Debt won’t affect power bills

FEARS that households and small businesses will be forced to bear the brunt of debt lumbered onto power distributor TasNetworks can be categorically dismissed, according to economist Phil Bayley.
Nanjing Night Net

TasNetworks will from today take on $325 million of Hydro debt, in a move the government says will ensure the renewable energy generator remains sustainable.

The transfer takes TasNetwork’s total debt to about $1.64 billion, after it last month gave $30 million to prop up Forestry Tasmania.

Greens leader Kim Booth argued the government was pursuing a dangerous strategy bound to drive up power prices.

‘‘TasNetworks has only got one way of collecting revenue and that’s to charge for transmission of electricity and that ends up on everybody’s power bills, so the Treasurer is just using weasel words,’’ Mr Booth said.

‘‘If TasNetworks has an alternative revenue source by which they will pay down this debt, then please inform us.

‘‘Otherwise clearly it is Tasmanian mum and dad power consumers, and local business consumers, who will be paying.’’

Mr Bayley said the assertion was wrong, arguing TasNetworks was a regulated business with no capacity to alter its prices.

‘‘The mix of debt and equity any regulated business holds has no impact on its pricing … there’s absolutely no relationship there at all,’’ Mr Bayley said.

‘‘There is some evidence having high debt encourages power network businesses to operate efficiently and refrain from gold-plating network assets.’’

His views were echoed by TasNetworks chief executive Lance Balcombe, who said the increased debt level would not impact prices, customer services or capital plans.

Mr Balcombe said the Australian Energy Regulator assumed a debt gearing of 60 per cent among distribution companies and set prices accordingly, irrespective of a company’s financial standing.

He said TasNetworks’ debt loading would increase to 62 per cent after today’s transfer – a level he described as comfortable.

Mr Balcombe said there was no immediate need to pay off the debt, and did not believe it would impact the company’s credit rating.

Treasurer Peter Gutwein this week said Hydro had been forced the shoulder the multimillion–dollar debt when the former government bought the rarely-used Tamar Valley Power Station.

But Labor leader Bryan Green hit back, saying Mr Gutwein supported the purchase while in opposition.

‘‘The reality is that Mr Gutwein’s irresponsible spending spree during the election campaign has resulted in real pressure on our economy,’’ Mr Green said.

‘‘The government is eroding public services and stripping more and more money from our GBEs to pay for election pork barrelling that we cannot afford.’’

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