Hydro blasted as `monopoly'

Hobart Mercury
Friday 8/1/2010 Page: 5

POWER prices will rise, industry will leave the state and renewable energy research will stall if Hydro Tasmania retains its monopoly an independent report has warned. The report by Tasmanian Energy Regulator Glen Appleyard comes amid revelations that Australian Competition and Consumer Commission investigators have combed Hydro's Hobart offices.

The ACCC's probe into whether there have been breaches of the Trade Practices Act has also involved its officers monitoring every power price transaction conducted by Hydro. Mr Appleyard says:

• Hydro is misusing its market power.
• Is extracting monopoly rents and is anti-competitive.
• Ultimately this would threaten hundreds of Tasmanian jobs and drive up power prices.

The investigation by Mr Appleyard centres on a decision by Hydro to raise its prices when its major Tasmanian generation competitor, the power retailer Aurora Energy, commissioned its Tamar Valley gas-fired power station last April. In response Hydro increased its charges to access the power grid from $32,000 to $10 million. Mr Appleyard slammed the decision, which cost Aurora Energy $8.5 million and resulted in the electricity retailer having to lift its power prices, costing Tasmanian households who have already endured a 30% spike in electricity costs in the past two years.

"If Hydro Tasmania's pricing deters new generators from entering the market, then the future security of supply in Tasmania may also be affected, which is not in the public interest," Mr Appleyard says in his report. "A renewable energy generator in Tasmania may be forced to abandon plans to expand its operations if Hydro continues to act anti-competitively." Mr Appleyard also warns that Rio Tinto's smelter operations in Tasmania may not be viable if a secure electricity supply at a competitive price and quality cannot be found.

Hydro communications manager Ian Colvin said the state owned company stood by its actions, did not accept Mr Appleyard's views and was shocked by the findings. "We also strongly reject the assertions that we have extracted monopoly rents and that our behaviour has, in any way, been anti-competitive," Mr Colvin said. "Hydro Tasmania is reviewing the regulator's statement of reasons to understand why the decision has been made and any basis for an appeal.

"We are concerned that the decision, if implemented, may have adverse implications for the effectiveness of the National Electricity Market Management Company in Tasmania." Liberal energy spokesman Peter Gutwein has slammed Hydro's action and has demanded a please-explain from Energy Minister David Llewellyn. Aurora Energy chief executive Peter Davis was reluctant to weigh into the feud but has said the decision had cost the company millions. Mr Llewellyn criticised Mr Gutwein's comments. "Both Hydro Tasmania and Aurora Energy are managed by independent boards and expert managers," he said.