Why is the Yallourn deal a secret?

In March this year the Victorian Government announced it had struck a deal to close the Yallourn coal fired power station four years early, in 2028. The details of the deal with the power station owner, EnergyAustralia (EA), remain confidential, described by Victorian Energy Minister Lily D’Ambrosio at Budget Estimates in June as “commercial in confidence“. The question is why?

The “secret deal” has been widely speculated about since it was announced in March, with rival generators raising suspicions that it might involve minimum price guarantees for Yallourn, meaning the power station would be able to generate up until 2028 at greater output, and able to ignore low wholesale prices, which are a signal for uneconomic generators to reduce output or even close.

Alternative speculation on the confidential safety net deal also suggested it may have been designed to prevent the power station from exiting before 2028. Yallourn is approaching the end of its operational life, where reliability issues can become more frequent.

This theory is supported by reference to the deal in the Victorian State Budget Statement of Finances (p 214) released in May. The Statement says that the “agreement includes, should it be needed, a safety net to avoid an unplanned exit of Yallourn.

“As part of this safety net, the State agrees to compensate EA in the event of certain non‑business-as-usual costs imposed on the operation of the Yallourn Power Station.”

Certain non-business-as-usual costs might include the multi-million cost of diverting water from the nearby Morwell River and to repair cracking in the levees holding back the river from the main mine pit that feeds the power station.

The power to withhold information relating to contracts written between the State Government and commercial entities is described in Section 34 of the Victorian Freedom of Information Act. The Government is allowed to withhold details of contracts if the information contained therein relates to trade secrets or would unreasonably disadvantage the undertaking. In this case, the undertaking is maintaining the reliability of the power station until 2028.

The Victorian Solicitor General’s Office has explored these issues, and the question of whether the Victorian Government has the right to withhold information would likely be determined by whether revealing the exact terms of the deal would unreasonably disadvantage EnergyAustralia in some way, or that some greater public interest could be demonstrated.

It is difficult to see how the details of Victorian Government assistance to keep Yallourn operational until 2028 would unreasonably disadvantage EA. If anything, given the speculation to date, there is more likely to be a public interest benefit in releasing the terms of the agreement so that other agents in the National Electricity Market can make better informed decisions about how the power station will operate until 2028, so they can plan and invest with greater certainty.

It makes sense for the Victorian Government to ensure a hard and 7 years distant end-date for the ageing power station, for reliability, planning and investment purposes. Given concerns around the recent threat of flooding leading to the power station being taken off line or even closed, it would be helpful for the market if these details were made public.