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KIT's Basslink says will comply with 'unnecessary' pricing directive

BASSLINK, the undersea power cable company, said on Monday that the new directive from Australian state enterprise Hydro Tasmania that restricts it from operating at full capacity except during critical periods when demand pushes wholesale power prices to their maximum will result in "adverse consequences".

The pricing directive from Hydro Tasmania was set out in a market statement on Oct 18. Hydro Tasmania said at the time that the bidding instructions will reduce the risk of the Basslink cable operating above its design limits. 

Under Hydro Tasmania's instructions, from Nov 1 to May 31, the last 33 megawatts of Basslink's 478 MW capacity can only be used when the wholesale electricity price reaches the market price cap.

Basslink chief executive Malcolm Eccles said on Monday: "The pricing instruction given by Hydro Tasmania is unnecessary as it is based on multiple assumptions, hypotheticals and disputed information. In Basslink's opinion, the pricing instruction may result in a series of deviations to various compliance responsibilities and legal requirements of Hydro Tasmania."

Nevertheless, Basslink has "no choice but to comply" with Hydro Tasmania's pricing instruction under the Basslink Services Agreement, it said.

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Basslink noted that Hydro Tasmania received a preliminary recommendation on July 24 from DNV GL to limit the interconnector's capacity as part of an initial evaluation that has not been validated, is based on assumptions, and is subject to ongoing analysis by DNV GL.

In response, Basslink provided Hydro Tasmania an independent response from its experts, Cable Consulting International, which expressed concerns about the reliability of the information used by DNV GL to come up with its recommendation.

Despite these concerns, Hydro Tasmania has not provided Basslink with any further work or investigation conducted by DNV GL beyond the preliminary evaluation three months ago, Basslink said.

Basslink also said the pricing instruction will further restrict its import and export limits and impact Tasmania's energy security as summer approaches.

While Basslink is able to make the interconnector available at 500 MW (from the sending end), Hydro Tasmania's directive will reduce availability from the National Electricity Market (NEM) on a sustained basis and lessen the competition in the NEM impacting supply and pricing, according to Basslink.

Basslink is a unit of Keppel Infrastructure Trust (KIT). KIT units last changed hands at S$0.54 on Friday.

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