Power tariffs to hit Pioneer Valley

With the expectation that transitional electricity tariffs will be removed by 2020, the future of the Pioneer Valley Water (PVWater) scheme becomes cloudy as it would be thrust into Business Low Voltage General Supply Tariff (Tariff 41) or Business over 100MWh per annum - demand small (Tariff 44).

The $47.4 million scheme, constructed in the late 1990s and used by some 250 sugar cane growers in the Mackay region, comprises a number of separate reticulation sections of which three include major pumping stations - Septimus, Palmyra and Silver/McGregor.

A five-page document sent out to State and Federal departments from Pioneer Valley Water CEO John Palmer outlines the possible implications for the move.

"Although Business tariffs (T41 and T44) have a much lower unit charge for electricity than Tariff 62, the associated demand charge and daily service fee lead to the significant increases," Mr Palmer said.

"The annual cost of the Tariff 44 daily service fee is $20,735 which is more than the cost to consume some 95MWh at the Septimus Relift station in 2012/13 under Tariff 62."

Mr Palmer said increasing electricity costs both for supply by PVWater and for on-farm irrigation by customers have contributed to a concerning reduction in water use in the scheme.

"Electricity comprises a significant component of production costs and many customers are choosing to gamble on rain falling rather than switch on electric irrigation pumps," he said.

"Sugar cane will not necessarily die under this strategy but it can have a dramatic impact on agricultural production for the region with yield substantially reduced due to a lack of water for the crop in peak growing periods.

Figures in the document show PVWater average electricity costs over all schemes going from $12.55/ML in 2002 to $26.27/ML in 2013, with 8458ML less water used.

This was also despite lower rainfall (October to December) in 2013 (87mm) than in 2002 (104mm).

"This is firm evidence of the reduction in irrigation water use in the irrigation scheme due to high electricity costs," Mr Palmer said.

"The demand tariffs severely penalise businesses providing water in supplementary irrigation schemes with very variable annual irrigation demand and hence electricity consumption patterns.

"Placing these businesses onto those tariffs will quickly result in them closing down operations due to customers not being able to afford water charges based on those business electricity tariffs."

It has further bolstered a call by Canegrowers for the Queensland government to recognise food and fibre irrigators as a separate group of network users. Paul Schembri, chairman of Canegrowers, said he was very familiar with the PVWater scheme and it highlighted the need for Queensland government action.

"Unless they start to reduce electricity prices they'll begin stranding their own assets, and not just electricity assets but water assets," he said.

The PVWater document said the Queensland government was the major contributor to the establishment of the scheme to the tune of $31.7 million.

"I know the Mackay region well, and when it comes to input costs to farmers, when they don't have the funds they start to take risks with rain and that can damage their own business," Mr Schembri said.

"There's a real risk of mills not having the production throughput, it's getting to that point where farmers are parking up."

Last week, Queensland Energy Minister Mark McArdle urged irrigators to review their current electricity tariffs in order to save money.

Figures compiled by Ergon Energy show more than 4500 customers across the state could potentially benefit by shifting from the transitional farming tariffs (62, 65 and 66) to a small business tariff (20 or 22).

Mr McArdle said that while individual farms often had very different electricity use profiles depending on crop and climate, Ergon had found that on average some of its customers could be $800 a year better off.

The independent Queensland Competition Authority (QCA) found some irrigators using electricity predominantly at peak times would likely pay less under Tariff 22 than under Tariff 62.

Irrigators are expected to save 5 per cent since the repeal of the carbon tax.

The QCA also found while the rise in Tariff 20 will be limited to 3.3pc, the increase in Tariff 22 will be 1.7pc.

Mr Schembri said Canegrowers had been in discussions with the Premier and various departments regarding electricity prices.

He said the organisation is also going over QCA tariff recommendations in developing a report which is yet to be released.