Page 711 - Week 02 - Thursday, 12 February 2009
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will be closely monitoring this situation and will be examining appropriate support mechanisms over the coming months.
Moving now to the amendments, to facilitate the smooth introduction and operation of the first stage, four major areas of amendment have been identified. These are a mix of technical and practical implementation issues. The first of these is the appropriateness of using the transitional franchise tariff factor in setting the premium price. The transitional franchise factor, or TFT, is currently used in the act as the default base value of the premium price multiplier. The use of this has been questioned. The TFT is, by definition, transitional and is now not expected to exist in its current form for more than two to four years under current national electricity market reforms. In the context of a 20-year program, this use poses several operational problems.
The Independent Competition and Regulatory Commission has additionally raised the issue of appropriateness. The TFT is not an actual retail price paid by Canberrans. It is a reference price used by the Independent Competition and Regulatory Commission in setting electricity prices. It is, in fact, higher than the usual retail price. Payment of a multiple of that figure overstates the premium price and leads to unwarranted additional imposts on consumer bills.
I have taken the advice of the ICRC senior commissioner in adopting an initial premium price base of 12.9c exclusive of GST. This price, which is actually ActewAGL’s Always at Home package price, is the most common price actually paid by ACT electricity users. After applying the 3.88 multiplier already encoded in the act, I propose to make a disallowable instrument under existing part 3(10)2 of the act to set a premium price of 50.05c per kilowatt hour, excluding GST, for the period 1 March 2009 to 30 June 2010.
The second issue is the appropriateness of using the transitional franchise tariff as the default value of the normal cost of electricity. Electricity retailers are entitled to recover, through charges back to the electricity distributor, the difference between the premium price and the normal cost of electricity. The act currently equates the normal cost with the TFT, which is about 15.2c per kilowatt hour.
This is not appropriate in a market where the normal wholesale cost ranges between 5c and 7c per kilowatt hour. In effect, electricity retailers are obliged to purchase ACT generated renewable electricity at a cost about three times that offered in the competitive market. This creates a guaranteed loss position on every unit of electricity purchased which, compounded by the act requirement to participate in the scheme for 20 years, strongly discourages participation or support from industry.
This impact was unintentional and requires amendment so that the normal cost is a more realistic market figure. Again, based on advice received from the ICRC, I propose to make an instrument under clause 9 of the new bill, setting the normal cost at 6c per kilowatt hour for the period 1 March 2009 to 30 June 2010.
The third key amendment is the introduction of a cap on eligibility to minimise cost and social impacts on ACT electricity users. The act currently provides that any installation over 30 kilowatts capacity is eligible for a payment per unit of 75 per cent
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