LAKES R US P/L- APPLICATION RE SNOWY HYDRO P/L- SUPPLEMENTARY SUBMISSION TO THE NCC. • POINT 1 in NCC letter of 1 November 2004. Lakes R Us Pty Ltd (LRU) Proposal and the Operations of Snowy Hydro Limited (SHL) The reasons for selecting Snowy Hydro Limited operations. • No other storage facility has the capacity to divert water to the Murray or Murrumbidgee systems. • The evaporation rate is higher in other dams in the Murray Darling Basin Commission (MDBC) area because SHL’s storage facilities for water are colder and deeper. The benefit of storing water, where it will assist SHL to reduce the cost of insurance to its electricity customers in the event of their gas and coal fired generators experiencing failure, for what ever reason, is of great value to every household with reduced electricity charges. Consideration should be given to the environmental benefits as a result of a reduction in greenhouse gases achieved because it would be less likely for the thermal generators to be operating their generators in standby mode in anticipation of a National Electricity Market spike in price. The increased volume of stored water in SHL will increase SHL’s peak electricity output capabilities. LRU’s water will have the same value as the “above target” water that SHL utilizes to produce at least 60% of its income from only 15% of SHL’s yearly electricity generation. The NSW “Energy Directions Green Paper” issued by the Minister of Energy and Utilities, Frank Sartor released on the 6th Dec 2004 states that electricity demand is rising at 2% each year with peak demand spikes rising even faster at 4%. 10% of NSW generation and network capacity was used for only 1% of the year. 1300 megawatts of generation capacity was used to meet 87 hours of peak demand. From current predictions 18% of generation capacity would be required for 1% of the year. Current generation and interconnection capacity is unlikely to Draft – 4th January 2005 meet demand under normal circumstances and will not meet demand in exceptional weather conditions over the next decade. The value of water, held by LRU which may be used to meet the future needs of this impending crisis will increase if it is held in Lake Eucumbene, the largest of SHL’s storage facilities. Electricity restrictions in NSW in the near future and during the next decade will cause disruptions to the economic well being of NSW and the nation. LRU’s access to SHL would assist at peak usage spikes in the N.E.M as there would be more water to cope with the extra demand for peak electricity generation. This benefit to the nation would occur with a nil increase in greenhouse gas emissions. All this is achievable by LRU utilizing vacant airspace in SHL’s storage. Under the current science on global warming the luxury of not using the air space to store water is unaffordable. This air space has been vast and vacant for at least 60% of the time since it’s construction. If global warming is going to make rainfall even less likely and predictable then leaving this air space vacant is not in the public interest. LAKES R US Business Plan. When the outcomes of the declaration to SHL by LRU has been finalised, a full business plan will be provided to the NCC. It is extremely difficult to provide a business plan with so many variables in both income and the expenditure. Currently SHL rents airspace in Blowering Dam, which is owned by NSW. The rental rate is set at $120,000 for 120000 megalitres of airspace which must be left vacant at all times to facilitate the rapid generation of electricity and not cause flooding downstream of SHL’s turbines. LRU’s rental conditions on SHL’s Lake Eucumbene would differ in that there would be no stipulation or demand that up to 800,000 megalitres of airspace be maintained at all times. LRU believes that its impost on SHL’s Lake Eucumbene will beless than SHL’s impost on the NSW owned Blowering Dam. Under this precedent the rental charge per year should not be more than $1 per mega litre per year, for the utilisation of Lake Eucumbene’s vacant airspace by LRU given that LRU and its customers are prepared for, and except, the water losses in spill events. LRU expects that in times of peak demand that SHL will pay LRU (and its customers) a fee of $98 per mega litre to borrow LRU water for generation purposes. SHL deemed $98 per mega litre was the price some water users should pay to borrow SHL water in October 2004. Under this precedent LRU and its customers must be paid by SHL if SHL use water that belongs to LRU for Page 2 Draft – 4th January 2005 peak generation or operating in the hedging and derivatives in the national electricity market using LRU water. LRU proposes to sell shares to allocation holders in the Murray Darling Basin that can utilize the benefits that LRU can offer. These shares should increase in value over time as LRU’s volume and the value of the water increases to SHL for electricity generation. Lakes R Us will charge its customers a fee, for a profit, to store water with them in SHL’s facilities. LRU’s business offices will be situated in Berrigan, New South Wales for the day to day operations of directing the storage and trading of water from South Australia, Victoria and New South Wales. LRU’s water exchange would also facilitate trades in temporary water from one year to the next water allocation year and will also operate a futures market. There are plenty of water traders within the Murray Darling Basin and there is no facility or organization that would be able to offer all the services that LRU could offer to water users if Lakes R Us is successful in its application to the NCC for declaration. SHL could offer some of these services though, on prices charged for offers to use SHL borrow facilities at up to $180 per megalitre, it is obvious that they have no competition in the market. LRU would like to compete in this market and the benefits would flow to the nation with the increased efficiency. The MDBC cap has greatly increased the uncertainty of water supply to most water users. Often it is not until the irrigation season is well underway that an estimate of how much water will be available can be made. The water users have had the cap imposed on them and now require a cost effective and efficient method of helping them to deal with this circumstance. LRU believe that its application for declaration to SHL storages will help immensely for water users to manage their own water needs from year to year • Point 2 in NCC letter of 1 November 2004. Clearly Identify the Service The services that Lakes R Us is seeking access for are those services that are required to store water after it has been allocated to the water user in the water usage year and the transportation of that water to the Murray and Murrumbidgee. Some of the allocation holder’s water may be in excess of requirements in that allocation year due to rainfall or prudent attitudes to water use. This unused water shall be transferred back up into the SHL system by swapping required release water coming out of SHL storage’s’ under the MDBC guidelines that SHL must adhere to. LRU requires access to the service that Lake Eucumbene would provide in storing water over time in the vacant airspace that exists between the current water level and its maximum storage level set at the spill height for Lake Eucumbene. Page 3 Draft – 4th January 2005 SHL offers a loan facility for water referred to as “Snowy Borrow” for irrigators from time to time, currently there is a “Snowy Borrow” on offer to Murray Irrigation Limited water users at the rate of $98.00 per megalitre. This is a precedent for the method that LRU would use to enable LRU to utilize the airspace in Lake Eucumbene. SHL currently loans water to water users and this water is repaid back into SHL storages, including Lake Eucumbene, using the swapping of required release water as the replacement mechanism. LRU requires access to this service. This mechanism is subject to MDBC approval and LRU would require access to this process. When LRU’s water enters the MDBC controlled water storage and regulation system the normal temporary trade rules will then apply for this water, for delivery to allocation holders at their request. LRU’S water will be temporarily traded into SHL storages and a trade under the current temporary trading rules is all that is required to trade this water out of SHL. Access will be required to all the services provided by structures including valves, tunnels, pipes, turbines, streams and regulation equipment that allow water, stored in Lake Eucumbene, to be transported into Blowering Dam from SHL. When LRU’s water reaches Blowering Dam, LRU will then require access to the water release mechanism at Blowering Dam and access to the watercourse that allows water to be transported to allocation holders in the Murrumbidgee River system and beyond. LRU will also require access to the service SHL can provide with all the structures including valves, tunnels, pipes, turbines, streams and regulation equipment that allow water stored in Lake Eucumbene to be transported through the Khancoban Regulating Pondage, into the M.D.B.C.