Release of Panel’s report welcomed; central claim rejected

Hydro Tasmania has welcomed the release of the Expert Panel’s draft final report into the State’s electricity industry, but rejected the central claim that the wholesale market structure is a barrier to retail competition in the state.

CEO Roy Adair said that some of the Panel’s recommendations could be effectively implemented to benefit consumers. However, others required more careful consideration to ensure they did not reduce the value of the electricity businesses to the Tasmanian community while offering little or no improvement in prices for households and small businesses.

Mr Adair said it was important to understand the real drivers of power price increases and how the wholesale market in Tasmania actually worked.

“The Panel concludes that price rises over the past few years have been driven by increased network charges and, to a lesser extent, wholesale energy costs for residential and small business customers,” Mr Adair said. “Hydro Tasmania agrees with this assessment.

“The Panel itself has identified a simple initiative which we support that if implemented would see prices drop. The wholesale energy component of the household power bill could be reduced to a sustainable level with a different approach to how it is regulated. This would see less money for the electricity businesses but lower prices for consumers.

“However, to suggest that Hydro Tasmania is a barrier to retail competition is simply wrong and is not supported by the facts. Moreover, this ignores the fact that interstate retailer ERM has already successfully moved into the State, embraced local opportunities and made positive statements to the Panel about the way the local market is operating.

“Hydro Tasmania is not opposed to sensible regulation of the wholesale contract market to facilitate the entry of more retailers.

“These are simple measures to introduce, yet the Panel is instead focused on risky, complex and costly changes that we strongly believe are unnecessary for Tasmanians. If pursued, the Panel’s recommended changes will reduce government revenue while having little or no impact on power prices.”

Mr Adair said that while there were items in the Panel’s draft report with which Hydro Tasmania disagreed, there were findings that were strongly welcomed and supported.

Hydro Tasmania is pleased that the Panel has concluded that ‘Basslink has enabled Tasmania’s demand for electricity to be met at a materially lower cost than would otherwise have been the case’ and ‘the financial benefits to Hydro Tasmania from Basslink over the first five years of operation years are positive’.

“The Panel has clearly shown that Basslink continues to be beneficial to the State and not a cause of higher power prices,” Mr Adair said. “This supports the strongly-held view that Basslink was by far the best option to ensure security of supply in a State prone to drought, while capturing the economic opportunities of being part of a national market.

“We are also pleased the Panel has dispelled the myth that there is any cross-subsidy between residential/small business customers and major industrial customers.”

Mr Adair said there was obviously a lot of detail in the 850 pages of material published by the Panel today, a significant amount of which Hydro Tasmania has not had the opportunity to review. Hydro Tasmania will analyse the contents, findings and options prior to making a formal comprehensive response to the Panel in the new year.

“Hydro Tasmania will work with the Panel as we believe the community deserves an electricity supply industry of which they can be proud and which delivers the lowest possible electricity prices on a sustainable basis to Tasmanians.”

For more information please contact Samantha Meyer on 03 62305746