The Tamberlin review
Wednesday, 02 November 2011 07:59
Like the Owen report before it, the Tamberlin review is a milepost on the long road to restructuring and rebuilding the New South Wales electricity supply sector, but it is not a landmark.
Unfortunately, the political community keeps falling short of completion of a whole new edifice for NSW power, as has been achieved in Victoria and South Australia, and the prospects of this occurring in 2012, given the populist issues, can’t be seen as high.
Despite the gen-trader approach being “sub-optimal,” the developments late in the life of the Keneally Labor government have their merit, according to Judge Brian Tamberlin.
Sale of the State’s energy retail assets and the gen-trader part-sale, the report finds, have delivered a more competitive end-user market, have the potential to deliver a more competitive wholesale market and have had the effect of encouraging some private investment.
The $5.3 billion process can’t be characterised as a “fire sale” in Tamberlin’s judgement.
The report’s recommendation that the O’Farrell government sells all the electricity-related activities that are taxpayer owned is, inevitably, gaining most of the media’s focus, but there are other aspects of the review that merit attention, too.
One is its quiet observation that the gen-trader process may not have been sufficient to obviate the need for more government spending (on generation) to meet future demand. This needs to be read against a recommendation that the government sell the power station development sites as well as all the generation businesses.
Waiting in the wings for resolution are the recommendations by each of Macquarie Generation (which is still intact) and Delta Electricity (with a large part of its production sold) that future demand should be met by either a major coal-burning power station at Bayswater B or Mount Piper 2 sites or by construction of a succession of gas-burning combined-cycle plants.
While the report now suggests that the commissioning of additional capacity is not needed until 2018, the time needed for construction will require that the chosen project (or others that could be put forward) gets under way in 2013-14.
Another important issue canvassed in the report is whether or not State-owned generators will pass through the full cost of the national carbon price.
(Tamberlin engaged Professor Tony Owen to contribute to the review and there is a 33-page “report within a report” from him which includes a warning of the danger that the State generators may be encouraged to absorb some of the carbon price pass-through “for non-commercial reasons,” thereby endangering the integrity of the federal “clean energy future” scheme.)
A third, related concern is that the subsidised coal to be provided by the Cobbora mine, currently being built, also cuts across the intent of the carbon abatement process, especially with the mine intended to be the main supplier to the NSW power stations post-2020. The Tamberlin/Owen advice is that the mine should be sold and contracts for coal supplies renegotiated.
All of these issues are of first-order importance, but they are probably all outweighed by what the O’Farrell government decides to do about privatising the four network businesses because their collective sales value could be as high as $30 billion.
Rather unhelpfully, the Tamberlin report says that (a) the evidence tends to support a view that the network sales would lead to efficiency gains over time but (b) “there is a lack of emperical evidence to support these views.”
The bottom line is that the ball is again in the NSW government’s court and it would be charitable to suggest at the moment that even the foundations of a landmark structure have been laid.