Minister Backs Basslink - David Llewellyn, MHA - Tasmanian Government Media Releases


Energy Minister David Llewellyn today confirmed in addition to its considerable strategic benefits, Basslink is a positive commercial proposition for Tasmania.
“Since assuming the energy portfolio, I have been aware of the politically motivated scare campaign that has been run in relation to Basslink.
“Mindful of the apprehension and confusion this kind of misinformation causes ordinary Tasmanians, I recently asked the Chairman and CEO of the Hydro for their assurance that Basslink remains a positive commercial proposition.
“On the basis of those extensive briefings, I am confident in addition to its strategic benefits, Basslink is a very wise investment," said Mr Llewellyn.
At a strategic level, Basslink provides:
· effective drought proofing for Tasmania;
· the physical link that enables Tasmania’s participation in the National Electricity Market that delivers some of the lowest energy prices in the western world;
· the flexibility to share the benefits of spare Victorian and Tasmanian generation capacity over time.
Mr Llewellyn said for several years, Hydro Tasmania’s Annual Reports have shown that it will pay Basslink’s owner, National Grid, a facility fee for 25 years.
On the revenue side, Basslink is funded by:
· arbitrage, or the practice of buying low price electricity from Victoria and exporting it back at times of higher prices in the physical market;
· contract trading, by taking profitable positions in the NEM’s financial and ancillary services markets;
· the sale of additional Renewable Energy Certificates, derived from both wind projects and the upgrade of existing dam plant;
· increased system yield, in that Tasmania can now sell energy from water that would have otherwise spilled for no return; and
· drought proofing, in that Basslink imports are substantially cheaper than running Bell Bay on either heavy fuel oil or gas.
"I have been assured the financial modelling of Basslink’s revenues and benefits is expected to exceed the cost of the facility fee, over the life of the contract."
Mr Llewellyn also confirmed that he has asked Hydro Tasmania to provide preliminary advice regarding the potential conversion of Basslink by National Grid Australia (NGA) from a Market Network Service Provider (MNSP) to a regulated transmission asset.
"The conversion of MNSPs such as Basslink to regulated status has always been an option.
"I am aware that the operators of the other Australian MNSPs, Murraylink and Directlink, have successfully made this transition following favourable policy changes in the national regulatory environment and I am keen to know what costs and benefits a similar course of action might offer to Tasmania.
"Under a regulated model, the Australian Energy Regulator would be asked by NGA to determine the value of the link.
"The regulatory asset value would be used to determine the stream of revenue that would be recovered as a component of Transmission Use of System charges, paid by the consumers that benefit from the link’s operation in both Tasmania and Victoria."
Mr Llewellyn stressed consideration of this issue is only at a very early stage and no negotiations are currently afoot.
"If conversion is found to be a plausible option worthy of further investigation, the proposal would be subject to exhaustive analysis by NGA, involving all the relevant stakeholders.
"Consideration of this issue is only one part of my broader energy policy agenda as Energy Minister this term.
"The successful implementation of NEM entry and physical connection through Basslink and gas have been great achievements that will drive the prosperity of the Tasmanian economy for years to come.
"However energy reform is never finished. My priority as Energy Minister is to review our portfolio of energy assets and our energy policy to ensure that we make similar progress in the years to come.
"The status of Basslink is only one element of that process, but one that deserves our careful scrutiny."