HYDRO FEARS

Date : Thursday, 22 Jun 2006 Subject : HYDRO FEARS Author : Hon Will Hodgman MHA There are concerns government mismanagement is jeopardising the future of the Hydro at a time when it is subject to the high volatility of the National Electricity Market. And the Energy Minister David Llewellyn is either not across the issues of concern or he's covering them up. The Budget reveals the government has not only refused Hydro the $300 million bail-out it says it needs, but it is going to tax it to the tune of $49 million next year, at a time when it is already flagging reduced profitability due to the costs of gas. The very use of gas to supplement Tasmanian's electricity supply is largely necessary because dam storages are low, raising questions about whether Tasmania can sell enough power interstate to cover its $92 million Basslink facility fee. Tasmanian Liberal Leader, Will Hodgman, said the situation was worrying. "The National Electricity Market is highly volatile and competitive and there are concerns about how the debt-plagued Hydro is going to be able to compete against players with better balance sheets, let alone pay the facility fee it is locked into for the next 25 years," Mr Hodgman said. "The Hydro says Basslink weakens its balance sheet and that means it will need to adopt a less risky trading strategy than its peers once Basslink is connected, which will lead to lower revenues. "Compounding matters is the fact that last year was the eighth in a row where inflows to Hydro storages were less than the average needed to meet electricity demand, and things are not looking much better this year. "If the Hydro is using gas to the extent that it is impacting on profitability, how is it going to generate enough power to supply Tasmania's needs, and make sales in the NEM? "In this context, it is notable that Labor is taxing Hydro to the tune of $50 million next year and refusing its request for a $300 million bail out, which was raised by the Hydro immediately after the election. "Labor needs to explain how the Hydro is going to meet its $300 million need, and sell enough electricity interstate this year to cover its facility fee, particularly in light of the fact that the Budget papers are warning of significantly reduced profitability this year because of the cost of gas." David Llewellyn addressed none of these issues in Question Time today. Meanwhile, the fact that the Hydro's guarantee fees have increased in the Budget by 25 p.c. to more than $5 million is another sign that all is not well. This fee represents a commercial payment for the risk to the Tasmanian balance sheet exposed through providing guarantees to the Hydro. "If the guarantee fee has increased so much, the risk to Tasmania must have too." The Premier's refusal to explain how much the risk to Tasmania has increased, necessitating the increase in guarantee fee, was unacceptable. Don't want to receive these Media Releases? Remove your address from our mailing list