NSW Treasurer Daniel Mookhey: state ‘lost control’ of energy by selling Eraring Power Station

NSW lost ‘control’ of its energy future to the private owners of the Eraring Coal Power Station and its sale was the ‘worst decision’ by a government in decades, Daniel Mookhey says.

Origin Energy's Eraring power station is set to close in August 2025.

NSW has “lost control” of its energy future to the owners of the Eraring coal power station and its sale was the “worst decision” by a government in decades, the state’s first Labor Treasurer in more than 12 years has declared.

With taxpayers potentially paying billions to keep the 40-year-old power station open beyond its slated 2025 closure, NSW Treasurer Daniel Mookhey says he has no control over his state’s energy mix despite electricity bills going up by between 20 and 25 per cent at the start of this financial year.

The Treasurer’s admission that he has no control comes ahead of the state government’s negotiations with Origin to ensure Eraring keeps the lights on in NSW as renewables struggle to meet the state’s power needs. Mining and energy experts echoed the dim outlook of the state’s energy situation, admitting the government was in a “difficult bind”.

Mr Mookhey – who will unveil a $7.8bn deficit, but with a four-year $3.6bn improvement to the state’s bottom line in his budget on Tuesday – told The Australian the O’Farrell Coalition government’s decision to sell Eraring in 2013 “will rank among the worst decisions made by a NSW government in decades”.

“It means that we don’t have control of our energy future,” he said. “Unlike other states that have held on to public ownership, (which) can decide for themselves the future of their principal power sources.

NSW Treasurer Daniel Mookhey. Picture: John Feder

“We now find ourselves in a position where those decisions (energy mix and power sources) are being made by a private company that answers to their investors, as opposed to a government that answers to the people of NSW.”

NSW Energy Minister Penny Sharpe announced on September 5 that the state government had accepted the recommendations of an independent report urging the need for Eraring to stay open to safeguard electricity supplies and prevent soaring increases to bills.

In August, the Australian Energy Market Operator warned NSW would face a material shortfall in electricity generation if ­Eraring retired.

Mr Mookhey has previously been coy on the government’s approach to Origin to extend Eraring, saying the company shouldn’t try to “game the people of NSW” in order to boost profits.

The Treasurer hasn’t revealed whether any estimated cost associated with Eraring would be ­included in Tuesday’s budget.

NSW Minerals Council CEO Stephen Galilee.

NSW Minerals Council CEO Stephen Galilee backed up Mr Mookhey’s view that the state had lost control of its power ­future.

“The sell-off of energy over an extended period has greatly reduced the current NSW government’s ability to influence energy policy,” Mr Galilee said.

“In states like WA and Queensland, where some electricity assets remain in government hands, they have more options when it comes to energy supply and power prices – they can choose to forgo some revenue in exchange for lower household electricity bills.”

University of Sydney energy expert Glenn Platt said the state government was in “difficult bind”.

“The question becomes what levers can the state government pull to get capacity,” Professor Platt said, adding the most obvious was Eraring’s extension.

A stockpile of coal at Eraring Power Station in Eraring on the NSW central coast.

“But the corporate game is to be the last man standing, as you’re the only one the government can turn to.”

The other levers the government could pull – or use as part of any negotiations with Origin – were “unconventional” and without the analysis to determine if they were a viable option.

“Rooftop solar on a massive scale (is another lever), but there’s debate about whether you could roll it out fast enough,” Professor Platt said.

“If there was better analysis (of the other options) you could give yourself some negotiating room.”

Professor Platt said world governments had seen previous success quickly making up capacity, but it required a sense of crisis and “political and community will”, akin to Japan rapidly meeting a shortfall after the Fukushima ­nuclear accident in 2011.

However, University of NSW energy systems analyst Dylan McConnell said the Eraring situation didn’t mean the state had “lost control”.

“There’s lots of tools at the disposal of state energy ministers, the government still has control in the energy space,” he said.

Dr McConnell said the detail was in the fine print: Origin closing Eraring is an option, not an obligation. “There’s been delays to Snowy Hydro, we haven’t seen the expansion of renewable energy in the interim,” he said, querying what an extension could actually look like – and what it would mean for the taxpayer.

NSW Energy Minister Penny Sharpe. Picture: Gaye Gerard

“Does it mean it’ll be subsided and run as it is, or in reserve when needed for emergency circumstances?” he said, adding the latter’s cost on the coffers was “negligible”.

An Origin spokeswoman said the company had been consistent in its willingness to talk with the state government.

“We will continue to engage to find a path forward that can help navigate the economic challenges facing the plant and avert any risk to the reliability of electricity supply in the state,” she said. “The closure notice provided an important signal to the market about progress towards our nation’s climate goals, and Origin does not shy away from the need to exit coal generation as soon as there is sufficient renewables and transmission capacity available.”

Energy expert Tony Wood – a senior executive at Origin until 2011, before it purchased Eraring – said “it’s a pretty low bar to call it one of the worst decisions”.

The Grattan Institute’s Tony Wood. Picture: Julian Andrews

He blamed a lack of long-term closure management planning, meaning the station had taken on undue “importance” given the closure of other power stations and delays to renewable projects.

“We should be asking why there wasn’t the policy and long-term closure management plan in place, to ensure we didn’t have a situation whereby Eraring is of such importance,” he said.

“We’ve left it too late (to plan for its potential closure) and of course it’s going to feel painful.”

Mr Wood said it was very unfortunate the commercial deals done by the Victorian government with energy companies – such as with AGL to keep open the Loy Yang A power station – were not made public.