APA Group, the owner of the Basslink energy cable connecting Tasmania and Victoria, is seeking to regulate the cable and pass maintenance costs onto consumers. This move could potentially harm Hydro Tasmania's profits and increase energy prices in both states.
The national energy regulator is considering a proposal from Basslink 's owner that would pass the cost of maintenance onto consumers. The owner of the Basslink energy cable between Tasmania and Victoria has criticized a draft decision to reject its application to recoup upkeep costs.
The company states that if the decision stands, it will be forced to prioritize maximizing the cable's profits, leading to an increase in wholesale energy prices in both states and potentially excluding Hydro Tasmania. A decision by the Australian Energy Regulator (AER) on how Basslink charges customers could impact Hydro Tasmania's profits and escalate energy prices, according to a leading energy analyst. The AER has indicated its intention to deny a request from APA Group, Basslink's owner, to regulate the undersea power cable and shift the cost of maintenance to consumers. APA warns that if this decision is finalized, it will instead focus on maximizing its profits by directly trading energy between Tasmania and Victoria. A leading energy analyst suggests that the national energy regulator's decision could threaten Hydro Tasmania's profitability and drive up energy prices in both Victoria and Tasmania.Currently, under the Basslink Service Agreement, Hydro Tasmania pays APA a fixed fee to utilize the Basslink cable. This allows the state-owned energy company to sell Tasmania's power into the national grid when prices are high and purchase when prices are low, maximizing profits and preserving water levels. However, if APA assumes control and operates Basslink as a 'market link,' it would capture the profits from selling between the regions. This could potentially damage Hydro Tasmania's 'cash cow' status and increase power prices in both Victoria and Tasmania. Basslink's 370 kilometers of undersea cables connect Loy Yang in Victoria to George Town in Tasmania. Energy Analyst Marc White of Goanna Energy emphasizes that if APA controls Basslink, Hydro Tasmania would be at its mercy, similar to relying on a trucking company without a firm contract. He also warns that APA could manipulate the wholesale energy price by limiting the amount of energy supplied through the link. According to White, APA might choose to bid only a portion of its 450 megawatt capacity into Victoria, artificially inflating the price and maximizing its returns.APA acquired the 370-kilometer high-voltage cable between George Town in Tasmania's north and Loy Yang in Victoria's southeast in 2022, after the previous owners faced difficulties. APA committed to seeking regulation for the cable, a position supported by the Tasmanian government, with the current service agreement extended in the interim. Basslink, responsible for connecting Tasmania to the national energy market, entered voluntary administration after disputes with Hydro Tasmania and an unsuccessful sale. In its response to the draft decision, APA claimed that the revenue it received under the service agreement was insufficient to sustain long-term operations and would not be extended. It asserted the need to 'maximize revenue,' which would likely result in increased average wholesale electricity prices, potentially impacting Tasmania more significantly.If APA succeeds in making Basslink a regulated cable, it seeks to recover $103 million annually from energy consumers through higher transmission charges. However, it claims that independent economic modeling by ACIL Allen demonstrates an overall benefit of $1.6 billion over the cable's lifespan. Hydro Tasmania's acting chief executive, Erin van Maanen, stated that APA's plans would render Basslink less predictable, utilized less frequently, and more costly for consumers. She emphasized that Tasmania's flexible generation capacity positions it well to continue supporting reliable supply for Tasmanian customers. A final decision on whether to regulate Basslink is anticipated at the end of this month. The AER acknowledged the 'high degree of uncertainty' surrounding the benefits of regulating Basslink and exercised caution to avoid burdening consumers with the asset's costs. The AER also expressed concern that the proposed Marinus Link, a second undersea and underground electricity and data interconnector jointly owned by the Australian, Tasmanian, and Victorian governments, could diminish the value of Basslink. Hydro Tasmania, in its submission on the draft decision, argued that regulating Basslink would 'ensure efficient inter-regional trade, mitigate systemic market risks, and support the ongoing energy transition.
Basslink APA Group Hydro Tasmania Energy Prices Regulation Australian Energy Regulator (AER) Marinus Link Tasmania Victoria
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