Published: 02 August 2023

Guy Barnett will need to explain how the interconnector will help deliver services for the state, writes Ruth Forrest

The proposed $4bn Marinus interconnector will foreshadow a second wave of hydro industrialisation, will lower power prices, and fill the government's coffers to the brim so we can house everyone in need, provide timely health care to all and fix all the state's current woes.

So we are told.

The reason Marinus is supposed to signal the dawn of a new era is that it will enable Tasmanian electricity generators, Hydro plus all the wind farm hopefuls, to take advantage of the price differences between here and the mainland. Not only to save the planet with renewable energy and prevent us facing blackouts, but to make money doing so.

Not everyone believes that.

The growing list of nonbelievers received another member last week.

APA, the new owners of the Basslink cable, rather than take advantage of the price differences to maximise revenue they opted instead to become a regulated link with regulated prices.

Perhaps the price differences aren't as large as has been suggested? Or perhaps they might be here today and gone tomorrow?

Basslink has elected to convert from its current unregulated status, propped up with an exclusive arrangement with Hydro, to a regulated provider offering transmission services to all-comers.

If the Australian Energy Regulator (AER) agrees it's in the best interests of consumers, it will then proceed to work out what amount of revenue Basslink will be allowed to earn.

The revenue will be collected by the transmission providers at each end, TasNetworks in Tasmania and AusNet Services in Victoria, who will pass the impost to retailers who will in turn add it to everyone's electricity bill.

Consumers will pay more.

Consumers aren't currently directly impacted by Basslink because it's a private arrangement with Hydro. The expected start date for Basslink as a regulated asset is July 1, 2025.

As current Chair of the Joint Public Accounts Committee, extracting teeth would be easier than trying to discover if Basslink has been profitable for Hydro. Why did Hydro abandon the old Basslink Services Agreement only to sign up again for another stint? Was it to give APA time to apply for Basslink to become a regulated asset and be able to face the future with guaranteed returns?

Perhaps it was a way of ensuring both Hydro and the state government received what was still owing to them by Basslink P/L, more than $100m following the 2016 cable outage.

What was the quid pro quo? To back APA in its bid to make Basslink a regulated asset or at least not to argue against the proposal? The conversion process, from an unregulated interconnector to a regulated link, is a public process where interested parties can, and do, have their say.

A similar thing happened with Murraylink, an interconnector linking Victoria and South Australia.

It was once an unregulated interconnector trying to make money in a contested market. It was struggling, so the owners applied to make it a regulated asset. The AER wasn't prepared to be seen to be propping up a dud investment and assessed the value of the link, the Regulated Asset Base (RAB), much lower than Murraylink's owners hoped and much lower than its original cost. The RAB determines the allowable return on the asset, which when added to operating expenses makes up most of the revenue Murraylink is allowed to recoup from consumers.

No doubt APA is hoping for a RAB that is not too far removed from the $773m it paid for Basslink, so it can make a return for shareholders.

After all, APA, as the largest owner of transmission infrastructure in the country, knows the rules better than most.

Whatever Basslink is allowed to recoup will be split, probably in equal shares, between Victorian and Tasmanian consumers. On a per capita basis Tasmanian consumers will pay far more given Victoria has twelve times the population.

That brings us back to Marinus.

If and when the time comes to determine how much Marinus P/L will be allowed to extract from consumers, AER will follow a similar "Extracting a return for a $4bn asset which will leave consumers better off will be a tall order indeed procedure, without undermining Basslink and in a way that benefits consumers.

Extracting a return for a $4bn asset which will leave consumers better off will be a tall order indeed.

Basslink, although currently an unregulated asset is part of the National Electricity Market (NEM).

This is a reality we can't ignore. It has simply applied to become a regulated asset in the NEM.

But more interconnectors designed to deliver benefits to a select few may be an extravagance we can do without.

Minister for Energy and Renewables Guy Barnett who is now the new Health Minister will have plenty of opportunities to explain to health workers, and to Tasmanians generally, how Marinus will help the state deliver, not only the essential health services, but all services our state so desperately needs.

We wait with bated breath.

The Mercury, Wednesday 2 August 2023

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