Powerlink's poles of gold

Tuesday, 17 January 2012 10:38

Powerlink, Queensland's monopoly transmission line builder and operator, currently seeking exorbitant price rises, has come in for another round of criticism from experts in the national electricity market (NEM) and should be sent back to the drawing board, Total Environment Centre said today.

Last year, Powerlink asked the Australian Energy Regulator to approve a revenue increase for 2013-2017 equivalent to three times the amount it earned during the previous regulatory period. Independent consultants engaged by the AER found that the amount of energy delivered by Powerlink is likely to actually decrease between 2013 and 2017; and the price rise was unwarranted.

“In its draft determination released in December, the AER reduces Powerlink's proposed revenue from a price rise by 23 per cent. But this is not nearly enough. There's more to do to get a greener and consumer friendly outcome,” said Jeff Angel, Executive Director of the Centre which has been involved in reviewing NEM decisions for the last 8 years.

Late last year the AER launched a public inquiry into Powerlink's proposal. Many submissions to the inquiry criticised Powerlink of “gold plating” its network — building more infrastructure than is necessary to meet its reliability and safety requirements in order to increase its revenue. It was also accused of “creative accounting” and “rorting the system”.

“Powerlink's original revenue proposal was an ambit claim of ridiculous proportions. The AER's draft determination will still result in an increase of Powerlink's average annual revenue of around 40 per cent, and an increase in prices of around 10 per cent per annum. This increase must be passed on to consumers, resulting in higher bills. The Powerlink component of higher bills is likely to outstrip the contribution of the federal government's carbon price,” Mr Angel said.

 “We are calling on the AER to get much tougher on Powerlink. Demand on the national electricity grid has plateaued in recent years, with more emphasis on energy efficiency measures like home insulation and better appliances.  This also has significant environmental outcomes and is cheaper all round.”

“Even if demand were increasing, there are other ways to meet it than building expensive new power lines, such as offering consumers incentives to reduce their demand at peak times.”

“Unfortunately Powerlink's behaviour is not unusual in the electricity market. There is evidence that Powerlink's equivalents in other states, like TransGrid in NSW, also inflate demand projections and infrastructure needs in order to increase their income. This inevitably means higher prices for consumers,” said Mr Angel.