'Volatile': Power company says deal was offered to BSL

CS ENERGY and Rio Tinto say they would return to the negotiating table to secure an electricity deal for Boyne Smelter Limited.

Last week BSL general manager Joe Rea said "jobs will be lost" with a cut in production due to "unsustainable" electricity prices.

Aerials of Boyne Smelter Limited (BSL) from early 2013. Photo Contributed
Aerials of Boyne Smelter Limited (BSL) from early 2013. Photo Contributed Contributed

While the number of jobs at risk has not yet been released, Mr Rea has told The Observer 40 aluminium-producing cells will be closed to save power.

The ongoing power battle has some questioning the state's electricity prices and big industry intentions in Gladstone.

CS Energy chief executive officer Jim Soorley says Rio Tinto, owner of BSL, was offered a 12-month electricity deal.

It was a deal he said was "below $70MW/h" in October last year.

Mr Soorley said this would have protected them from the "volatile" electricity spot market, which BSL purchases 15% of its electricity from.

"If workers have to lose their jobs it's not the power price," Mr Soorley said.

"The contract price is for 12 months, and we offered them a substantial discount off the $70 average price in October, which they declined.

"I told them (the spot market) is a highly qualified, skilled strategy and you're going to get burnt."

The remaining 85% of BSL's power is supplied by the Gladstone Power Station at a price below generation.

"The power market in Australia is one of the most dynamic and therefore can be volatile," Mr Soorley said.

He said the National Electricity Market, which includes Queensland, Victoria, South Australia and Tasmania, fluctuates due to demand.

Boyne Smelters general manager operations Joe Rea announced job cuts due to increased power prices.
Boyne Smelters general manager operations Joe Rea announced job cuts due to increased power prices. Mike Richards GLA200117bsljobs

Mr Rea said securing electricity, which counts for 30% of the business's annual costs, was an ongoing issue for BSL.

He said the deal offered by CS Energy was "not globally competitive" but Rio Tinto was, however, continuing negotiations with electricity generators for a 12-month power contract.

Meanwhile, the company faces the ongoing challenge of a low aluminium price impacting its abilities to compete on the global market.

"The global aluminium price has remained flat over the past six years but the power prices have risen 260% in that time," Mr Rea said.

Mr Rea claims the state's electricity generators have been manipulating the spot market by holding back electricity.

"The bidding behaviours of generators are contributing to unnecessary volatility in the market, most recently through the decision to move up to 40% of their capacity to more than 500 times the cost of their generation," he said.

The production cut followed a price spike to the electricity spot market on January 14, which saw the power price rise to more than $13,000MW/h.

Mr Rea said the price hike, which is being investigated by the Australian Energy Regulator, has already driven up forecasts for the 2018-19 contract prices.

He said this was another reason BSL and Rio Tinto were questioning the state's electricity regulators.

"Added to this is the fact that the spot market prices have increased by around 30% each year since 2014," Mr Rea said.

Topics:  boyne smelter limited gladstone industry

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