Bell Bay Aluminium power fears - The Examiner reports

Bell Bay Aluminium has warned of an economic ‘‘death spiral’’ being fuelled by a meteoric rise in electricity distribution prices.

The major industrial has lobbied a Senate committee investigating energy network companies, calling for urgent action on a 200 per cent surge in Tasmanian transmission charges over the past five years.

Bell Bay Aluminium general manager Ray Mostogl told the committee TasNetworks was grossly overspending on assets and capital works while overcompensating its owners, the state government.

Mr Mostogl said excessive transmission charges were crippling the company’s investment capacity and threatening its competitiveness in the global market.

‘‘The current regulations and the way in which TasNetworks chooses to operate within them, if unchanged, will potentially lead to a death spiral,’’ Mr Mostogl said.

He said if one major industrial were to crumble, others would likely follow.

‘‘It is imperative that TasNetworks and its owners focus on finding the right balance between service delivery, reliability and cost in order to minimise the risk of losing one of the state’s major users,’’ Mr Mostogl said.

He warned further staff cuts were one of the few options available to his company if urgent and significant action was not taken.

Mr Mostogl said TasNetworks must reduce its capital and operational spending, lower its returns to government and drop its prices accordingly.

His calls were backed by Big Picture Tasmania, which represents Tasmania’s six largest energy-intensive employers, including Bell Bay Aluminium.

Together the group contributes about 40 per cent of TasNetworks’ revenues.

Large profits and infrastructure projects ‘‘not needed, grossly overestimated or driven by flawed peak demand projections’’ were undermining the state’s economic and social security, the group told the inquiry.

‘‘Allowing this perverse situation to continue without significant reform by federal and state governments is bordering on neglect,’’ they said.

A TasNetworks spokesman said the company’s revenue proposal dropped 18 per cent in 2013-14, and would continue to reduce for the next four years.

‘‘TasNetworks works with all its major industrial consumers, including Bell Bay Aluminium, to ensure the lowest sustainable power prices,’’ he said.

‘‘We are confident that the revenue proposal outcome and our strategy will underpin the ongoing sustainability of these large and very important customers to our business and the state.’’

TasNetworks last week took on $325 million of Hydro debt, taking its total debt to about $1.64 billion, after last month bailing out Forestry Tasmania to the tune of $30 million.

Energy Minister Matthew Groom said TasNetworks’ cost management was a key focus of conversations between government and industry, and would form a central plank of the state’s new energy strategy, which was nearly finalised.

The Senate committee is expected to report on its findings in March.