May 23, 2013
Ergon Energy will ease out of the energy marketplace and in future purchase energy “predominantly” from the government-owned corporations Stanwell and CS Energy.
Treasurer Tim Nicholls announced yesterday the State Government would implement “new wholesale electricity supply arrangements” for Ergon in the wake of a review.
Commentators noted after the announcement the decision to shift Ergon into contracts with Stanwell and CE Energy could make the government-owned power generators a more attractive proposition for potential purchasers.
Mr Nicholls said the new wholesale energy procurement arrangements would be implemented for a term of up to four years from 2013-14, and would “supplement rather than replace” existing supply arrangements.
Energy purchases would begin on January 1, 2014 “at modest levels” with volumes increasing over the term of the arrangement, Mr Nicholls said.
The Treasurer said Ergon received a significant Community Service Obligation payment from the government to enable it to supply electricity to regional areas at a reasonable price.
“In 2012-13, the cost of the CSO is budgeted to be $620 million and, in 2014-15, this cost is estimated to increase to more than $700 million,” Mr Nicholls said.
“This is a significant cost to the State and, to help offset this, the government is committed to improving the efficiency of its energy portfolio wherever possible.
“This is a short- to medium-term strategy to ensure that electricity is supplied to the Ergon region in the most cost effective manner by utilising the government-owned generation portfolio,” Mr Nicholls said.
The longer-term objectives for the government’s energy portfolio are being considered by the Government’s Inter-Departmental Committee on Electricity Sector Reform and as part of the 30-Year Electricity Strategy.
This includes assessing the feasibility of other structural options for the government-owned energy portfolio, such as creating a vertically-integrated energy utility similar to other competitive market participants.
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