Who picks up the tab should a Major Industrial close?
Today’s update by Bell Bay Aluminium to its employees and suppliers advising it has not yet been able to secure an electricity contract beyond 31 st December this year, combined with this week’s news about Boyer Mill, and previous media about Liberty Bell Bay and Nyrstar should be a red flag for the State and Federal Government.
Importantly, the Tasmanian community may be oblivious of how this could impact their cost of living pressures.
With all four Major Industrials experiencing business continuity issues, albeit due to a range of different challenges, electricity pricing appears to be one source of cost pressure for all four. It begs the question why and what can be done, and importantly, what it could mean to Tasmanians if one of the Major industrials closed.
Earlier this year, the Premier reported to Parliament the MI’s have will need to stump up an additional 25% in transmission costs over a two-year time frame. The MI’s shielded consumers from the increased revenue TasNetworks were approved to recover. Now all four have issues. The federal governments energy transition has seen eastern Australia’s electricity pricing go up far beyond CPI – and there does not appear to be anything to change this trend.
Ray Mostogl, the CEO of the Tasmanian Minerals, Manufacturing and Energy Council (TMEC) said, “One of the political decisions which needs to be made in Tasmania is to what extent should the economic contribution a MI makes into the state economic and social (jobs, taxes, payment to GBE’s and suppliers) be used together when determining what is a fair price for the electricity in the state?
A study over ten years ago demonstrated a megawatt of electricity used in Tasmania by an industrial, delivered five times more financial benefit than selling the megawatt interstate”. Ray went on to say, “Some community members and entities like Hydro, TasNetworks and Aurora may make the case selling “baseload” electricity a MI uses will deliver more revenue if it can be sold at higher prices when the mainland demand exceeds supply.
What this argument overlooks are, how will the other entities respond to the loss of revenue – which currently funds the fixed costs of the overhead? Take seaborne freight as an example. The proportion the MI currently pays will need to spread across the remaining users – with 99% of the states freight coming in and going out via the ports, everything we buy or sell will incur a higher freight cost. The same situation can be applied to TasRail, TasNetworks, etc”.
The MIs spend $300-400 million each year with GBE’s – the funding gap would be big. Which remaining Tasmanian consumers will have this added to their bills?
The extra cost may trigger a domino effect on the remaining MI’s where their costs would increase and drive them even further away from continuing their operation. The state government changed the charters – the agreement between shareholding Ministers and the Boards of the GBE’s to require GBE’s to think beyond their own balance sheet and profit and loss statement. They were to consider “Team Tasmania” when working through commercial decisions.
Given Tasmania has four MI’s struggling, it draws attention to whether Team Tasmania is a slogan or a tangible mechanism for the state to be best off overall? That is why it needs a political decision – even if it only buys time to ensure a federal and state response can be determined.
Media Contact: Ray Mostogl, CEO TMEC, 0409 124 710