Hydro praying for rain

There was more than a hint of Donald Rumsfeld’s maxim of ‘known unknowns’ when new Chairman Grant Every-Burns spoke of challenges facing Hydro Tasmania:

“The corporation is impacted by the well understood uncertainty around carbon pricing, renewable targets and rainfall variability. We are able to predict with certainty that the Hydro will be impacted for some years into the future.”

Hydro Tasmania appeared before a House of Assembly committee two weeks ago.

Scrutiny hearings often produce more heat than light, but amongst the wearisome adversarial exchanges was some useful information.

FT and the Economic Regulator

The Government’s willingness to breach the spirit of national competition policy by its use of State resources to prop up Forestry Tasmania whilst imposing austerity on broader sections of the Tasmanian community has struck a discordant note with many of the affected.

If prices charged by Forestry Tasmania were required to fully cover costs then it would be required to cease its unprofitable native forest harvesting.

A willingness by the affected to pursue remedies and solutions has precipitated this note.

Competitive neutrality complaints are handled by the Office of the Tasmanian Economic Regulator (OTTER) pursuant to the Economic Regulator Act 2009 .

A breach of competition policy?

The Forestry Tasmania scrutiny hearing left no doubt that its survival depends on selling more native forest woodchips at higher prices.

Filling the void left by Gunns’ departure and venturing into the space currently occupied by private woodchippers and exporters is not without public policy problems, notably a need to adhere to national competition principles.

Getting government funds into Forestry Tasmania is more than simply a question of a choice between deficit funding and equity transfers.

The principle of competitive neutrality applies to government businesses competing with the private sector, and ensures that any advantage arising solely from their government ownership be removed unless it’s in the public interest, and prices need to be set as if they were privately owned and are fully cost reflective.