Media Release

Peter Gutwein MP
Shadow Minister for Energy

Thursday 7th January 2010

Jobs and investment under threat, power prices could go up

A new report from the Energy Regulator says that he considers that Hydro has acted in an anti-competitive way.

As a result, major players in the heavy industry and energy sectors argue that jobs and investment are under threat and power prices could rise if regulation doesn’t occur.

The Regulator said that Hydro has abused its market power, extracted monopoly rents and was anti-competitive. The report was a result of an investigation into why Hydro suddenly began charging significantly higher prices than usual for services needed to generate power into the Tasmanian grid.

Other generators and even some large employers who use significant amounts of power were also caught in the cross-fire and the Regulator was told that Hydro’s behaviour could cost jobs and investment in Tasmania.

One renewable energy generator said in the report it would shelve plans to expand its operations if Hydro’s behaviour continued and one of the State’s largest employers, Rio Tinto told the Regulator that its operations in Tasmania may not be viable if a secure electricity supply at a competitive price and quality cannot be found, which would threaten hundreds of Tasmanian jobs.

Aurora told the Regulator as part of his investigation that Hydro’s behaviour had increased Aurora’s costs and that “the outcome is likely to be an increase in energy prices” if regulation doesn’t occur. This would be the last thing that Tasmanian households need, after already being stung by a 30% rise in power prices over the last two years.

The Energy Minister, who failed to provide a comment to the Regulator, now must explain when he became aware that Hydro was deliberately distorting the energy market to attack Aurora. The Minister, who is responsible for both Aurora and Hydro, must explain what action he took upon being notified and whether through taking a passive approach he effectively condoned what was occurring.

The report, published just before Christmas, says:

• “Hydro Tasmania is misusing its market power, extracting “monopoly rents” and is anti-competitive” (p.6)
• “The Regulator considers that Hydro Tasmania’s bidding behaviour poses a risk to present and future competition” (p.27)
• “If Hydro Tasmania’s pricing of FCAS deters new generators from entering the market, then the future security of supply in Tasmania may also be affected which is not in the public interest” (p.34)

The report also says that:

• Aurora Energy Tamar Valley said that Hydro’s behaviour could drive up power prices in Tasmania (p.27).
• A renewable energy generator in Tasmania may be forced to abandon plans to expand its operations if Hydro continues to act anti-competitively (p.29).
• Rio Tinto’s operations in Tasmania may not be viable if a secure electricity supply at a competitive price and quality cannot be found, which would threaten hundreds of Tasmanian jobs (p.30).