The Tasmanian Premier Lara Giddings has released the Government’s blueprint for energy reform, announcing that power retailing will be privatised, but the wholesale electricity market will be kept in public hands, despite a recommendation by the Expert Panel that it be open to competition.

 

Under the reforms, the customer base of the state-owned electricity retailer Aurora Energy will be sold off in two or three tranches to mainland power retailers.

 

The Government has also decided to simplify the structure of Tasmania’s energy businesses, reducing the number from three to two which, it says, will save at least $8 million annually.

 

Aurora’s Distribution Business and Transend Networks will be combined into one State-owned business responsible for the transmission and distribution of electricity.

 

Ownership of the Tamar Valley Power Station will be transferred from Aurora to Hydro Tasmania.

 

The Government will also consider selling the power station if it does not compromise the State’s energy security and is more valuable under private ownership. A final decision will be made by June 30 next year.

 

Ms Giddings said Government was “steering a responsible and well considered course through the issues facing the electricity supply industry and is also determined to ease pressure on power customers”.

 

“The Expert Panel concluded after its 18-month review that major reform was needed, Government agrees and now we can act.”

 

Ms Giddings said following consideration of the Panel’s work the Government would immediately move to limit the effect of steep power price rises expected in July.

 

“Reducing the wholesale price on electricity together with the Government’s ongoing commitment to index energy concessions will provide relief across the board, particularly for Tasmanians on low and fixed incomes.

  

“The fact is that instead of facing power price rises as high as 26 per cent on July 1 Tasmanians will now have the second lowest increases of anywhere in Australia.

                      

Ms Giddings said the Government has accepted most of the Panel’s findings but has addressed key issues that will deliver improved outcomes for Tasmanians in a lower cost, and less risky and complex way.

 

“The Government will achieve this without privatising or breaking up Hydro Tasmania and by retaining ownership of our network of poles and wires.

 

“This will ensure our power generation and distribution remains in public hands and continues to provide significant value to Tasmanians who have invested in these assets over generations.

 

Ms Giddings said the introduction of a price on carbon from July 1 would also mean Tasmania will begin to realise the true value of its renewable energy reflected in the price Hydro Tasmania receives in the national market for its energy.

 

“Future returns from Hydro Tasmania are forecast to be strong, as a result of both its business model and the Federal Government’s carbon pricing policy, and this will allow the State Government to spend more money on priority areas like health, education and police,” Ms Giddings said.

 

  

Mr Green said strict and independent regulation of prices that can be charged by Hydro Tasmania, and a decision to sell Aurora’s retail customer base would enable competition to be introduced for all Tasmanian households and small businesses by a target date of January 1, 2014.

 

“The Government agrees with the Panel’s conclusion that to facilitate competition there must first be reform of the energy sector.

 

The Panel concluded that  “Simply removing Aurora Energy’s monopoly over supply to non-contestable customers will not deliver competitive retail outcomes, because such a policy would lack the foundation of a competitive wholesale market in which new retail entrants could source contracts. The likely outcome would be piecemeal and unsustainable retail entry that would provide only small benefits to consumers while undermining the value of Aurora Energy’s retail business.

 

In short, gains for customers would not be widespread and any such gains would probably be short-lived, while Tasmanian taxpayers, as the ultimate owners of Aurora Energy, would lose value.

 

Deputy Premier Bryan Green said the Expert Panel found there was a compelling case for the sale of Aurora’s customer base to further facilitate competition and choice for consumers.

 

“At the same time, it is extremely important to the Government to provide certainty as quickly as possible to all employees likely to be affected. We are determined to minimise any job losses.

 

“We are looking to maximise opportunities for Aurora’s retail personnel and assets, including the call centre and customer care and billing services, in the Momentum business.