The Tasmanian Government is demanding compensation from Basslink over the 2015 undersea power cable outage.
The state looks set to begin legal arbitration next week unless the company agrees to stump up tens of millions of dollars.
The cable connecting Tasmania and Victoria was out of action for six months at the same time as an extended rain shortage saw the state’s dams fall to record low levels.
The combination of events threw the state into an energy crisis, with no capacity to import power.
An independent report produced by Basslink could not find a precise cause for the fault.
The company then claimed it was proof the failure was a “force majeure” event, or unavoidable catastrophe.
The Government disagreed, and Energy Minister Guy Barnett said he had written to Basslink Proprietary Limited (BPL) and advised that the State considered it was entitled to compensation for its losses.
In a statement, Mr Barnett said the Government would begin the legal process next week unless compensation was agreed to.
“We have never accepted the original assertion that the cable outage in 2015 was the result of a ’cause unknown’,” he said.
“The expert reports into the cable failure delivered in December 2017 indicate that BPL had operated the cable in a manner that allowed it to exceed its temperature design limits during a number of periods in its service life.”
The Minister did not say how much the state was seeking to recoup, but it was expected to be tens of millions of dollars.
Company denies liability
Basslink has strongly denied allegations it breached any warranties under the operations agreement, or that it’s liable for any losses.
The company said it was “extremely surprised at these very belated allegations”.
In a statement on Thursday night the company said if the State Government took the allegations any further, it would vigorously defend any legal action.
It stood by the report of an independent cable expert, which found no cause for the cable break.
Basslink said the interconnector was tested rigorously during its commissioning in 2006 to ensure the design and construction requirements were satisfied.
Cable value questions
Energy analyst Marc White from Goanna Energy expects the Government will try to recoup Hydro Tasmania’s consequential losses of more than $140 million.
But he said the state might also want compensation for the ongoing cost of a lower Basslink export capacity.
“It’s not only the losses from the event itself,” Mr White said.
“It’s also the future of the cable and the value that’s now under question.”
He expects lost export costs to reach millions of dollars if an indefinite measure to lower Basslink’s export capacity limit from 630 megawatts to 500 megawatts remains in place.
“The value of that 130 megawatt de-rating, at extreme price events in Victoria, could really equate to $100 million over the remaining 12-year term of the Basslink contract.”