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TasNetworks - Marinus Link

Dr Rosalie Woodruff MP

Dr Rosalie Woodruff MP  -  Friday, 2 December 2022

Tags: Marinus Link, TasNetworks

Dr WOODRUFF - I have a question about the regulated asset costs for Marinus. In your funding announcement of 19 October this year, you said Tasmanian customers will pay no more than 15 per cent of estimated total project costs across both the Marinus Link and North West Transmission Developments.

Tasmania has approximately 290 000 electricity customers in total. Victoria has 2 900 000 customers. Tasmania has 10 times fewer electricity customers than Victoria.

Would it be true then that if Tasmania's customers pay 15 per cent of total project costs an individual electricity consumer in Tasmania would in fact be paying 50 per cent more for the costs associated with these projects than an individual consumer in Victoria?

Mr BARNETT - Thank you for the question. I appreciate that. As I said earlier, if we follow the existing rules, RIT-T, it would be 50-50 per cent between Tasmania and Victoria. That was unfair. It was never tenable, never a goer. The arrangement we've made with the federal government is that as a result of that agreement, the operational costs be reduced by nearly half. Likewise, the agreement allows for and agrees on Tasmanian customers to pay no more than 15 per cent of the estimated total project costs across Marinus Link and the North West Transmission Development. We think that's fair. We think that's reasonable.

We believe we have a very good deal for Tasmania, based on the agreement we have. It is however, subject to financial investment decision in 2024. It is subject to clarification on those costs for the link, as in the cable, which is a very expensive cable. It needs to be fit for purpose and likewise the converter station and other costs. Marinus Link have already done a lot of work in that regard, but there is very significant work to do between now and the end of 2024.

Dr WOODRUFF - I would have thought you'd like to put to bed that question because it certainly is concerning. I would like you to address it because people are trying to understand your pretty slippery language on this stuff. You can say 15 per cent, but as I just laid out to you, there are 10 times fewer customers in Tasmania. What does that mean?

We understand it would mean, on the face of it, that Tasmanian customers would actually be paying 50 per cent more relative to an individual customer in Tasmania and an individual customer in Victoria.

Can you please disavow me of that, if that is not true?

Mr BARNETT - Thank you for the question. I don't appreciate the verballing that you provided in the first part of your question. However, I am happy to advise that because it is a regulated asset, customers will only pay for it once it is built. As we said earlier, that is scheduled for 2028-29 for the first link and then 2030-31 for the second. So, it needs to be built and operational and providing a net benefit to customers. As Bess Clark confirmed just a few moments ago, for the average household in Tasmania, Marinus Link will deliver a $60 to $70 net benefit to their power bill.

Dr WOODRUFF - Minister, in 2020, the Economics Security Board provided advice to energy ministers on a new transmission cost allocation methodology and a decision was expected that year. As far as we are aware, it still hasn't happened, two years later.

Earlier this year Marinus Link Proprietary Limited announced its intention to pursue a different process and pursue a rule change that would allow the cost allocation to be developed individually for Marinus Link. You'd appreciate on laying this out for people who are listening. I know we have talked about this. Ultimately, they lodged a proposed rule change proposal that would allow revenue determination to be made for an intending transmission network service provider. That proposal explicitly did not include rule changes about a cost allocation. It seems to us that every avenue for a cost allocation has stumbled and has found a dead end, so where on earth has that 15 per cent that you keep repeating come from, given there seems to be no relevant cost allocation method that has been approved by any relevant regulator?

Mr BARNETT - I can see where you are coming from. The answer is in the Rewiring the Nation program, which the federal government has announced and now implemented via this first renewable energy project - in fact, the largest since the Snowy Scheme. It is a big commitment by the federal government through that program to provide fair outcomes for Tasmanian consumers and the Tasmanian economy.

As a result of that - and to go back one step, you are right. This has been put forward to the energy ministers' meetings consistently, including and particularly by Tasmania, over many years, to ensure that we had a fair deal, because we were not going to accept a deal that was unfair. This Government advocated strongly time and again for a fair deal, fair cost allocation. That was put time and again. You mention the Energy Security Board. They came back with a number of models. Never landed it at the energy ministers' meeting.

However, since the election of the federal Labor Government and the Rewiring the Nation program, that has allowed for Tasmania to negotiate a very good deal, despite the criticisms of our Government for not doing the deal sooner, or rejecting certain proposals and offers. We kept holding the line all the way to get the best possible deal for Tasmania, and we got that deal. Now, it is subject to financial investment decision. There is more work to be done, and working with Victoria as well. The energy ministers made it clear and we have all agreed that certain transmission projects would be projects of national significance. That means they are treated in a difference way.

Marinus Link is one of those five, and we are now the first cab off the rank. When I was at the energy ministers' meeting a couple of months ago, they were so admiring and pleased and congratulatory of Tasmania and the Commonwealth and likewise Victoria for sealing this deal. They are very interested in how they can have a deal for themselves in their own jurisdictions. We have led the pack, as a result of the advocacy and lobbying of this Government over a long period of time - the Premier, the former premier, and the premier before that as well - to get the best deal for Tasmania possible.

Dr WOODRUFF - Would you say then that the deal has been formally agreed? Has it been formally signed off? I know you have been trying to prosecute this, but has it formally been agreed through a mechanism?

Mr BARNETT - The Premier and myself on behalf of Tasmania, and the Prime Minister and the Minister for Energy have signed a letter of intent between our two jurisdictions.

Dr WOODRUFF - Of the 15 per cent cost allocation for Tasmania?

Mr BARNETT - We have signed an agreement. The media release to which you refer and Mr Winter referred to earlier outlines at least key parts of that agreement, which is on the public record.

Dr WOODRUFF - Minister, I wanted to dig into the claims that Tasmanians will pay 15 per cent of total project costs for Marinus. I note that you've never said, neither has the Victorian minister, that Victorians will pay 85 per cent. I understand 20 per cent of the Marinus cost would be funded through an equity injection. I assume this component of costs will not be recoverable through charges as a regulated asset. When you say 15 per cent of total project costs, do you mean 15 per cent of charges associated with being a regulated asset or do you literally mean 15 per cent of the project costs?

Mr BARNETT - I refer you to my earlier answer, but I would like to add to that. Regarding the 80 per cent debt funding, 20 per cent equity, this is as a result of the Rewiring the Nation agreement that we have. It's concessional rates and concessional returns, including for equity. Yes, it will be a regulated asset in accordance with the usual procedures. There are experts around this table who are more expert than me. I met recently with both the head of the Australian Energy Regulator and the Australian Energy Market Commission and will be meeting them again on Thursday. I met with the AEMO control room in Sydney a couple of weeks ago.

As a result of this agreement, we have a very good deal for Tasmania. Regarding the debt, we have the ability to pay off that debt over the life of the project and maintain our 33 per cent share of the equity and of the project. The north west transmission is owned 100 per cent by TasNetworks, which is owned by our Government.

CHAIR - Thank you, Minister. The time for scrutiny has now expired for the Tasmanian Networks. I'd like to thank Mr Barnett, Mr Gill, Mr McGoldrick, Mr Westenberg and Ms Clark for their attendance today, and also the committee, and the secretary and the Hansard. Thank you very much.