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House of Assembly - Fifty-Third Parliament, Second Session (53-2)
2017-02-14 Daily Xml
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Electricity Prices

Mr MARSHALL (Dunstan—Leader of the Opposition) (14:18): What are the implications on electricity prices and grid stability for South Australians when the Hazelwood plant closes?

The Hon. A. KOUTSANTONIS (West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:18): The best forecast we have, of course, is from the ASX forward prices and the OTC prices. The over-the-counter markets, which is a majority of the contracts written in the market, I am advised, support contracts between counterparts. We don't get much of an idea of what those contracts are, other than when businesses actually show us what those contracts are. The exchange-traded markets, which are an electricity futures product, are traded on the Australian Securities Exchange. Participants, including generators, retailers, speculators, banks and other financial intermediaries, buy and sell future contracts. Terms and conditions of the OTC contracts are confidential.

Mr Marshall: He's reading it.

The Hon. A. KOUTSANTONIS: I anticipated your question; that's how easy you are to read.

The SPEAKER: The Treasurer is called to order for a gratuitous remark, and the tenor from Altavilla will stop interjecting.

The Hon. A. KOUTSANTONIS: The terms and conditions of the over-the-counter contracts are confidential, so it's hard to know what prices they are being traded at, so it is hard to get a measure of the impact of the removal of such a large amount of generation. Remember that the Northern power station made up roughly 8 per cent of the competitive market in South Australia, whereas Hazelwood makes up 20 per cent of the Victorian market in terms of competition. The futures market allows parties to lock in a fixed price to buy and sell, given the quantity of electricity over a specified time. Each contract relates to a nominated time or day, and it is a very complex and difficult matter to explain. In particular, the important part about this trading is that it gives an idea of what these prices will be.

In regard to the recent electricity base load futures prices, I can advise that in the first quarter of 2017—of course the futures market factors in the withdrawal of supply going forward—you can see that in South Australia they were traded at $121.25 a megawatt hour. That is unacceptable; that is a high rate. Let's compare that with some other jurisdictions. In comparison to the same quarter, electricity based on futures in New South Wales, Victoria and Queensland last traded at $135 a megawatt hour, $81.13 a megawatt hour and $210 a megawatt hour respectively. In the futures market, Queensland has overtaken South Australia.

On a further note, the futures market often factors in that the actual prices paid are much lower. In terms of the impact of the instability of the national grid and the absence of policy certainty, meaning that people are not prepared to invest, it's creating a risk in the market. Quite frankly, despite the Prime Minister telling us that clean coal is the solution (much like his safe cigarettes policy), what we are going to see is no investment in the electricity market and futures prices getting worse and worse.

Interestingly, it is not renewable-rich South Australia that is bearing the brunt of this; it is coal-rich New South Wales and Queensland, which destroys the argument that renewable energy is more expensive than coal. Don't believe me, believe the market. Don't believe me, believe the ASX. The Prime Minister said we need some socialist paradise; this is a privatised market that operates entirely at market forces. How socialist is that?

Mr Pederick interjecting:

The SPEAKER: The member for Hammond is called to order for an earlier offence.

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