The Australian Energy Regulator (AER) issued a draft decision rejecting APA Group's (ASX:APA) application to convert Basslink from a contracted market network service provider to a regulated transmission network service provider, according to a Tuesday filing with the Australian bourse.

APA's application, submitted in September 2023, sought to regulate Basslink, an undersea electricity interconnector between Tasmania and Australia, as part of the company's consultation with the Tasmanian government, the filing said.

Despite modeling suggesting that regulating the interconnector could provide an average economic benefit of AU$1.6 billion to consumers from 2025 to 2050, the AER decided not to support the regulatory change.

If the draft decision is confirmed, the company plans to operate Basslink as a non-contracted MNSP after its current revenue contract with Hydro Tasmania ends on June 30, 2025.

The energy infrastructure company already has systems in place to facilitate the interconnector's operation in the spot market, in line with the current contract with Hydro Tasmania, the filing added,

The company said it will continue engaging with the regulator.

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