Tasmanian government to cap state power prices

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Tasmanian government intervenes to shield homes and business from “unacceptable” 15% power price hike.

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The Tasmanian government has become the latest to act on Australia’s high electricity prices, announcing plans to introduce legislation this week to cap the state’s wholesale power price for 12 months.

State energy minister Matthew Groom said on Sunday the government had decided to intervene in the market, in an effort to shield consumers from an expected price increase of about 15 per cent from July 1.

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Tasmania has more ability than other states to do this because the energy generation, distribution and retail companies remain publicly owned.

Electricity prices in the state are normally set annually and independently by the Tasmanian Economic Regulator who looks at factors including electricity generation, network and retail costs, as well as changes within the national energy market.

And while Tasmania’s power prices fall mostly on the lower range of the national scale, conusmption levels are high – especially in winter months – due to the cold climate and older energy inefficient housing stock.

But forecast wholesale energy prices of up around $126/MWh – driven by supply balance problems in South Australia and New South Wales, and the closure of the Hazelwood power station in Victoria – were “unacceptable”, Groom said.

“These anticipated power price increases are just too high for households and small businesses to cope with and so the government is intervening,” Groom said on Sunday.

“We’re going to directly intervene to introduce legislation into Parliament to enable the Treasurer to set the wholesale price for this reset on the first of July and deliver an outcome which is consistent with CPI of about 2 per cent.”

Groom said it would not be a case of putting off the inevitable, promising Tasmanians would not be hit with a massive spike in power prices at the end of the 12-month cap.

And he said the Tasmanian government – which faced its own power supply crisis early last year through a combination of drought constrained hydro and the failure of the Basslink interconnector – would continue to monitor the situation.

“There won’t be a price shock at the end of this — we’re committed to ensuring there won’t be a price shock for Tasmanian households and small businesses and that is why we’re directly intervening.”

But Opposition Labor Leader Rebecca White said greater long-term certainty was needed.

“There’s no doubt that power price hikes are hurting people, but addressing the issue just for 12 months isn’t a long-term solution,” she told the ABC.

“This is a cynical political move from the government, to put the issue off past the next election. It’s not going to address the long-term issues that the state is facing, and it’s a very short-sighted decision.”

To this end, Tasmanian energy consultant David Hamilton recently suggested merging HydroTasmania, TasNetworks and state-owned retailer Aurora to reduce overheads.

Hamilton also advised that the government should stop expecting a dividend from the organisation.

“It should have two clear monetary objectives: provide the cheapest electricity to Tasmanians possible … and make the largest profit possible from mainland electricity sales – consistent with clear and prudent energy security requirements.”

Interestingly, data from Sunday night shows (below) that Tasmania was, at one point, importing large quantities of power from Victoria, when Victoria had a price of $68 to Tasmania’s $223. But prices were also high a day earlier when exports were high.

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1 Comment
  1. Just_Chris 3 years ago

    This is very sensible.

    Although Tasmania is a slight net energy importer my guess is that it imports when power is cheap and exports when power is expensive. Unless I am missing something very fundamental, this should mean that Hydro-Tasmania is making more profit per kWh sold due to the increase of whole sale electricity with it’s cost largely remaining the same (i.e. importing a small amount of less cheap power should be more than compensated for selling power for more). Increased profits will be happening for every generator across the NEM. The difference being, private generators, will put the extra money in their pocket where as the Tasmanian government is giving some of it back. I hope it is setting some of the wind fall (pun intended) aside to invest in new renewable energy generation so that it becomes a net exporter. Maybe if it invests wisely it could get to the point where it no longer requires its gas turbine except for emergencies or where it makes money supporting the rest of the NEM with low cost renewable energy.

    I wonder what the Snowy hydro people will do with all the extra money they will make this year? If the whole sale price has gone up by $50 /MWh they should be getting about $200 million extra in revenue this year. That is not an insignificant amount of money – I suspect its shareholders will snaffle it for “budget repair” rather than use it to fill the massive gap that will open up in the energy sector as we shut down our aging generation fleet but here’s hoping that they’ll do something useful with the bonanza this year…… although expecting people to invest the profits of today to make the profits of tomorrow more modest is probably wishful thinking.

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