Hydro Tasmania’s operations were dominated in 2006/07 by managing the impact of drought conditions, with one of the lowest inflows into storages since 1967 coming on top of one of the driest years on record. Pressure on water storages was unprecedented and new rules and operating conditions for plant and water use, planned in previous years for low storage scenarios, were brought into force to maintain a reliable supply. Basslink proved its worth as a drought relief strategy and, coupled with Bell Bay gas-fired power, contributed to maintaining supply throughout the year.

However, meeting demand and protecting our storages has come at a considerable cost to Hydro Tasmania. $100.6 million was spent on purchasing energy from the market via Basslink and gas to fire Bell Bay Power Station and the gas turbines.

Hydro Tasmania’s total generation for 2006/07 was 9087 GWh compared to 10371 GWh in 2005/06.

Operational Short and Long-term Reliability

Water management
The Ministerial Charter, under which Hydro Tasmania operates, states that the Minister expects Hydro Tasmania to manage its water storages prudently, consistent with the advised long run energy capability.

During the 2006/07 year, Tasmania received an estimated 69.5 per cent of its average annual rainfall.

Storages started the year at 30.5 per cent of full capacity and dropped below 20 per cent for the first time since 1967, down to a low of 17.3 per cent at the beginning of May 2007. Good rains during May saw storages end the year at 19.3 per cent.

It has been a challenge over the past few years to keep water levels within preferred operational limits that are considered by Hydro Tasmania to be sustainable and at low risk. Hydro Tasmania is implementing strategies for sustainable trading and operations to ensure long-term value against a limited energy position. A formal set of prudent water management criteria was introduced in August 2006 to maintain sustainable water management principles during low levels of storage and ensure the short and long-term reliability of electricity supply.

Several storages entered into low lake level medium or high risk environmental bands, triggering a range of additional mitigation actions, including regular monitoring of water quality and charophyte beds, as well as turbidity levels that could potentially impact both the environment and our generating plant. These bands have been set to ensure that environmental impacts are factored into our operations as we draw storages lower than our preferred operating ranges.

Basslink imports and gas-fired generation will continue to support Tasmania’s power supply and help Hydro Tasmania meet the criteria for prudent water management.

In the last quarter of 2006, the gas peaking plant at Bell Bay was commissioned, having been purchased as an additional drought relief strategy in 2005. It operated in peak periods from November 2006 through to February 2007.

Bell Bay power site thermal units and the gas turbines generated 936 GWh during the 2006/07 financial year. The thermal units have operated continually, however the gas turbines have not operated since late February 2007 due to the pending sale arrangement of the units.

The Bell Bay site has been sold to Alinta, with the conditions precedent to the sale either satisfied or waived on 29 June. Under the sale arrangements, Hydro Tasmania will operate the Bell Bay Power Station until at least 2009.

Water allocation
Work continues on implementing the Memorandum of Understanding (MoU) between Hydro Tasmania, the Department of Primary Industries and Water and the Tasmanian Farmers and Graziers Association, which establishes a framework for future water allocation decisions in the South Esk, Meander and Macquarie catchments. It recognises historical water use and provides clarity about the allocation process used by Hydro Tasmania for future applications. We are continuing to liaise with farmers to resolve water allocation issues.

Power station reliability
Hydro Tasmania has a comprehensive risk management program to manage its asset portfolio. Key asset risks and mitigation measures are reported to executive management and the Board on a quarterly basis, with a major review every 12 months.

Hydro Tasmania’s generation asset refurbishment plan aims to maintain satisfactory performance of power stations over the long term. Performance targets are set and monitored to ensure the reliability of generating units and to ensure the asset refurbishment plan is targeting assets appropriately.

Less than a third of key generation assets require refurbishment in the coming years, including some mid-life refurbishments for the 60 per cent of power stations built before 1970. The asset refurbishment plan calls for an increased level of investment in the existing assets to deliver the required level of performance over the long term. This will increase the internal competition for capital investment.

Capital expenditure on system refurbishment for 2006/07 was $37 million, with major projects completed during the reporting period at Gordon Power Station and Tungatinah switchyard.