Government abandons power station closure talks

THE Federal Government will not be offering financial support to close highly emissions intensive power stations under the Contract for Closure Program and has ceased negotiations with the electricity generators involved.

Resources and Energy Minister Martin Ferguson said the government could not be satisfied that entering into such arrangements would achieve value for money against the Contract for Closure Program objectives.

“The Contract for Closure negotiations have taken place constructively and in good faith, but there remains a material gap between the level of compensation generators have sought and what the Government is prepared to pay,” he said.

“Recently published forecasts for lower energy demand in Australia presented serious questions around the value for money evaluation of proposals. The recent announcement to link with the European emissions trading scheme and remove the price floor did not alter this outcome.

“I have said throughout this process that we had a set envelope of funding and were not willing to enter into contracts at any cost – this is about the responsible expenditure of public funds.

“I recognise that there has been some uncertainty around the Contract for Closure program and appreciate the patience of electricity generators and surrounding communities while negotiations have been underway.”

Mr Ferguson said the Regional Structural Adjustment Assistance package would remain available to assist regions which may be significantly affected by the introduction of the carbon price.

He said the government remained committed to working in partnership with all levels of government and local leaders to develop a plan for economic diversification, such as responding to the Latrobe Valley Transition Committee report.

Three of the five generators involved in Contract for Closure Program discussions are in Gippsland, Energy Brix and Hazelwood in Morwell, and TRUenergy in Yallourn.

In a statement, IPR-GDF SUEZ Australia, which owns 91.8 per cent of Hazelwood, said it had not been able to find common ground with the Federal Government on the terms of a closure.

“Throughout the process we have maintained that we would respect and protect shareholder investment in our asset while also seeking to provide certainty for our employees and other stakeholders,” the statement said.

“We will continue to focus on providing competitive and reliable base load power to the national electricity market.”

Environment Victoria campaigns director Mark Wakeham said the Federal Government had abandoned a very clear and public commitment to retire the most polluting power stations, seriously damaging the credibility of its Clean Energy Future package and Australia’s prospects for cleaning up our power supply.

“You can’t have a clean energy future with power stations like Hazelwood continuing to operate indefinitely – it becomes hollow rhetoric,” he said.

“We are extremely surprised that this announcement comes just a week after changes to the carbon price which would have had a significant impact on the value of the power stations and therefore the negotiations. It suggests that the government wasn’t really committed to securing an outcome.”

Mr Wakeham said that the failure to deliver on contracts for closure should lead to a review of proposed compensation over the first five years of the carbon price.