a more reliable and affordable energy supply to millions of consumers,” Transgrid CEO Brett Redman said in a statement.

Transgrid’s shareholders are a group of seven large foreign and domestic infrastructure and pension funds.

The 900km EnergyConnect transmission line links South Australia with NSW, with the extremely controversial VNI West line looping down into Victoria to connect that state as well. 

The project is now set to cost $4.1 billion.

Consumers are already paying $2.28 billion of the cost of building the 330 kilovolt transmission project.

By Transgrid’s estimates, adding a bit more on to household and business bills would reduce the savings they can expect from the project by 50-80 per cent, or as little as $5 a year. 

“Consumers in the three states will be better off because the small additional transmission charge will be more than offset by the significant savings in wholesale energy costs enabled by the project,” Redman said.

Transgrid’s request for loading up network tariffs comes at the same time as the Australian Energy Market Commission (AEMC) looks at asking all households to wear much higher network fees, to make overall bills fairer to people without solar or batteries because the benefits of using these will be less.

The saga continues

The transmission line is a key part of the Australian Energy Market Operator’s (AEMO) grid roadmap, and considered critical to unlocking key renewable energy resources in the south-west of NSW as well as providing added grid security to help South Australia reach its target of 100 per cent net renewables by 2027. 

The 200 km South Australian section runs from Robertstown to the NSW border. It was completed by ElectraNet in 2023 on time and within budget ($457 million, approved by the AER).

The 700km Transgrid section of the development has been a saga. 

By December last year, it was 90 per cent complete. It is still not finished now, with Transgrid saying it is “97.5 per cent” done. 

Its share of the budget had, by February last year, somehow doubled but with little explanation of why. 

This week, Transgrid said the extra costs were due to “unforeseen external factors” that included flooding in 2022-23, COVID-19, inflation, increased cost of labour and materials due to tight supply chains, and the collapse of one of the project’s original joint venture delivery partners.

The transmission company had to redo the construction contract with Elecnor Group early in 2025, after the Spanish contractor said it lost $22 million in 2023 from negative Australian margins.

Transgrid is also leading the VNI West link to Victoria, which some projections now have costing $11.4 billion, and it is building the Humelink line now, which itself saw costs rise by five times from 2020 to 2023-24.

If you would like to join more than 28,000 others and get the latest clean energy news delivered straight to your inbox, for free, please click here to subscribe to our free daily newsletter.