Independent inquiry reveals why we're paying more for power

Sunday Tasmanian
26 June 2011, Page: 1

HOUSEHOLDS are paying to keep the Tamar Valley power station viable, an independent review of Tasmania's electricity prices has concluded. The Independent Review of the Tasmanian Electricity Sector's Issues Paper shows the gas fired station has been propped up by households and small businesses through recent power price increases. The report indicates these two groups, as non contestable customers, are bearing the burden to keep the Aurora Energy station up and running despite it being only a back up option for all electricity users.

The report said: "Prices for noncontestable customers, through the regulatory framework, have been increased to preserve the viability of the TVPS. Essentially non contestable customers appear to be funding the 'insurance premium' being the difference between the market related value of the TVPS and its full cost yet the facility provides risk mitigation for all electrical users".

Opposition energy spokesman Matt Groom said households were paying because in June 2010 the Labor Green Government had changed the rules for the economic regulator, which meant prices were based on long range marginal costs (LRMC) and not market costs. "The Green Labor government is forcing households and small businesses to subsidise Aurora Energy by artificially jacking up power prices to a higher level than they should be", he said yesterday.

A table in the Issues Paper shows long range marginal costs estimates can be up to 12.4% greater than market cost estimates. Mr Groom said LRMC estimates pushed the costs for households up while protecting companies that could buy bulk power from interstate firms in the contestable market. "The Labor Green government has rigged the role of the economic regulator to artificially jack up power prices in order to stop Aurora Energy from going broke", he said.

Mr Groom said the report confirmed the Liberals' long held belief that small business and households are paying more for power than they should. The paper shows that if the energy market was opened up to competition, households and small businesses could be paying less for power, he said. Energy Minister Bryan Green said the Government would properly consider the review's findings after all deliberations by its panel of experts. He did not comment about the TVPS or the LRMC estimates.

"We will not be distracted by the antics of the Liberals and their political commentary on the review as the panel continues its important work", he said. "As expected, a wide range of issues has been raised with the panel during the public consultation. The Liberals are being opportunist and simplistic in relation to the complex issue of power pricing. "The Liberals have no evidence to support their claim that going to full retail contestability will mean lower electricity prices in Tasmania.

"They are gambling with future power prices because they don't know whether consumers will benefit. The Government is not prepared to take that gamble. "The Government needs to be sure the benefits of full retail contestability outweigh the costs and is taking a responsible approach by referring the matter to the expert panel to consider as part of its review. "Long range marginal cost (LRMC) is no more than recovering the costs of power generation".