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Infratil Energy Australia

20 Mar 2009

Customer numbers remained stable over February at 386,000 accounts. Spot electricity prices were volatile and both spot and contract prices softened as weather conditions eased. IEA’s price hedging functioned to expectations.

A number of encouraging political developments occurred over the month.

Queensland’s elections, to be held 21st March, are likely to result in a more constructive discussion about energy pricing regulation.

The NSW Government released it energy strategy which reconfirmed the intention by the end of 2009 to sell the State’s energy retail activities, trading rights in respect of state-owned generation, and the sites which have been developed for new generation plant.

It is hoped that the NSW moves will result in enhanced wholesale energy market liquidity, the avoidance of market dominance, and prices moving to fairly reflect supply and demand. The State’s decision to increase retail tariffs by 20% also signals the pro-market intentions, albeit most of the price rise flows through to network companies owned by the NSW Government and has little impact on the viability of generators and retailers in NSW. It does demonstrate political resolve to address the State’s artificially low electricity prices.

The Commonwealth Government released draft legislation on the Carbon Pollution Reduction Scheme (CPRS), the equivalent of New Zealand’s Emission Trading Scheme. The draft largely reflects the scheme flagged in the December White Paper in terms of emission reduction targets, scope and start date of 1 July 2010. However, there continues to be uncertainty about how the legislation will evolve in the Senate as the Labour Government will need support from amongst the opposition, the Greens, or independent senators.

The level of consensus on CPRS is diminishing due to the economic downturn (resulting in increased opposition from conservative parties and business groups) while environmental groups oppose compensation being paid to large emitters and the lack of recognition and reward for voluntary abatement measures.
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