Official Review Of Queensland's Electricity Supply
'Power grid run into the ground' The Courier-Mail 24/7/2004

Government-owned power companies have let the electricity network deteriorate to a level where it cannot meet current demand let alone future growth, an independent review has found.

Energex has been too obsessed with making money, and Ergon Energy too slow to modernise to notice the increasing risk of blackouts and disastrous network failures.

The Beattie Government now faces a massive rebuilding program and will have to get tough with its distributors to ensure population growth does not plunge the state into prolonged darkness.

The Courier-Mail has a final draft of the three-member review panel's report — the Electricity Distribution and Service Delivery for the 21st Century — which shows a network in disrepair and a history of management failures.

"To date, in the panel's view, the distributors have not had a sufficient focus on the service quality they deliver," the report states.

Ergon Energy inherited "six networks of varying quality, with some having been poorly maintained" and has taken too long to properly assess its network and make improvements.

"In the case of Energex, it is the panel's view that this position has been reached because there has been too much focus over a considerable period on producing an improved financial result," the draft report states. "While expenditure has certainly been reduced, the panel believes that this has been at the expense at the condition of the network. It is now operating at a utilisation of about 76%, whereas the prudent industry level is around 60 to 65%. The assets are stressed and this impacts on reliability."
"In short, there is a need for greater accountability and some catch-up expenditure on both networks to bring them back to an acceptable condition."

The draft report does not estimate the cost of the "catch-up" but suggests Ergon Energy will not have the resources to meet even its capital works program.

The panel found Energex management had decided as early as 1989 to "take a greater risk than had previously been the case" and "work the assets harder". The decision to avoid expenditure, as the chances of a blackout were small, was expected to save Energex $1 billion over 10 to 12 years.

Energex did not regularly monitor the network utilisation rate before 2001, underestimated the growth in demand over the past two years, and its capital expenditure was "too low for at least the past two years and possibly considerably longer".

The panel's main criticism of the Government and the industry regulatory, the Queensland Competition Authority, was that legislative and regulatory provisions had not been used to ensure a reliable supply of electricity.

The panel said the Government practice of taking special dividends did not impact on the ability of the distributors to spend funds.

Cabinet appointed the panel in February after summer storm blackouts.