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Wednesday, 1 June 1994
Page: 1141

(Question No. 1160)

Senator Bell asked the Minister for Finance, upon notice, on 23 March 1994:

  (1) How much money was paid to the Tasmanian Government as a contribution to the construction cost of the Tasmanian King Anthony power scheme in compensation for loss of the proposed Franklin River power development.

  (2) What forecasts of load demand were used to justify the construction of the scheme and, in consequence, Commonwealth assistance.

  (3) What checks were undertaken of these forecasts for the Commonwealth Government, and by whom.

  (4) What other Tasmanian projects have been funded by the Commonwealth as compensation for the cancellation of the Franklin project, and what has been the cost of these projects.

  (5) What analysis, cost benefit or otherwise, and against what criteria, was used to justify these projects.

  (6) What evaluation has been undertaken of the effectiveness and appropriateness of the Commonwealth's funding of these projects, and by whom.

Senator Cook —The Minister for Finance is responsible for the scheme of payments to Tasmania following the termination of Stage 2 of the Gordon below Franklin (GBF) power development scheme, and has provided the following answer to the honourable senator's question:

  The Minister for Primary Industries and Energy answered a similar question (No 1163 of 14 March 1994) on this issue from Senator Bell and this answer adds to the response from the Minister.

  (1)—(6) Following the decision resulting in the termination of Stage 2 of the GBF power development scheme, the Commonwealth and Tasmania agreed on financial assistance measures to ameliorate the impact of the decision on Tasmanian electricity costs and employment. The terms of this financial agreement are set out in a 1984 Memorandum of Understanding (MOU) between the Commonwealth and Tasmania.

  The MOU provides that the Commonwealth make a number of payments to the State, namely an ex gratia payment related to Tasmania's expenditure on the GBF, an electricity subsidy, and grants for employment generating projects.

  The ex gratia payment of $25m to Tasmania effectively reimbursed the State for expenditures by the Hydro-Electric Commission (HEC) of Tasmania for its past expenditures on the GBF development.

  The electricity subsidy consists of ten annual payments of $20m as adjusted for price changes. These funds were to be used by the HEC as a subsidy to reduce the cost of producing 112 Megawatts (MW) of electricity to the cost equivalent of the electricity that would have been produced by the GBF scheme. The MOU recognised that the King River Power Development and the Anthony Power Development schemes represented replacement 112MW of electricity that would have been produced by the GBF scheme.

  The last electricity subsidy was paid in 1992-93. Tasmania has provided the Commonwealth with audited statements that these funds have been used to reduce electricity costs. The funds have been used by the HEC to finance capital expenditure on the King River and Anthony power developments.

  The MOU also provides that, if the need is demonstrated for a further 68MW of electricity, representing the balance of capacity that would have been provided by the GBF scheme, then the Commonwealth and Tasmania will negotiate on arrangements to provide a subsidy in respect of this 68MW.

  In respect of grants for employment generation, the Commonwealth and Tasmania agreed initially on a schedule of projects and funding to be allocated to each part of the schedule. From time to time as these grants have evolved, the Commonwealth and State have agreed on amendments to the schedule of projects and reallocations of available funds amongst projects.

  These grants proceed on the basis that Tasmania undertakes expenditure on a project and this is reimbursed by the Commonwealth. The Department of Finance is currently considering Tasmania's final claim for reimbursement of expenditure on these projects. When this claim is settled, the Commonwealth will have paid over $45m in total for these projects.

  The Senator's queries on analysis and evaluation of the various components of the Commonwealth's financial assistance under this program have been noted. The components of this assistance package represent the priorities of both the Commonwealth and Tasmanian Governments in resolving the termination of the GBF scheme. In this context, the principal factor in any assessment of the Commonwealth's contribution to the assistance package is whether the Commonwealth met all its undertakings as required by the agreement and therefore whether the Commonwealth has successfully contributed to the achievement of both its and the State's priorities. As described above, the Commonwealth has fulfilled its requirements.