Published: 01 March 2024

If you’re having trouble understanding the electricity policies of parties as they vie for your vote, you’re not alone. Being Chair of three inquiries looking at various aspect of the electricity industry, from the termination of the Basslink agreements to electricity pricing and broader energy related matters including the Marinus deal, all placed on the backburner when the election was called, has given me some appreciation of the challenges ahead.

But the proposed solutions have left me bemused and bewildered. With no shortage of false facts and dubious claims, trying to understand how we Tasmanians will be better off is difficult.

It is true that Hydro Tasmania has a long and proud tradition of providing electricity for Tasmanians. But politicians have a long tradition of using Hydro as a cash cow to fund the general government, leaving it short of cash to look after its aging assets. TasNetworks similarly has been raided. Having started life as Transend over 25 years ago with zero debt, it now owes over $2 billion. The history of our electricity companies from one perspective is a history of commendable engineering achievements. But from another perspective it’s a history of muddling politicians.

Of course, if governments agree to buy electricity from private generators at a guaranteed price and then arrange for electricity to be sent to market via a system of regulated prices, which means consumers will pay, they’ll be a queue of investors wishing to lock into long term government guaranteed returns.

But if governments and consumers are footing the bill it needs to be shown how costs will be exceeded by benefits to the wider economy. We hear the claims but see no evidence.

The Liberals claim Hydro’s governing act prevents Hydro from building new generation facilities bigger than 40MW. That’s not what my copy of the Act says. New hydro projects are restricted but not wind projects. Woolnorth and Musselroe didn’t require parliamentary approval. Perhaps the Act catches the Tarraleah rebuild and the Cethana pumped hydro proposal? Is that why the Liberals are belatedly going to change the Act? Or are other hydro projects or new dams planned that we don’t know about that they want to bypass parliamentary scrutiny?

For years we were reminded the government had a Tasmania First policy and that only excess power would be exported. ‘Tasmania First’ was the repetitive mantra I frequently heard at government business scrutiny hearings.

Tasmania is usually a net importer of electricity each year, so there’s an opportunity with the existing Basslink interconnector to become a net exporter and increase electricity production by another 20 per cent. So why exactly do we need Marinus? To assist whom exactly?

Labor claims it will sell Marinus when built for about $600 million which is based on 17 per cent of the estimated construction cost. But most of the construction cost will be funded by Marinus’ borrowing so Tasmania’s net equity will be much smaller to start with before disappearing completely when the regulator determines the price consumers will have to pay via regulated prices which in turn will almost certainly cause a write down in the value of

Marinus and therefore, in Tasmania’s share. There won’t be any gains from selling our share in Marinus.

If the Regulator’s price is higher consumers will pay more. Will Victorians agree to pick up 90 per cent of the operating costs of Marinus, or will Tasmanian consumers have to pick up a greater burden. So how will this lead to lower prices for consumers?

We are being assaulted from all sides by promises based on a flawed understanding of what’s happening. Most of Hydro’s profits end up in government coffers anyway. Forcing Hydro to lower prices will lead to lower profits and hence lower returns to government. Government’s will have to borrow more to fund services and Hydro will have to borrow more to look after its aging assets and invest in any new generation.

Guaranteeing prices for wind farm generators, power purchase agreements, is what this government has done with the recent wind farms and what Labor did when they agreed to sell 75 per cent of Woolnorth and Musselroe to a Chinese State company. What that guarantees is lower profits for Hydro and higher returns for foreign investors. The returns to Tasmanians are questionable.

Both parties have a chequered history when it comes to electricity policy. The current policies offer little hope for change and ignore some fundamental economic realities.


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