DEBATE flared yesterday over how much the Federal Government’s carbon tax compensation package had been pocketed by Latrobe Valley’s power generators at the expense of electricity consumers.
After a front page The Age report said a new study showed generators could reap up to $5 billion in “windfall profits” from carbon price compensation, a counter argument was launched by the Energy Supply Association of Australia.
Only one of the Valley’s generators was prepared to comment on the findings of a study by Carbon + Energy Markets consultancy director Bruce Mountain which suggested generators had so far been able to pass on all their extra carbon price costs, effectively turning the carbon tax compensation package into pre-tax profit.
A spokesperson for EnergyAustralia, owner of Yallourn power station, maintained the government’s financial support was “vitally important” in a transition to lower emission generation and said the study’s findings failed to “take into account the impact the carbon price has had” on the plant’s value, which she said had been “written down to the value of…$350 million” by an independent auditor.
Spokespersons for Loy Yang and Hazelwood power stations declined to comment on the study commissioned by Environment Victoria, however the Energy Supply Association of Australia has branded claims of “windfall gains” as “plain wrong”.
essa chief executive Matthew Warren issued a statement saying Australia’s coal-fired power stations had “written off around $2.5 billion in asset values as a result of the introduction of a carbon price”.
“These asset write downs are a real and permanent hit to the industry,” he said.
essa describes itself as “fuel and technology neutral” but two of the Valley’s generators referred The Express to the association for its insights into Mr Mountain’s study.
Mr Warren said claims of windfall gains ignored reality and the study, ‘Transitional assistance or windfall profits?’, was “based on the deliberate and misleading assumption that coal-fired generators are able to fully pass through the price on carbon and are able to continue to do so indefinitely”.
“Generators are price-takers in the National Electricity Market, not price setters,” he said.
“They cannot pass through all the carbon cost…a result they incur losses of hundreds of millions of dollars each year.”
EV campaigns director Mark Wakeham, however, said the study showed brown coal businesses were “relatively unaffected” by the carbon price, prompting his organisation to call for a review of “excessive” compensation payments.
The report said it had “calculated that Victoria’s brown coal generators have been able to pass through an estimated 111 per cent of the cost of the carbon price in the spot market, or a little over 100 per cent after accounting for the cost of emission permits that need to be surrendered for electricity used in the process of generating electricity at the power stations.”
Mr Mountain said this was “a higher level of pass-through than was expected” with previous modelling predicted generators would recover around 80 percent of the emission cost.
According to The Age the Greens and the federal opposition have backed the study’s findings, with the Greens also calling for an “urgent review” of compensation payments and the Opposition saying the carbon tax had “robbed the poor through higher power bills” to pay the rich.