VicGrid’s procurement approach for transmission augmentations in Victoria.
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VicGrid’s role in procuring transmission augmentations
On 1 November 2025, the responsibility for planning Victoria's transmission network transferred from the Australian Energy Market Operator (AEMO) to VicGrid. This includes the planning, authorisation and provision of augmentations to Victoria’s declared shared network.
An augmentation of a transmission network means to enlarge a network or increase its capability to transmit active energy.
Our procurement approach
To support the delivery of transmission projects and the state’s shift to renewable energy, the Victorian Government has undertaken reforms to the procurement of transmission augmentations in Victoria through the Victorian Transmission Investment Framework (VTIF).
Our new procurement approach allows us to plan transmission augmentations in anticipation of new renewable energy generation connecting to the grid, enabling timely upgrades and making the process more efficient. It will also maintain competition to help ensure value for money and to minimise impacts on consumer power bills.
Contestability Guidelines
The VicGrid Contestability Guidelines outline the criteria that VicGrid will apply to determine whether an augmentation to the declared shared network is contestable in accordance with Clause 8.11.6 of the National Electricity Rules, as amended by the National Electricity (Victoria) (VicGrid) Regulations 2025.
Contestability will be determined on a case-by-case basis.
A contestable augmentation is one for which a competitive process will be undertaken to select a declared transmission system operator that will build, own and operate the augmentation. Whereas a non-contestable augmentation will not be subject to a competitive tender process.
Tender and Evaluation Guidelines
The VicGrid Tender and Evaluation Guidelines outline the steps that VicGrid will follow in the procurement of a contestable transmission augmentation in accordance with Clause 8.11.7 of the National Electricity Rules.
Tender and evaluation processes may be tailored to suit the specific needs of each augmentation.
VicGrid’s new procurement approach, along with most of the reforms outlined below, came into effect on 1 November 2025.
Key changes to procurement of transmission augmentations are listed below.
For projects identified in the Victorian Transmission Plan (VTP), the requirement to do a Regulatory Investment Test for Transmission (RIT-T) will be replaced by a multicriteria and robustness analysis designed to meet the cost-benefit requirements of the National Electricity Law, ensuring transparency and value for consumers.
This new method is designed to be more responsive to the rapidly transitioning energy sector, enabling faster and more informed decision-making. It also takes a broader view of project impacts by considering economic, social, cultural and environmental factors and involves First Peoples, communities and landholders earlier in the process.
The VTP’s analysis assesses development pathways involving multiple projects. This programmatic approach identifies the consequences of under-investment and over-investment, supporting long-term planning and optimisation of the electricity grid.
VicGrid has been granted new powers to undertake early works during the planning phase of augmentation projects. This includes activities such as site investigations, technical assessments and stakeholder engagement, which will improve the accuracy of cost estimates, facilitate timelines for project delivery and help reduce risks.
By enabling early-stage activities, VicGrid will be better positioned to deliver projects with greater certainty and efficiency.
VicGrid will determine whether an augmentation is contestable or not case by case, based on the Contestability Guidelines it has developed. This reform is aimed to encourage competition and keep energy costs down for consumers.
One of the criteria used to determine whether an augmentation is contestable or not is whether its capital cost is reasonably expected to exceed the ‘relevant limit’.
The ‘relevant limit’ was $10 million until 2024 and has been raised to $20 million for the financial years commencing 1 July 2025 and 1 July 2026. It will be subsequently adjusted every year in line with inflation. The National Electricity (Victoria) (VicGrid) Regulations 2025 provide the methodology for calculating the relevant limit each year.
The Australian Energy Regulator (AER) is an independent regulator and will have the power to assess whether the process adopted by VicGrid for the procurement of the construction of a contestable augmentation will achieve a competitive outcome.
The AER will develop guidelines that sets out its assessment approach. At the end of a procurement process, the AER will publish its report publicly contributing to greater accountability, transparency and assurance across our procurements.
This reform relating to the AER’s oversight of VicGrid’s contestable procurements will come into effect once an agreement between the Victorian and Australian governments is executed to confer this new function on the AER and relevant Constitutional law requirements are met. These important steps are anticipated to be completed by early to mid-2026.
Smaller non-contestable augmentations will be able to be undertaken by a Declared Transmission System Operator (DTSO) directly, subject to certain requirements.
These requirements will include that the non-contestable augmentation is technically and economically feasible and its estimated capital cost is less than the cost provided for under clause 5.16.3(a)(2) of the National Electricity Rules (currently $8 million).
In addition, its details will need to be provided in advance to VicGrid by the DTSO, and VicGrid will need to consider, after consulting AEMO, that the augmentation is operationally necessary and prudent.
This reform will reduce administration associated with smaller augmentations and make the process more efficient and economical as they would not be required to be authorised or directed by VicGrid each time.
These projects will still be subject to oversight through established planning and governance processes, ensuring they align with broader system objectives and maintain accountability.
