Rather than throwing barbs at one another, our leaders would be better off explaining the ongoing role of Basslink, its costs and benefits and who's paying for it, writes Ruth Forrest.

A BREAK from parliamentary sittings always provides an opportunity to engage with the electorate and discuss issues of concern.

Questions relating to electricity are never far away.

Why are we still in the National Electricity Market?

Why are prices rising so fast?

We know who's paying, but who's benefiting? Why did Hydro abandon Basslink?

Why are we building another cable? Who will pay and who will benefit?

Hydro Tasmania issued a media release on August 1, revealing dam levels at the lowest levels since 2016 for this time of year. It's not an alarming situation but one which we needed to know about and understand.

Seemingly oblivious to the message sent by voters on May 21 that they want their political leaders to abstain from divisiveness and to concentrate on enacting sensible policies, both the state government and Labor opposition seized the opportunity to toss a few barbs at each another without explaining the logic of their own positions.

Labor claimed Hydro was exporting too much electricity.

The government claimed it demonstrated why we need the NEM and Basslink.

Who are we to believe?

For a start, Hydro is not an exporter and never has been.

Basslink P/L (BPL), now in receivership, has always done the inter-regional trading. It's called 'inter-regional' because the NEM comprises five regions, one of which is Tasmania.

Until February 2022, when Hydro announced its relationship with BPL was over, BPL paid any interregional revenue to Hydro in exchange for a regular monthly fee.

Since February the interregional revenues have remained with BPL.

Hydro as a generator, tells the Australian Energy Market Operator (AEMO) what electricity it wishes to sell, along with all other generators in the NEM. AEMO then matches what's available with what retailers and others wish to buy. Some might get exported. BPL as a participant in the NEM buys in one region, Tasmania say, and sells in Victoria.

Imports and exports have been almost identical since February. Dam levels would be the same with or without interstate trading.

The government responded to Labor's claims by saying Basslink is a necessary part of Tasmania's infrastructure needs.

But since the Hydro/BPL somewhat acrimonious marriage split, BPL is looking at how it will survive. Without Hydro providing guaranteed income, life is riskier. It will need to apply to AEMO to become a regulated link, just like all other interconnectors in the NEM.

In which case it will receive regular income, from AEMO, paid for by transmission companies on both sides of Bass Strait.

Hence half the cost of a regulated Basslink will be paid by TasNetworks who will pass it on to Tasmanian consumers.

Reclassifying Basslink as a regulated interconnector will cost us. Isn't that what political leaders should be discussing instead of slagging off at one another?

The costs of Basslink have, until February, been borne by Hydro. Those costs have always been far more than inter-regional revenues received from BPL.

A significant part of the excess has been payments to Macquarie Bank for premarriage counselling when finalising the 2002 deal with BPL.

That marriage has been a rocky affair as everyone knows.

But for Macquarie Bank it's been a marriage made in heaven.

Hydro were sweet-talked into fixing interest rates which impacted the monthly fee payable to BPL until 2031.

The side deal has led to Hydro paying Macquarie Bank between $20m and $40m each year because interest rates have fallen below 8 per cent rate prevailing at the time.

Worse still, Hydro will have to keep paying Macquarie until 2031 even though it walked out on BPL in February. How much we are yet to discover.

We need to understand the ongoing role envisaged for Basslink, the costs and benefits and who's paying. How can we make decisions about another interconnector without it?

Adding to the cost uncertainty, recent new wind farms propped up in Tasmania with government power purchase agreements. These were supposed to make Tasmania self-sufficient in renewable energy.

Has the government given BPL's receivers an undertaking we won't exit the NEM? Otherwise the cable which the receivers are trying to sell might be worthless? Is this related to the $150m or so Hydro and the government are trying to recover from the receivers? Throwing good money after bad perhaps?

Maybe the real reason for NEM involvement is so Marinus can proceed. Part of AEMO's grand plan we are told, which up until now hasn't included offshore winds farms, more costly to build and operate but more productive than those on land, and without the same social and environmental impacts. And without the need for a $4bn government-funded cable.

We need more than glib assurances that all will be OK.

Basslink is a classic case where the benefits were always overstated and the costs either understated or hidden.

We mustn't make the same mistake with Marinus.

The Mercury, Friday 12 August 2022