The latest plan has ETEF being phased out between 1 July 2010 and 30 June 2011, with a quarterly 20% roll-off. The exact dates of the roll-offs have not been specified.

Most recently, ETEF was set to run until June 2010, although the end of the scheme was left open-ended.

The new document, ‘Delivering the Strategy: approach to transactions and market structure’ details the updated plan including:

• The Gentrader contract durations will be set to the remaining technical life of the power stations;
• The Gentrader contracts will be offered in five bundles, two from Maquarie Generation’s current operations, two from Delta’s and one from Eraring’s;
• Generators will ‘pass through’ current fuel costs to Gentraders before switching to fuel tolling agreements to be managed by the Gentraders;
• Co-insurance arrangements will be used to offset losses due to outages;
• Incentive will be offered for Gentraders to invest in the plant;
• Periodic payments for the Gentrader contracts will be considered, although preference will be given to up-front payments;
• The retailers (EnergyAustralia, Integral Energy and Country Energy) will be sold as they are, although bidders will be able to bid separately for EnergyAustralia’s gas customers;
• Transitional services agreements will run for three years, with built in termination clauses;
• The retail brands form part of the asset being offered. The distribution networks will develop new brands;
• Development sites will be offered separately, but part of the same sale process. Munmorah will be offered as a Gentrader contract until its decommissioning, after which it will be offered for sale;
• Retail price regulation will continue to at least June 2013;
• ETEF will be extended until June 2011; and
• The Government will offer a ‘Consumer Protection Package’ including energy rebates and other assistance.

The most interesting part of the annoucement was the ‘plan B’ approach of merging Eraring, Integral Energy and the Bamarang development site and floating the entity via an Initial Public Offering. This approach would only be taken if the individual assets did not achieve acceptable bids in the trade sale process or if the sale process failed to facilitate ‘at least one new generation entrant’.

An accompanying Policy Framework document explains how the exemptions were arrived at in absense of Commonwealth Government legislation defining EITE exemptions (such as the stalled CPRS Bills and the interim RET assistance).

The framework is based on the approaches taken in the following Commonwealth documents:

• Assessment of activities for the purposes of the emissions-intensive trade-exposed assistance program, Guidance Paper, February 2009;
• Establishing the eligibility of activities under the emissions-intensive trade-exposed assistance program, June 2009;
• The Carbon Pollution Reduction Scheme White Paper, December 2008;
• The draft Carbon Pollution Reduction Scheme Regulations, June 2009; and
• Activity Definitions from the Department of Climate Change website, as at 30 July 2009.

At this stage, no firm decisions have been made on future orders to run from January 2010.

Four of the five original ETEF reduction dates have now been abandoned, the most recent in January (see earlier article ETEF Deferred Again which includes further information on the operation of the fund).

The change involves an amendment to the table in clause 2.1.1 of the Electricity Tariff Equalisation Fund Payment Rules. Interestingly, while Treasury have removed the September 2009 and March 2010 reduction dates, it has also removed the explicit 0% rate that previously applied from the 27th June 2010 onwards. Thus the rules no longer explicitly state that ETEF will not continue past 30th June 2010.

• Financial and other assistance to households to reduce energy use;
• Assistance to business and industry to ‘pursue cost-effective energy efficiency opportunities’;
• Energy efficiency standards for residential and commercial buildings, appliances and equipment;
• New air conditoner standards to start in 2010;
• A review of regulation to ensure that it is encouraging demand side abatement and smart grid technologies; and
• Consideration of vehicle efficiency measures.

The communiqué says:

“…where retail prices are regulated, energy costs associated with the Carbon Pollution Reduction Scheme and the Renewable Energy Target shall be passed through to end-use consumers. These price increases, together with more cost-reflective retail prices, including the phase-out of retail price caps where competition is found to be effective, will help drive more efficient use of energy and assist in managing peak energy demand growth.”