Volume Thirteen 2015 Electricity

The NSW Government continues to divest its interest in electricity businesses.
 
In 2014-15, Macquarie Generation and Delta Electricity’s Colongra power stations were sold, collectively raising over $1.7 billion in gross proceeds.
 
In November 2015, the NSW Government announced the lease of TransGrid for 99 years to a private sector consortium for $10.3 billion and the sale of Delta Electricity’s Vales Point power station for $1.0 million. It expects to lease 50.4 percent of Ausgrid and Endeavour Energy during 2016, but retain 100 percent ownership of Essential Energy.
 
Its net investment in the electricity businesses at 30 June 2015 was $10.8 billion ($11.4 billion at 30 June 2014). This comprised $14.0 million in the electricity generators, $2.1 billion in TransGrid and $8.7 billion in the distributors.
 
'The sale and leasing transactions will significantly reduce the government’s investment in the electricity sector in New South Wales and its taxation and dividend revenue. These totalled $1.4 billion in 2014–15 and $1.7 billion in 2013–14', said Acting Auditor-General, Tony Whitfield. 'The government’s intention is to invest the net proceeds from these transactions in infrastructure for New South Wales', he added.

The recent AER determination for Transgrid and the electricity distributors

The Australian Energy Regulator (AER) determination for the five-year regulatory period from 1 July 2014 reduced the electricity distributors revenue allowance, and operating and capital expenditure compared to the previous determination.
 
'Over the five years, the allowance for network revenue is $2.6 billion lower, operating expenditure $1.6 billion lower, and capital expenditure $8.0 billion lower than the previous determination. I understand the NSW distributors are appealing the recent determination', the Acting Auditor-General said. The AER’s recent determinations will significantly impact the electricity businesses in New South Wales', he added.
 
'The AER approved a capital expenditure allowance for Transgrid of $1.1 billion for the four year regulatory period from 1 July 2014 compared to $2.6 billion for the previous five year regulatory period. The approved revenue allowance has been set at $3.0 billion compared to $4.0 billion for the respective regulatory periods', said Mr Whitfield.
 
Mr Whitfield noted, 'In making its determination the AER must be satisfied that the distribution and transmission businesses’ operating and capital expenditures reflect the costs a prudent benchmark operator would need to operate its network safely and comply with its obligations'.

Further Information

Please contact Barry Underwood on 9275 7220 or 0403 073 664; email: barry.underwood@audit.nsw.gov.au