Volume Four 2011 focusing on Electricity

The sale of the State’s electricity retail and trading rights raised $5.3 billion. The electricity retail businesses sold for a $3.08 billion profit with the electricity generation output sold for a $1.85 billion loss, delivering a overall profit of $1.23 billion.

‘The proceeds from selling the generation output represented less than half of the value of Government power station assets at the time of sale,’ said Mr Achterstraat. ‘An Australian Tax Office ruling is currently being sought to clarify the tax deductibility of the capacity charge payments and a positive outcome would deliver the Government approximately an additional $258 million,’ he added.

Electricity wholesale prices decreased by 16.9 per cent from an average of $44.19 per megawatt hour in 2009-10 to an average of $36.74 per megawatt hour in 2011. However, the retail price paid by residents and small business customers will increase by an average of 17.3 per cent in 2012.

‘Network costs and green scheme costs are the main drivers behind the retail electrical price increases, accounting for 87 per cent of the price increases,’ said Mr Achterstraat. ‘There is a concern that network costs may be higher than they need to be,’ he added.

The New South Wales Government has set a target of 20 per cent renewable energy consumption by 2020 in line with the national Renewable Energy Target scheme. Energy from renewable sources increased by 33.5 per cent and now provides seven per cent of total needs.

These are some of the findings in a report released today by the Auditor-General, Mr Peter Achterstraat on his financial audits of government agencies in the electricity sector.

‘I am pleased that the audits of the seven State-owned electricity corporations’ financial statements for the year ended 30 June 2011 each resulted in an unqualified audit opinion,’ said Mr Achterstraat. ‘I did note significant uncertainties in assessing the value of power station assets where Government still owns the production output due to the unknown impacts of the Australian Government’s carbon price scheme,’ he added.

Excluding the proceeds from the electricity sale transactions, dividends to government and profits after tax fell in 2010-11. Profits fell from $1.2 billion to $1.1 billion and dividends from $867 million to $637 million. Income tax paid increased from $528 million to $569 million in 2010-11.

The three government energy distributors recorded small falls in customer satisfaction in 2011. Ausgrid fell 3 per cent to 93 per cent, Endeavour Energy fell from 80 to 79 per cent and Essential Energy fell from 88 to 86 per cent.

‘Projected electricity demand in New South Wales is currently expected to exceed supply by 2018-19 and supply will fall below minimum reserve levels if additional capacity is not created by this time’ said Mr Achterstraat.
Further information

Barry Underwood, on 02 9275 7220 or 0403 073 664 and email barry.underwood@audit.nsw.gov.au