27 September 2018
In January 2018, a comprehensive study was commissioned by the Tasmanian Small Business Council (TSBC) to examine the role, purpose and performance of the Tasmanian wholesale electricity market and its relationship to and impacts on small business in Tasmania.
There are three important reasons for the study. First, the role of the Tasmanian wholesale market in a small business context has never been examined before. Secondly, wholesale electricity prices have been rising rapidly across the National Electricity Market (NEM), including in Tasmania, and electricity futures prices remain high. Finally, the results of the study will allow the TSBC to build its capacity on the Tasmanian wholesale electricity market and to advocate for its further development and reform.
The report begins by describing the National Electricity Market (NEM) wholesale market, how it works, its key features and competition within the market (including highlighting its gaps).
The structure of the Tasmanian wholesale electricity market is then examined, including its lack of competition, the dominance of Hydro Tasmania, the Tasmanian market’s strong links to the Victorian market and the former’s high degree of regulation.
The study describes how Tasmanian wholesale electricity prices are determined and examines historical wholesale prices in Tasmania and the NEM, noting price volatility, its causes and the close links between Tasmanian and Victorian prices.
Tasmanian wholesale electricity prices have a significant bearing on retail electricity prices for small business, accounting for about 37 per cent of small business electricity bills.
Tasmania is the most regulated and least competitive wholesale electricity market in the NEM and is also the only NEM State with near total Government ownership of electricity assets.
Following an extended period of (almost a decade of) relatively benign wholesale electricity prices, they began to increase significantly in Tasmania in 2015 in response to low dam levels and a prolonged outage of the Bass Strait interconnector.