Gas Week

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NSW Ministers face conflict of interest: will they act to make life harder for innovative small off-grid gen, to protect State-owned old-tech suppliers?

Posted by gasweek on 25 September, 2007

The NSW Independent Pricing and Regulatory Tribunal, (IPART) response to the retailer supplier licence application by GridX Power Pty Ltd did not appear to favour high insurance obligations for small off grid generation, and siad that was a matter for the Minister.

What the NSW Minister could order: Retailer of Last Resort (RoLR) events for islanded networks, could apply as “customers of these networks would be required to pay slightly more now to provide for insurance against possible problems in the future”, Or “there may be other insurance options that could be explored, such as performance guarantees. The insurance premium would be factored into their electricity tariffs”.

The Minister has the power: “The Minister specifically has the power to impose retail licence conditions “… requiring the holder of the licence to maintain specified insurance cover in respect of specified risks”. If an insurance option is available, the level of insurance cover required would need to be set. This may be difficult, since costs of a RoLR event will vary depending on the size and location of islanded network, and the capacity constraints of the nearby grid.

What GridX State-owned competitors may want: Further consultation would be required with GridX, DNSPs and the insurance industry to determine whether an insurance product like a performance guarantee is feasible and what level of insurance cover is appropriate. Ultimately, deciding whether regulation is required to deal with the financial risks to customers in these circumstances will require the Minister to exercise judgement”.

The issues were:

• Should customers supplied by islanded networks be protected (for example, in the form of customer funded insurance if available at a reasonable commercial cost) either fully or partially against the costs of connection to grid supply in the case of a worst case RoLR event?

• If so, should industrial and commercial customers be treated differently to small retail customers in these circumstances? ;

• Is an insurance product like a performance guarantee suitable to deal with the contingency of business/ infrastructure failure?

• If so, what level of cover is desirable and should this level of coverage be adjusted over time as circumstances change? (For example when new islanded networks are built, or when grid supply is extended in area and capacity.)

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: Website:

Erisk Net, 21/8/2007


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