Gas Week

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IPART proposes NSW off-grid islanded generators need not pay bank guarantees as consumers will not get ‘retailer of last resort’ protection

Posted by gasweek on 25 September, 2007

The NSW Independent Pricing and Regulatory Tribunal, – commenting on the GridX Power Pty Ltd retailer supplier licence application argued bank guarantees were not needed against the costs of a retailer of last resort (RoLR) event as the there was no way for a second retailer to supply as it was not connected to the main grid. IPART mooted that the cost of guarantees “may affect the viability of small scale islanded network proposals” – and reduce wholesale competition.

What happens if GridX goes bust:

• the IPART paper said “costs are difficult to estimate and may vary widely. Where these costs are small, they may be readily met by increasing supply charges to the existing customers of the failed business (a user pay principle would apply). But where they are significant, customers may have difficulty in meeting these costs despite the ability to raise tariffs;

• customers have some responsibility for major purchasing decisions (‘buyer beware’). However, if customers are to pay for costs associated with RoLR events there should be adequate disclosure of risk at the time of purchasing or leasing a property connected to islanded network. Current state and federal legislative obligations do not require such disclosure. Changes to disclosure requirements fall outside the scope of the energy licensing framework”;

• “as the NSW energy market becomes more competitive there is no guarantee that all retailers will remain financial(ly) viable”.

Reference: Independent Pricing and Regulatory Tribunal, GridX Power Pty Ltd – retailer supplier licence application. Electricity Licensing – Consultation Paper, May 2007. Inquiries regarding this document should be directed to a staff member: Gary Drysdale Phone: (02) 9290 8477 Email: gary_drysdale@ipart.nsw.gov.au Website: http://www.ipart.nsw.gov.au

Erisk Net, 21/8/2007

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