Government could take hit over energy giant’s $200m IT project blowout

The Queensland government could take a financial hit over a $200 million cost blowout on key IT upgrades by the country’s largest electricity distributor,also running a year late and subject to a probe into contracting arrangements.

The state government waswarned by the Queensland Audit Office last year its returns from the company could be affected should the project costs run higher than what had been approved by the Australian Energy Regulator.

The IT upgrades span Energy Queensland’s stock and electricity management systems,along with payroll services for more than 7600 staff.

The IT upgrades span Energy Queensland’s stock and electricity management systems,along with payroll services for more than 7600 staff.James Alcock

Energy Queensland has been tasked with the overhaul since it was formed in 2016,when state-owned energy providers and retailers Energex and Ergon merged.

Chief executive officer Rod Duke described the computer systems as dating back to “just after the Second World War”.

Duke was questioned at astate budget estimates session on Tuesday after concerns over project costs,delays and contractor conflicts were raised by the Electrical Trades Union.

He said the business case put a figure of $633.5 million on the project — to span stock and electricity management,along with payroll services — and slated it for completion this July,but it was now projected to cost $814.6 million and not be ready until July 2023.

“To give you some context,our total spend is expected to be about 2.9 per cent of our total asset value of $28.4 billion — so less than 3 per cent of the assets of the business will comprise these[IT] spends over a six-year period,” Duke said.

“I would hold that that’s a very modest investment in the context of what is Australia’s largest electricity network,indeed one of the largest electricity networks and one of the most complex electricity networks in the world.”

Under energy market rules,the company has five-yearly approved revenue and expenditure caps overseen by the regulator. If the company exceeds these,the regulator can launch a review.

“If Energy Queensland spends more than the approved funding,it may not be able to recover the excess by increasing its customer network charges,” the audit office noted in its report last year. “Financial returns to government[the shareholder] may be affected.”

Opposition energy spokesman Pat Weir said the government was “pouring money down the drain” with the IT program.

He also asked whether the head contractor for the project had interests in a labour hire company which was also working on the contract.

Duke confirmed the “portfolio project director” was “an employee of an entity that also provides other employees to the project” and said an investigation had been conducted to review contract arrangements and found daily rates were value for money compared to other larger firms.

“The matter has been assessed in accordance with the Crime and Corruption Act 2001 and has not met the criteria for suspected corrupt conduct,” Duke said.

“The investigation is concluded and the matter is closed.”

Matt Dennien is a state political reporter with Brisbane Times,where he has previously covered Brisbane City Council and general news.

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