Tasmanian Electricity Reform: Wretched reform or necessary change?
Posted : Thursday, August 02, 2012
Session One - Response to the reform
Founder and Managing Director, Frontier
Executive Director, Energy Users
Association of Australia
Session Two - Response from
Dr Peter Davis
Chief Executive Officer, Aurora
Chief Executive Officer, Hydro Tasmania
Chief Executive Officer, Energy Retailers
Association of Australia
The Hon Bryan Green MLA
Tasmanian Deputy Premier and Minister for Energy and
Session one - Response to the reform package
Tasmania's electricity reform
package is a "wretched" package that "snuffs out competition" and
does not encourage retailers to market, Frontier Economics,
Founder and Managing Director, Danny Price, has told a
CEDA audience in Hobart.
Mr Price said the reforms are a complete reversal of where
Tasmania was heading and they will deliver less competition in a
state that already lacks competition.
"What the Government proposes to do is to dismember the only
potential competitor to Hydro Tasmania- Aurora through Tamar
Valley," he said.
"They now have to put in place a whole range of regulatory
arrangements to try and mitigate that power.
"Hydro Tasmania can set the price at whatever level they want.
They choose not to, but that doesn't necessarily mean that it's a
"Businesses will invest in any market where they think they will
get a decent return on a fair basis."
Businesses can manage the cut and thrust of the market, but they
can't manage the regulatory risks, he said.
Under the new reforms, Tasmanians will be worse off, Hydro
Tasmania will be better off and retailers won't come to market, he
"The reason retailers won't come, or won't come at a reasonable
price…is because there is no basis on which they can compete," he
"Regulation has never, will never, deliver sustainable long-term
benefits to consumers, except under some very precise set of
"My recommendation, to both the Government and to the Greens, is
it would be better to do nothing at all than to adopt these
Energy Users Association
of Australia, Executive Director, Roman Domanski said the
reforms were not what the Tasmanian Government says it wants and
not what Tasmania needs.
The Tasmanian Government's response has been timid on longer
term electricity issues for the state, he said.
Mr Domanski said more sustainable and fundamental reforms are
needed to deliver ongoing benefits and the Energy Users Association
of Australia (EUAA) wants to work with the Tasmanian Government to
see if reforms can deliver some gains.
On pricing, Mr Domanski said Tasmania was ranked 11th
based a EUAA report comparing international electricity prices.
The Tasmania electricity prices escalated in 2008, and we have
seen a massive divergence from the Consumer Price Index (CPI), he
The causes of the price increases were attributed to 38 per cent
wholesale, 25 per cent network, 17 per cent carbon, 11 per cent
Renewable Energy Target and nine per cent for retail, he said.
Mr Domanski said while the short-term actions are a welcome step
to help reduce price pressures immediately, the long-term
structural reforms are contrary to what the panel recommended in a
number of areas, and their recommendation that the whole package
needs to be implemented for full impact.
I have difficulty in reconciling how that is going to benefit
Tasmanians and fear this will be a bridge not far enough, he
Session Two - Response from industry
Aurora Energy, Chief
Executive Officer, Dr Peter Davis said the status quo was
not sustainable nor in the best interests of Tasmania's electricity
Dr Davis said Aurora will be the company affected the most by
the reforms, and from their perspective the reforms are not timid
Aurora supports and will continue to work with the Tasmanian
Government to implement the reforms, he said.
On pricing he said: "While no one is happy with the increase in
electricity prices, the reality is it is a national
"Public comments, about the price rises due to mismanagement or
inefficiencies on behalf of the industry, has led to a decline in
confidence in the industry.
"Effectively, we've reduced our costs by about 20 per cent over
the past two years or $88m in total operating costs.
"We share the public concern that existed about the declining
affordability of electricity.
"We've been a significant supporter of reform to the Tasmanian
"We actually agreed with the vast majority of submissions to the
expert panel that wholesale energy reform needed to be a
prerequisite to retail reform."
Hydro Tasmania, Chief
Executive Officer, Roy Adair said wholesale electricity
prices are already unsustainably low and the Tasmanian Government's
reforms are trying to improve competition.
"These recommendations will place Tasmania ahead of many states
within the National Electricity Market, certainly NSW and QLD," he
"I believe the Government is to be commended on the way it has
taken the panel's recommendations.
"It's not just about the latest, pure system of competition, it
is ensuring we have a safe, secure, reliable electricity market in
place, that is also delivering competitively based prices.
"I believe the plan that the Government has does do that."
The value of the emissions and emissions abatement has not been
recognised until 1 July 2012.
Mr Adair said there is no reason retailers won't come to market
with the new reforms if:
- Contracts are available;
- The pricing process is transparent; and
- All retailers are treated equally.
Association of Australia, Chief Executive Officer, Cameron
O'Reilly said Australia is experienced in contestable
energy retail markets and Australian's embrace choice and switch
"Our retailers have the best, probably global, experience in
dealing with customer switching," he said.
"The reality is that the market in Australia …is by far the most
However, Mr O'Reily warned: "Do not sell FRC (Full Retail
Contestability) to the public, on the basis of low prices."
"The reality is that retail prices are overwhelmingly determined
by generation cost and particularly now, by network costs.
"What really needs to be sold to Tasmanians is that FRC is
really about choice, and if there are more contestable options here
and the market conditions are right they will have choice.
"As far as I'm concerned, more choice, more retailers makes for
a more responsive industry and that's a good thing for
Tasmanian Deputy Premier
and Minister for Energy and Resources the Bryan Green said
when talking about Tasmania's energy future it was important to
recognise that the expert panel did say that the status quo was not
"It's alright to come up with lots of purist theoretical models,
when it comes to energy businesses…but we have to make decisions in
the best interests of the state overall," he said.
Mr Green said that the Government was focusing its objectives
- Secure, reliable supplies of energy;
- Maximising the value of the State's natural resources; and
- Ensuring that we have strong state owned electricity businesses
that are financially viable and run efficiently.
The Government is also considering the cost, risk, timeliness and
complexity associated with the implementation of any change, he
"We want to be in position to declare full retail competition
for households and small businesses across the state," he said.
"We've deferred making that decision in the past because we
didn't think the market here was mature enough and/or structured
properly to ensure that those reforms could come forward.
"We're working on this reform in that context. We want to ensure
now that we have that full competition and we're looking to do that
on 1 January 2014."
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