Government's blueprint for energy reform Tue 15 May 2012 Lara Giddings Premier Bryan Green, MP Deputy Premier The Premier Lara Giddings said today the Government's blueprint for energy reform was an opportunity to reshape the sector and contain power prices through a restructure of Tasmania's electricity businesses and market. Ms Giddings said the Government has carefully worked through the Expert Panel's report and will make significant changes to give Tasmanians renewed confidence in the energy sector. "We now have the chance to strengthen and maximise future opportunities that such important reforms will bring," Ms Giddings said. "The Government is 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," Ms Giddings said. "The Expert Panel concluded after its 18-month review that major reform was needed, Government agrees and now we can act. "The Expert Panel clearly demonstrated there is no short-term or simple political fix as the Liberal Opposition would have people believe. Ms Giddings said following consideration of the Panel's work the Government would immediately move to limit the affect of steep power price rises expected in July which will have a lasting affect for Tasmanian electricity customers. "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 challenges we confront are certainly not unique to Tasmania as governments around Australia grapple with the very same issues of rising electricity costs and keeping pace with growing demands on their energy infrastructure. "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 foremost in the Government's mind was the need to have a reliable energy network and the lowest possible electricity prices together with choice for all households and small businesses. "It has always been the Government's position to have competition and choice for consumers, the difference between what we are doing and the Liberals is that we ensure it is done effectively and that there are real and lasting benefits for consumers when it happens. 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 Liberals approach was wrong and now they should admit it. Page 6 Expert Panel report executive summary: 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. Mr 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 and we agree. "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. Mr Green said the Government has also decided to simplify the structure of Tasmania's energy businesses, reducing the number from three to two, which will save at least $8 million every year. "We will achieve this by combining Aurora's Distribution Business and Transend Networks into one State-owned business responsible for the transmission and distribution of electricity. Mr Green said the Government's view is that the State would be best served by transferring ownership of the Tamar Valley Power Station from Aurora to Hydro Tasmania. "We will also explore the option of 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. "The reforms announced today provide the best structure for the energy sector to move forward and provide value to the Tasmanian community for the long term. Mr Green said there is a substantial amount of work still to be done in order to implement the Government's reforms. "It is a significant and challenging task but the Government is committed to seeing these reforms through because we know that it is the right thing to do for Tasmanians," Mr Green said.