GOANNA ENERGY CONSULTING APRIL 2014 NEWSLETTER

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1 GOANNA ENERGY CONSULTING APRIL 2014 NEWSLETTER Goanna TSBC Submission helps save Households and Businesses $35M The Australian Energy Regulator (AER) is currently looking into transmission charges levied by Transend for the use of its high voltage power lines from 1 July 2014 to 30 June On average, these charges make up around 15 cents in every dollar spent by Tasmanian businesses and households on electricity, making them almost twice as significant as the carbon tax and renewable energy target combined. AER s first task was to make a placeholder determination for the 2014/13 Financial Year, which was released on 28 March, to be followed by a full determination covering the remaining four years. Goanna assisted the Tasmanian Small Business Council (TSBC) in preparing a detailed submission on the Transitional Proposal lodged by Transend. Goanna s assessment was that the rate of return proposed by Transend was too high and should be reduced by some 69 basis points and that elements of Transend s proposed expenditures were also likely to be too high, notwithstanding some welcome reductions in costs compared to the last AER review in Both measures would lower Transend s total revenue over the next 5 years by some $83 million (or 7.4%), which would be returned to consumers. The AER decision largely agreed with Goanna s assessment and reduced Transend s rate of return by some 39 basis points meaning a saving of $10 million for Tasmanian consumers in 2014/15 (which would translate to some $35 million over the whole 5 years). However, the AER only completed a preliminary assessment of Transend s expenditures and therefore did not reduce this (but signaled an expectation that it will likely do so in its full assessment). As a result of the AER s decision and Goanna s contribution to the TSBC submission, average transmission charges will reduce by 5% from 1 July, a good outcome for electricity consumers. TCCI Goanna Tasmanian Energy Breakfast Briefings The Goanna Energy team were joined by over 50 delegates across the State and were delighted to have Matthew Groom MP providing the opening address in Hobart followed by Jeremy Rockcliff MP and Adam Brooks MP at the Devonport session where Jeremy provided the opening address. Goanna Associate Roman Domanski, gave a run down on the Tasmanian electricity market, how it works, price trends (past and future), what factors influence prices, network regulation and some important energy policy questions (State and Federal) that will impact on price outcomes for business. He also discussed the influence of recent declines in the demand for electricity and gas prices.

2 Goanna would like to thank ERM Business Energy for sponsoring the series, the Deputy Premier Jeremy Rockcliff, the Minister for State Growth and Energy, Matthew Groom and the Parliamentary Secretary for Small Business, Adam Brooks, for taking the time to participate, all those who attended, the TCCI for hosting and supporting the series and all the venues involved, where we were made to feel very welcome. Goanna Team in Launceston Launceston Audience New Energy Minister Matthew Groom Reaffirms Liberal Policy Commitments The new Minister for Energy, Matthew Groom, MP, outlined at the recent TCCI-Goanna Breakfast Briefing in Hobart that the new Tasmanian Liberal Government would be focusing on the following first steps to implement a coherent energy policy designed to place energy squarely in the mix to boost Tasmania s competitiveness and productivity: Form a Stakeholder Working Group to provide it with the best available advice on how energy can return to its pre-eminent place as a source of Tasmanian competitive advantage. This has been eroded and lost in recent years with the large increases in electricity prices. The Group will report to the Government by the end of the year. Introduce full retail competition for small electricity customers in Tasmania on 1 July Look to place Aurora s retail customer base up for sale again. Reforms to ensure that State owned electricity assets deliver the best possible results for customers and are managed so that they operate efficiently and effectively. Examine options on how to most effectively deal with gas price pressures now starting to affect Tasmania. Goanna welcomes the new Minister s comments and looks forward to working with him and the Government to effect policy change.

3 ERM Business Energy announcement welcomed by Tasmanian Energy Brokers Goanna affiliate company Tasmanian Energy Brokers has welcomed the news that ERM Business Energy will now offer competitive energy pricing to an additional 4,000 Tasmanian businesses, who spend over $10,000 per annum on electricity. These businesses can now arrange energy price and cost comparisons by submitting their current bill online on the Compare tab at Goanna welcomes John Devereaux to the team Goanna Managing Director Tracy White is delighted to announce that John Devereaux has joined our growing team of energy specialists. John has extensive experience in the energy industry, including such roles as General Manager Strategy and Corporate Affairs with Power and Water (NT), Acting CEO of the Energy Networks Association of Australia, GM Networks and Chief Financial Officer with Aurora Energy. Over the past 18 months Goanna have been extensively involved in energy policy reform and electricity network regulation. Not only does John add another 30 years of energy and commercial experience, but his unique skills have further cemented Goanna s position as Tasmania's leading specialist energy consultancy. Mandated Renewable Energy Target Review Update As most of our readers would be aware, the Federal Renewable Energy Target (RET) sets a mandated target for achieving 20% of Australia s energy from defined renewable sources by 2020 and the Abbott Government has recently announced a review of the RET, covering both its small and large scale components. The RET is effectively a subsidy from electricity consumers to the renewable energy industry. It currently adds around 4% to Tasmanian electricity bills (very large users are partially exempt) and this is set to increase as the target ramps up to its 20% level. The Prime Minister has expressed a view that the target is adding to electricity bills and needs to be reviewed, although the renewable energy industry disputes this. The review is headed by businessman Dick Warburton and he is joined by Dr Brian Fisher (ex ABARE director), Shirley In't Veld (former CEO of Verve Energy) and Mr Matt Zemma (AEMO CEO) in making up the Panel. There has been much comment that the Panel is skewed towards climate deniers and people with a dislike of the RET. Among the controversial issues which the Panel will have to confront are: determining the costs of the RET and assessing offsetting benefits; its impact on electricity bills; whether the 20% target is realistic and achievable; what impact the recent declines in electricity consumption have had on the 20% target (eg, whether it should be expressed in terms of a predetermined Giga Watt hour amount or a percentage of actual energy produced/consumed at a point in time); whether RET coverage should be expanded to

4 include lower emitting forms of energy, such as gas; and whether the scheme should be abandoned or phased out altogether. It will be interesting to watch how the review unfolds and also the response to its recommendations. Goanna will be keeping an eye on the review and can assist clients who wish to become involved in it. A web site has been established at and the Panel is to report by mid Goanna work with COSBOA on AER Better Regulation starts to show results Readers would be aware from previous issues that Goanna has been working with COSBOA (Council of Small Business Australia) to provide small business input into a major program being run by the Australian Energy Regulator (AER) to implement a range of reforms to the way monopoly energy transmission and distribution networks are regulated. A key aim of the reforms and the AER s follow-up Better Regulation work has been to ensure that energy networks are only allowed to recover their efficient costs and only provided with a rate of return that is appropriate to their low risk monopoly status. This work was very detailed and involved Goanna assisting COSBOA in coming to grips with thousands of pages of complex information through 9 submissions, themselves totaling nearly 150 pages. Regulation certainly wasn t meant to be easy! However, the payoff for consumers, including Goanna clients, is now starting to flow with some network regulation improvements being implemented and CPI ish increases in network prices likely in the next few years (see separate story on the AER s recent decision on Transend in this issue). However, consumers can t rest on the laurels of this and will need to maintain scrutiny of network regulation if they are to enjoy the benefits of wellrun and efficient energy networks well into the future, which account for halve of their cost of energy. Goanna has considerable capacity in network regulation and pricing, which our clients can access. Next Edition: All Tasmanians to get choice of retail electricity provider, but who s at the party? Look out for our next newsletter for a Full Retail Contestability (FRC) update! For up to date large user pricing information contact Marc White direct on or for small - medium business users (<$100,000 per annum) arrange an online price comparison at For more information and media engagements please contact Marc White, Principal Consultant on (03) , Mobile or visit

5 Follow Marc on Twitter at and/or Tasmanian Energy Brokers on Whilst Goanna has endeavored to ensure that the information contained within this newsletter is accurate, we do not make any warranties or representations in relation to the accuracy of the information contained herein. This newsletter is intended as general advice only and is not intended to constitute personal financial product advice. It is has been prepared without taking into account the personal circumstances, financial needs or objectives of anyone person or organisation. Accordingly individuals or organisations, who seek to rely on information contained within this newsletter, should undertake their own independent enquiries and seek legal or financial advice prior to doing so. Disclosure: Tasmanian Energy Brokers Pty Ltd is an affiliated business of Goanna Energy Consulting Pty Ltd. Goanna Energy Consulting performs services for Tasmanian Energy Brokers, for which it may receive fees and/or commissions. Dated 7 April 2014