Tasmania is poised to enter the National Electricity Market following a final determination made by the Australian Competition and Consumer Commission today.
This means that through Basslink, an undersea electrical cable connecting Victoria and Tasmania, the Tasmanian market will have the opportunity to be open to competition and the Tasmanian retailer, Aurora Energy, and generator, Hydro Tasmania, will be part of the market that trades electricity in New South Wales, Victoria, South Australia, Queensland and the ACT.
The ACCC authorised the Tasmanian Government’s applications which facilitate Tasmania’s entry to the NEM subject to conditions, after finding that the public benefits outweighed concerns about the potential for competition within the state.
"A significant issue arising during the ACCC's consideration of the Tasmanian Government's applications was whether the market arrangements would be sufficient to encourage competition", ACCC Chairman, Professor Allan Fels, said today. "However, the Tasmanian Government has undertaken to implement policies to address these competition concerns".
"These policies impose bidding restrictions on Hydro Tasmania to limit its influence on Basslink bidding. The Government has also agreed to implement a framework to sell the revenue from the southward flows across Basslink in order to facilitate competition.
"Despite these undertakings, the ACCC is of the view that the market structure in Tasmania will have a much larger impact on the likelihood of new entrants entering the market".
In its determination, the ACCC requested amendments to the Tasmanian Government's vesting contract – a contract that sets the price for supply between the encumbent retailer (Aurora Energy) and generator (Hydro Tasmania) to help manage the transition to a deregulated market. It also requested changes to Tasmania's proposed derogations, or transitional rules, to be included in the National Electricity Code.
Hydro Tasmania plans to export electricity across Basslink to Victoria during peak periods, which will increase Victorian peaking capacity. Although this could lead to lower peak prices in Victoria, price outcomes for Tasmania are uncertain as deregulation has not yet begun.
Tasmania's entry to the NEM could also lead to a more efficient use of existing generator capacity in the market.