BY ALEX BAINBRIDGE
HOBART A cost blow-out of more than $250 million for the Basslink underwater electricity cable across Bass Strait has been a focus of attention since Greens MPs began questioning Premier Jim Bacon's Labor government about it, following the release of the 2003-04 state budget in early June.
The cost blow-out is significant because, at the time of its approval, the proponents of the private Basslink project, National Grid International (NGI), argued that even a $50 million increase in costs would be enough to give the project only a 50% chance of breaking even. Basslink was originally projected to cost $500 million.
A number of aspects of the Basslink proposal were controversial. Two of these could have been largely avoided by using underground instead of overhead transmission cables at the Victorian end, and by using a "bipolar return cable" instead of a "monopole" across the strait. NGI said that the increased spending required to implement either of these measures would make the project unviable.
Basslink was approved on the condition that a bipolar cable was used. NGI then argued that the project could meet this condition and remain viable, but refused to budge on the use of overhead cables in Victoria. The cost of using underground cables would have been $90 million.
NGI is arguing that the project is viable despite the cost blow-out. The increase in costs is likely to be paid by the government-owned Hydro-Electric Corporation through an increased annual "facility fee" when the Basslink cable is completed.
If the cost increase leads NGI to withdraw from the project, the agreement struck at the outset of the project leaves the Hydro still liable to pay an annual facility fee.