What are contingent projects?
Contingent projects are network investments above a defined threshold that are not included in revenue allowances upfront, but for which a defined regulatory pathway exists once a trigger is met. This pathway provides a structured and transparent way to progress these investments when the need for them becomes sufficiently certain, ensuring customers do not pay for them earlier than necessary, while still enabling delivery once clear evidence supports the need.
A project may be treated as contingent where it is identified in a Revenue Determination as reasonably foreseeable but insufficiently certain to include at the time, or where the Australian Energy Market Operator (AEMO) identifies it as an actionable Integrated System Plan (ISP) project. In either case, progression requires submission of a Contingent Project Application (CPA) to the Australian Energy Regulator (AER) to seek approval for cost recovery.
How does a project become a ‘contingent project’?
There are two main ways a project becomes a contingent project:
Revenue Determination pathway
A project is identified by Powerlink in its Revenue Proposal as potentially needed but insufficiently certain, so it is listed as a contingent project. Subject to the AER’s decision, it is included in the Revenue Determination but excluded from the revenue allowance. If Powerlink considers that defined trigger events set out in the Revenue Determination have occurred, it may seek an amendment to the Revenue Determination.
Integrated System Plan pathway
When AEMO identifies a project as an actionable ISP project it is automatically treated as a contingent project, even if not included in Powerlink’s Revenue Determination.
Contingent projects may also arise in response to changes to regulatory requirements, such as network solutions to address new system strength obligations.
In any case, a Regulatory Investment Test for Transmission (or RIT-T) is completed first to determine the option that best meets the identified need, with the Contingent Project Application then assessing the efficiency of the preferred option identified in the RIT-T.
How contingent projects become Contingent Project Applications
Progressing a contingent project requires a formal application to be made by Powerlink to the AER known as a Contingent Project Application.
This structured process is designed to ensure transparency, certainty and consumer protection.
1. Identifying the need and its trigger events
A contingent project starts as a potential investment where uncertainty exists about its timing, scope or materiality. In practice, such projects may be driven by changes in energy demand, generator retirements, market or policy developments, or emerging system security and stability needs. Evidence often comes from planning assessments and AEMO’s inputs. A trigger event defines the point at which sufficient certainty exists for the project to proceed through applicable investment processes and be considered for regulatory approval.
2. A credible trigger event must occur
A project can only move forward when a credible trigger event(s) — defined clearly and objectively — has occurred. Acceptable triggers must:
- be capable of objective verification
- link directly to the identified need
- make the project reasonably necessary
- relate to a specific location
- be likely to occur within the regulatory period.
Where an ISP project is declared ‘actionable’ by AEMO, it is treated as a contingent project even if it was not identified in a revenue determination.
For these projects, the trigger must include:
- a completed RIT-T, and
- written confirmation from AEMO that the preferred option aligns with the most recent draft or final ISP and the cost does not change its actionable status.
3. Application preparation, lodgement and AER assessment
Once a credible trigger event(s) occurs and the need for a contingent project becomes sufficiently certain, the project may move into the CPA process. This process has several stages:
Before lodging a CPA, Powerlink can meet with the AER to ensure there is a shared understanding of:
- whether the trigger event has occurred or is expected soon
- the maturity of project cost estimates
- the scope and type of information the AER will require
- how risks, staging, procurement and delivery considerations are being managed
- any specific issues the AER expects the CPA to address.
This engagement can help prepare for statutory assessment timelines and supports the submission of a complete, well evidenced application.
After the trigger event(s) has occurred and pre-lodgement engagement is complete, Powerlink may formally lodge the CPA to the AER. A compliant application must provide:
- evidence substantiating the trigger event
- total capital and incremental operating expenditure forecasts
- cost inputs, assumptions and risk assessments
- intended start and completion dates
- the incremental revenue required for each remaining regulatory year.
If the application is compliant, the AER accepts it and the AER’s formal assessment process begins.
The AER’s detailed review includes:
- confirming the trigger event(s) is valid and properly evidenced
- the proposed scope aligns with earlier planning (RITT, ISP requirements)
- the forecast costs are prudent and efficient, and reflect what an efficient operator would incur
- risk allowances, procurement strategies and delivery assumptions are reasonable.
The AER may request additional information and may draw on engineering, benchmarking or financial experts as required.
Consultation on a CPA gives stakeholders the opportunity to:
- understand the project rationale and timing
- review the cost estimates and evidence supporting the trigger
- provide feedback on prudency, efficiency, and community impacts
The AER considers all submissions and responds to issues raised as part of its final decision. This public process ensures transparency and strengthens the quality of regulatory oversight.
The AER’s assessment period can vary but it must make its decision within 40 business days from either the date it receives the application, or the date it receives any additional information required to make its decision, whichever is later. The 40 business days can be extended by a further 60 business days for complex assessments.
At the end of its assessment, the AER may:
- approve the proposed revenue
- approve a different revenue amount
- refuse the application
If approved, the AER issues an amended Revenue Determination reflecting the revenue required to deliver the project. Cost recovery then commences from the applicable regulatory year, depending on when the CPA was lodged.