New electricity supply arrangements for Ergon

The Newman Government will implement new wholesale electricity supply arrangements for Ergon Energy’s retail load in Queensland.

The Government has completed a review of energy purchasing for Ergon, Treasurer Tim Nicholls said.

“Ergon’s energy needs will be supplied predominantly through State-owned electricity generators CS Energy and Stanwell,” he said.

“The review found this would be the most effective strategy.

“The Newman government is working to improve the efficiency of its energy portfolio,” Mr Nicholls said.

The new market-based wholesale energy procurement arrangements will be implemented for a term of up to four years from 2013-14, and will supplement rather than replace existing supply arrangements.

Contractual volumes under this new arrangement will begin 1 January 2014 at modest levels, with volumes increasing over the term of the arrangement.

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.

The EEQ retail load is in the order of 8,000 gigawatt hours per annum and the effect of the new contracting arrangements will be the early achievement of energy purchasing price certainty for this load through contract levels typical of a retail portfolio.

“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.

[ENDS]  22 May 2013

Media contact: Maree Lacey 0409 947 957