The Palaszczuk Government’s power provider Energy Queensland will be forced to slash costs by more than $600 million a year, potentially impacting hundreds of jobs.
The Courier Mail reports Energex and Ergon Energy had calculated before their recent merger that capital expenditure across the two companies would have to be cut by $3 billion across five years. Operating costs would also need to be slashed following an Australian Energy Regulator (AER) decision last year that reined in the distributors’ demands to further push up power prices.
Energy Queensland will be forced to find the savings on top of the $560 million in forecast efficiencies from the creation of the company, which the Palaszczuk Government plans to pocket.
A new energy services business that will compete with private electricians across the state will be spun from Energy Queensland in a bid to allay some of the cost cutting.
It remains unclear how many staff will be transferred to the new entity which has outraged electrical contractors.
In a written response to a Budget estimates hearing, Treasurer Curtis Pitt said Energex had estimated it would require a $2 billion capital cut and Ergon a $1 billion reduction throughout the five years to 2020 compared to the previous period.
Mr Pitt said the AER prescribed a revenue cap rather than specific savings so it would be up to Energy Queensland management to decide where to cut costs.
“It is incumbent on Energy Queensland to consider how best to achieve the savings, including the profile and timing of individual initiatives,” he said.
Mr Pitt said the cuts would be on top of the $562 million in savings to come from the merger and flow to Government coffers.
“The estimated $562 million in efficiency and merger savings across the businesses is additional to savings required to meet the current AER regulatory determinations, and net of implementation costs,” he said.
Opposition treasury spokesman Scott Emerson said the merger had been mishandled and the supposed savings would fall well short of what was already needed.
“Like his decision to ignore the State Actuary’s recommendation and raid $4 billion from public servants’ super, Captain Risky Curtis Pitt has been caught out being loose with the truth,” he said.
“Mr Pitt should finally be upfront and release all modelling associated with this merger, including the implementation costs, which have previously been identified at as much as $170 million. Are the savings really there or is Mr Pitt just spinning figures?”