Lucas said the previous administration started the procurement process six months before the existing contract was due to expire ©AAP/PA Images
Lucas said the previous administration started the procurement process six months before the existing contract was due to expire ©AAP/PA Images

‘Rushed’ contract could see SA government electricity prices spike

6 August 2018

The treasurer of South Australia has warned that a rushed electricity contract could see central government’s energy bill increase by up to 73% to $106m.

Rob Lucas, the state treasurer, said the previous Labour administration only started the procurement for a new whole-of-government electricity contract six months before the existing contract was due to expire, which “left too little time to negotiate the best possible deal for taxpayers”.

Lucas announced a review, to be run by an independent consultant, on the contracting arrangement undertaken by the previous government. The review will consider whether the process should have been started earlier

In a statement to the Legislative Council, Lucas said the problem stemmed from a short-term deal to buy electricity from the incumbent supplier until a new renewable energy facility was operational.

The Labour government had agreed to buy energy from a solar thermal generation project being built by the firm Solar Reserve. However the facility near Port Augusta is not expected to be operational until 2020.

The administration therefore signed a bridging contract with incumbent suppliers Origin Energy and Simple Energy that Lucas said would “significantly increase” the cost of electricity for state government sites.

Lucas said: “While the cost will ultimately depend on usage patterns of departments, initial analysis suggests that total costs may increase to $106m in 2018, an increase of $45m from 2017, representing a staggering 73% rise.”

Costs are estimated to reduce to $90m in 2019 and $78m in 2020, however these are still respectively a 47% and 27% rise on 2017 prices.

Lucas added that some government departments would be hit worse than others, and that “some of the increases are beyond comprehension”.

He said the Department for Child Protection was expecting its electricity bill to increase 150% in 2018 compared to last year, and for the County Fire Service to see its bill increase five times in 2019.

SM could not immediately reach the Labour Party for comment, however Labour treasurer and energy minister defended the deal, telling The Australian the deal was “the best results… given the market conditions”.

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