Electricity Costs

The Hon. R.I. LUCAS (Treasurer) (14:16): I seek leave to make a ministerial statement on massive cost increases under the Labor government electricity deal.

Leave granted.

The Hon. R.I. LUCAS: Over the course of 2017 the former government entered into arrangements for the supply of electricity to government sites to replace the existing whole of government contract that expired in December 2017. Sadly, in my view this position was yet another example of the incompetence and financial mismanagement of the former Labor government.

The process for such an important procurement was commenced only six months before the expiry of the whole of government contract. Such a short period of time to negotiate a whole of government electricity contract left too little time to negotiate the best possible deal for taxpayers. As a result of this agreement, from 2020 the state government will source its electricity via a Generation Project Agreement with Solar Reserve and its Aurora solar thermal generation project near Port Augusta.

The creation of this agreement meant that the former government had to enter into a retail services agreement to provide electricity for the bridging period January 2018 to when the solar thermal plant is operational, estimated to be November 2020. To secure bridging electricity supply arrangements from 1 January 2018 until 31 October 2020 the former government entered into one-year contracts with incumbent suppliers Origin Energy and Simply Energy for small metered and unmetered lighting sites respectively, and an energy retail services and supply agreement with ZEN Energy for the provision of electricity supply and retail services for the supply of electricity to all government sites from 1 January 2019 to 31 October 2020.

The broad financial implication of the contracting arrangement for the bridging term is a significant increase in the cost of electricity for government sites from January 2018, largely based on increased costs for large sites. While the cost will ultimately depend on usage patterns of departments, initial analysis suggests that total costs may increase to $106 million in 2018, an increase of $45 million from 2017, representing a staggering 73 per cent rise. While the costs are estimated to reduce to $90 million in 2019 and $78 million in 2020, these still represent increases of 47 per cent and 27 per cent over the 2017 prices.

At an individual departmental level, some of the increases are beyond comprehension. For example, the Department for Child Protection will see an increase of nearly 150 per cent in 2018 over its previous electricity bill, while the CFS will see a five times increase in its power bill for 2019. I seek leave to have incorporated into Hansard without my reading it a purely statistical table, which provides a breakdown of estimated electricity costs by departments for the period 2017-2020.

Leave granted.

Attachment 1—Electricity Cost by Department (excl. GST)

The Hon. R.I. LUCAS: Without exception, all departments during the recent budget bilateral process have expressed great concern at the massive increase in their electricity costs as a result of this decision by the former Labor government. The government has sought to understand the basis for this increase and has been advised that, during the assessment and negotiation of final contractual arrangements, Frontier Economics provided advice on the merits of the proposition and cost implications in comparison to benchmark prices. However, we have been advised by Cabinet Office that we may not access this report due to the fact that the former Labor government attached the pricing analysis report to a submission to the former Weatherill cabinet.

We believe it is critical that the pricing report should be made public because it is important for South Australians to understand the basis on which this deal was struck, given the $90 million in additional electricity charges in the period up to 2020. This massive increase in electricity costs is another part of the financial mess left by the former Labor government, which will need to be provided for in the coming budget. Sadly, this appears to be just another outrageous example of Labor secrecy and lack of transparency in the way it applied taxpayers' money. I am sure South Australians will be gobsmacked by this deal the former Labor government negotiated.

Consequently, for transparency, the Marshall government will engage an independent consultant to review the whole-of-government electricity contracting arrangements undertaken by the former government. This review will consider whether an earlier procurement process should have been used and what other options existed that might have reduced costs to taxpayers.