Uncertainty surrounding Australia’s climate change policy may derail the Keneally government’s plan to partially privatise electricity.
The NSW Auditor-General, in his report released yesterday, says any future carbon reduction scheme could discount the value of the assets being auctioned, and the uncertainty around policy is having a significant impact on investments in the $10-billion-a-year national electricity market.
“I believe that clear articulation and co-ordinated direction from governments on carbon reduction initiatives and the future of coal would benefit NEM investment,” the report by Auditor-General Peter Achterstraat states.
The complexity of the “gentrader” model - where the private sector is bidding for contracts to trade the output of the state’s nine power stations - is also a “challenge”, he says.
The findings add to the pressure on Julia Gillard to clarify her government’s carbon price policy. The Prime Minister’s decision to leave open the option of a carbon tax or emissions trading scheme has sparked new debate about what form the policy should take.
The report also notes that demand for electricity in the state is expected to outstrip supply by 2016-17 and that the desalination plant at Kurnell, in Sydney’s south - which is about the same size as Queensland’s Gold Coast desalination plant - had driven up peak demand for energy.
The cost of desalination plants has already put immense pressure on water bills, with prices for a typical household rising by up to $164 a year.
On top of this, the report says that retail electricity prices are set to “increase noticeably” in NSW over the next five years, and by up to 42 per cent by 2012-13.
NSW Premier Kristina Keneally rejected Mr Achterstraat’s concerns about the complexity of the gentrader sale.
“The transaction is on track and bids close on the 15th of November,” she said.
But the opposition called for the sell-off to be halted.
“The people of NSW are likely to lose billions of dollars, never to be had again, on the back of this sale,” opposition Treasury spokesman Mike Baird said.
“The Auditor-General has very rightly identified the big problems in relation to the complexity of this transaction, which ultimately results in a reduced price. Selling these assets at this time in this form is not in the interests of the people of NSW.”
