Establishment of Owen Inquiry into Electricity Supply in New South Wales

By Paul O'Donnell and Hilary Hurrell.

Key Points:
The New South Wales Government has established an inquiry to be undertaken by Professor Anthony Owen into securing New South Wales' electricity supply.

In its Statement of Opportunities 2006 ("SOO"), the National Electricity Market Management Company Limited ("NEMMCO") stated that investment in additional generation capacity was required in New South Wales in order to meet increased consumer demand for electricity and increased economic growth.

Taking into account a range of factors including existing and committed generation, revised minimum levels of capacity reserves and forecasts of electricity demand, NEMMCO predicted that if no additional capacity was made available to the market, New South Wales would experience reserve deficits from 2010/2011.

This issue appears to have been addressed in the short-term with both TruEnergy and Delta Electricity constructing gas-fired peaking power stations - the Delta Electricity power station to be located at the existing Munmorah power station and the TruEnergy power station to be located at Tallawarra.

The issue of securing electricity supply in the longer term, however, is more uncertain. Accordingly, in response to NEMMCO's conclusions, the New South Wales Government has established the Owen Inquiry into Electricity Supply in New South Wales. The Owen Inquiry, to be undertaken by Professor of Energy at Curtin University of Technology, Professor Anthony Owen, has the following terms of reference:

• to review the need and timing for new baseload generation that maintains both the security of supply and competitively priced electricity;
• to examine the baseload options available to efficiently meet any emerging generation needs;
• to review the timing and feasibility of technologies and/or measures available nationally and internationally that reduce greenhouse gas emissions; and
• to determine the conditions needed to ensure investment in any emerging generation consistent with maintaining the NSW AAA Credit Rating.

The Government has also sought advice as to the actions required to "ensure timely investment in generation capacity that addresses greenhouse gas emissions while retaining the State's fiscal position".

Given the market mechanisms provided for in the National Electricity Market and the impact that intervention by the Government in power sector investment may have on investor perception, it will be interesting to see what action the Government will be able to take to act on the conclusions reached by the Owen Inquiry, which are due by the end of August 2007.

For further information, please contact Paul O'Donnell.