Opening for more private electricity suppliers

LETTER TO THE EDITOR

 

Sir – The NT Government today introduced legislation to support downward pressure on power prices for Territory families by enabling greater competition in the electricity market.

 

The effect of the proposed legislation would be the separation of the Power and Water Corporation (PWC) into three separate corporations with unique responsibilities for generating, distributing and selling electricity.

 

The proposed legislation would create the Power Generation Corporation, the Power Retail Corporation and leave the existing PWC with responsibilities for network and power system operations.

 

The establishment of the new Power Generation and Power Retail corporations will represent an important step in the wider reform of the electricity market in the NT.

 

This reform of the Territory electricity market is based on two key pillars: Firstly to make it more attractive for the private sector to enter the market and provide competitive electricity services to Territorians.

 

Secondly, the reforms involve a number of changes to the current structure of PWC. That current structure is in need of modernisation to create more efficient supply of electricity.

 

The new Power Generation Corporation will be responsible for the electricity generation functions currently undertaken by the PWC. This corporation will sell the electricity it generates to the new Power Retail Corporation as well as private sector retailers.

 

The new Power Retail Corporation will purchase electricity initially from the Power Generation Corporation but, in the longer term, also from private sector generators that may establish in the Territory.

 

Both new corporations will be established as Government owned corporations and will operated on commercial lines with separate Chief Executive Officers and professional board of directors.

 

The creation of the new corporations will involve the transfer of a substantial number of current PWC employees. The transfer of employees will not affect their terms of employment or any existing rights. They will have the same legislative protection they currently do.

 

The new corporations will be formally constituted this financial year so they are able to accept the full transfer of their respective responsibilities from PWC on 1 July 2014.

 

Structural separation of PWC is a significant step towards a more efficient and competitive electricity market in the Territory.

 

These changes also bring the structure of the Territory Government’s utility provider into line with electricity companies, both public and private, in the rest of Australia.

 

Dismantling PWC’s combined monopoly in electricity generation, distribution and retailing is vital if we are to attract new entrants to the Territory market and reap the benefits competition can bring to electricity users of all sizes.

 

Dave Tollner (pictured)

Treasurer

 

 

UPDATE Friday February 14:

 

Despite PWC’s $41 million before tax profit the utility company was still a long way off delivering a reasonable return for Territorians.

 

On top of the $2.4 billion investment taxpayers have made in PWC over time, last financial year more than $61 million was also tipped in to subsidise regulated utility tariffs under a Community Service Obligation.

 

Without that injection, PWC would be running at a $20 million loss. To get a commercial return of six per cent on the asset base, PWC would need to earn a net profit before tax of $69 million without the Community Service Obligation payment.

 

The bottom line is PWC would need to earn another $90 million to be making healthy returns. Given the massive investment taxpayers have made in the PWC, the government remains firmly of the view that the current structure of the corporation was not delivering sufficient value for money for Territorians.

 

The government believes PWC will deliver better returns if the generation and retail aspects are run as stand-alone entities. The bill for the structural separation of PWC will be debated in Parliament in March.

 

The bottom line of PWC also had to carry the $25 million cost of the former Gillard Government’s carbon tax.

 

If the Opposition in the Territory has a genuine interest in the viability of PWC, then maybe they can talk to Power Bill Shorten in Canberra and convince him to stop blocking the repeal of Labor’s tax on power bills.

 

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4 Comments (starting with the most recent)

NB: If you want to reply to a previous comment, start your comment with this notation: @n where n is the number of the comment you want to reply to.
  1. Janet Brown
    Posted February 18, 2014 at 7:51 am

    Last night’s Q&A program raised issues regarding the added cost to low income people due to the renewable energy roll out.
    Many factors come into this those I have in earlier articles attempted to get answered by managers in solar cities and PAWA.
    They took also to the media and stating that I had no idea what I was talking about. Now the truth is coming out and I am happy to say “told you so”.
    Mangers protecting their backsides and deliberately putting out misinformation and publicly ridiculing anyone who dares to reveal the truth.
    A government department that spent like money was a renewable resource and spent and spent and not on maintenance and upkeep.
    Now that would be a good question for Mr Whyte: Where has monies been wasted?
    I am not a fan of privatisation but when government departments refer to themselves as a corporation you can guarantee that money will be, as in this case, flushed down a toilet. No outcomes and no value for money. I also believe that PAWA assets are not at a standard to sell at a good dollar but with PAWA past disrespect for tax payers money, I would not trust them with providing our future energy supply. So sell it. At least then the government will be able to monitor it better. They sure failed all Territorians with the inability to monitor a government department.

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  2. Hermann Weber
    Posted February 16, 2014 at 4:35 pm

    I will be very interested to see how this plays out. Not being familiar with the current workings of what is now called the PWC I am not sure how the cost of supplying electricity in remote areas is treated.
    But I remember the old PAWA was required to supply at the same charges everywhere regardless of the cost of generating that power. The Territory has only two markets were a profit can be achieved: Darwin and to a lesser extent Alice Springs.
    I well remember the fight when a new supplier tried to enter the field but was only interested in large consumers like mines and supermarkets in the Darwin area. Leaving the costly stuff to PAWA.
    Good Luck.

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  3. Paul Parker
    Posted February 14, 2014 at 12:12 pm

    Will the new Power Corporation(s) be working to recover cost of power production in each of the communities outside of Darwin and Alice Springs where NTG currently supplies the power?
    Shall each of these new power retail suppliers provide a single price for supplies throughout all the NT?

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  4. John McCormack
    Posted February 13, 2014 at 4:31 pm

    It is all about trust, isn’t it?

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