Local States in $4bn raid on utilities - EXCLUSIVE ANNABEL HEPWORTH 814 words 19 January 2012 The Australian AUSTLN

2 - All-round First 1 English 2012 News Limited. All rights reserved. THE states will siphon an extra $4 billion out of their utilities by mid-2015 as they struggle to find extra money to offset lower GST revenues and other pressures caused by global economic uncertainty. An analysis by The Australian of state and territory Treasury figures finds they will raid their water, energy network, ports and other businesses for $5.9bn in dividends and tax equivalents this year, rising each year to almost $7.9bn in 2014-15, an overall increase of 33 per cent that raises fears of further price hikes. The resource-rich states of Queensland and Western Australia are responsible for most of the rise. Last night, both states insisted government-owned utilities were not ``money-making centres'' for them, as the government sent them back even more funds so they could provide subsidised services. Energy Users Association of Australia executive director Roman Domanski said there had been a surge in revenue-raising and excessive spending by energy networks, which was then passed back to consumers in higher tariffs and to governments as dividends and tax equivalent payments in several states. ``There is almost a gravy train here that's been created by this combination of factors of an excessive capital expenditure feeding into a bloated asset base, and then you get a bloated rate Continued on Page 4 Continued from Page 1 of return that gets applied to that,'' Mr Domanski said. ``The dividends just go up as a natural consequence of those factors.'' GoSwitch.com.au founder Ben Freund said the soaring cost of utilities ``almost acts as a regressive tax on households because you have to pay it regardless of what income you have''. ``It relieves them of the need to impose a tax elsewhere,'' Mr Freund said. ``It's a way of shifting money around. If it is the case that the network needs the upgrade, then the company needs its capital, it can't afford to pay dividends.'' While the states expect the carbon tax to curb the dividends from power generators, some have increased the percentage of profits that they take from other businesses. Victoria has increased the dividend payout rates from the Transport Accident Commission and metropolitan water businesses, and has recently declared it will start stripping dividends from the Victorian WorkCover Authority. Tasmania has increased the payout ratio of Hydro Tasmania from 50 per cent of underlying profit to 70 per cent and for Aurora Energy from 50 to 60 per cent. NSW is forecasting lower returns from its electricity generation businesses, but expects ``steady'' growth from the water sector; Sydney Water expects to pay a $250m dividend in 2013-14, compared with $242m this year. The government will again start taking dividends from Sydney Ports Corporation in 2013-14 (70 per cent Page 1 of 2 2012 Factiva, Inc. All rights reserved.

of its profits) and Port Kembla Port Corporation from this year after suspending the payments so they could fund infrastructure upgrades. In Western Australia, the revenue being pumped out of the government's companies is expected to grow at about 20 per cent a year, partly because the Barnett government has demanded a 5 per cent efficiency dividend from the utilities, which is designed to make them more profitable. Western Australia's Water Corporation is expecting bigger profits and higher dividends to the government, but consumers have been slugged by higher water bills, while residential electricity bills have risen 5 per cent this year. Last night, West Australian Treasurer Christian Porter said: ``All of the dividends and tax amounts and more gets effectively sent back . . . in allocations of taxpayer funds, which allow for the building of critical infrastructure in water electricity and ports. ``When the money coming in from water and electricity utilities is considered alongside the money going out for water and electricity infrastructure, these are not money-making centres for the state government. Western Australia compensates energy providers Synergy and Horizon Power because the government requires them to sell residential electricity at below cost. Queensland is expecting to collect $1bn in dividends and taxes from its 12 government-owned companies this year, rising to $1.75bn in 2014-15 -- even after the carbon tax forces the state's Treasury to slash the returns it expects from the electricity generators Stanwell and CS Energy. Electricity prices are set to rise further in Queensland as the government has told the state's pricing regulator that prices must reflect the actual cost of supply from July 1. Queensland Finance Minister Rachel Nolan said the higher dividends were because the Australian Energy Regulator increased revenues from the Queensland energy transmission entities and because of benefits from an electricity generator restructure. The government would provide about $1.9bn in Community Service Obligations to its utilities to deliver subsidised services, rising to $2.1bn in 2014-15 -- more than it would take in dividends. Document AUSTLN0020120118e81j0008d

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