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Will SA's power plan give households or businesses cheaper bills?

Tuesday, 14 Mar 2017 14:49:03 | Angelique Donnellan

An ambitious plan to build a new power station, fired by gas, is part of the longer term energy strategy. (Audience submitted: James Wigglesworth)

A plan to bolster the security of South Australia's energy market is an extensive, and expensive, strategy which aims to make power supplies more reliable and cheaper in the longer term. But how much can the state's taxpayers expect to fork out in the quest to bring down their household electricity bills?

How much does the plan cost?

Of the plan's total announced cost of $550 million, $360 million will be spent building a new 250-megawatt gas-fired power plant.

The South Australian Government will put $150 million into a renewable technology fund, offering incentives to private companies to build battery storage.

Another $48 million will be on offer to exploration companies in the search for new gas sources.

South Australia's Treasurer and Energy Minister Tom Koutsantonis said he had built up healthy budget surpluses which would now pay for the bold energy plan.

But peak business organisation Business SA, the Liberal Opposition and the welfare sector's South Australian Council of Social Service (SACOSS) expressed concerns about the cost of the plan, particularly about how much would be spent building a new power station.

"We hope that the market … delivers real price decreases for South Australians," Ross Womersley of SACOSS said.

"We don't know what the quantum of those price decreases will be, but we would certainly be hopeful that that was one of the outcomes."

Will electricity become cheaper for households?

The answer is pretty much unknown at this point, but since 2008 South Australian household electricity bills have risen about 60 per cent.

Premier Jay Weatherill did not give specific figures but he said he believed energy bill price rises would be higher without the Government's plan.

The Government's economic modelling suggested extra power generating capacity would increase market competition and put downward pressure on prices.

It said the big battery it was proposing would "provide an additional source of supply that will be able to contest peak prices in the market" and spot-price volatility could be reduced.

Having more gas supply would "take the upward pressure off " the price of gas used for electricity generation, it said.

How quickly will the plan have a market impact?

The SA Government said parts of its energy plan would start happening immediately, but projects such as the new gas-powered plant would take longer.

Josh Frydenberg speaking. Photo: Josh Frydenberg says SA is challenging the national electricity market structure. (ABC News: Nick Haggarty)

Federal Energy Minister Josh Frydenberg said he believed prices would go up, not down, and the SA Government's preference for "locally-made" electricity went against the spirit of the national electricity market.

"SA wants to rip up that national agreement and, in doing so, will only drive up prices for its people as well as those in other states," he told reporters.

Will business find electricity supply more reliable or cheaper?

When stormy weather led to a state-wide blackout last September, it cost South Australia's biggest energy user, BHP Billiton's Olympic Dam mine, more than $US100 million.

The mining firm has welcomed the energy plan the Government has outlined, saying it looks forward to "immediate steps being taken which will provide greater energy security for the state before the end of the year".

To be sustainable, globally competitive and able to attract long-term investment in this state, it is critical South Australian businesses, including Olympic Dam, have access to secure and competitively priced electricity," the company said in a statement.

"We look forward to engaging with industry and government stakeholders on the technical details and implementation."

Politically, the Labor Government will be keen to avoid blackouts next summer because it will face the voters a year from now, on March 17, 2018.

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