ELECTRICITY transmission and distribution company TasNetworks says power prices cannot sustain the business in the long term.
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TasNetworks was established this year in a merger between Transend and Aurora's distribution arm, inheriting a $3-billion asset base.
In the company's first annual report, chairman Dan Norton said Tasmania's electricity demands were likely to grow at less than one per cent a year - a much lower rate than other states.
Dr Norton said TasNetworks needed to find a realistic pricing model for electricity distribution.
"TasNetworks faces a number of challenges as it balances the delivery of safe, reliable and efficient network services against customer expectations in regard to electricity prices," he said.
"Traditional pricing and revenue models are unlikely to support sustainable network services or predictable price paths for customers."
Dr Norton said the state-owned company was highly dependent on big customers, with the four largest energy users accounting for more than half the energy consumed.
"TasNetworks therefore remains vulnerable to the loss of a major customer," he said.
"A key focus will be to work with these customers to understand how we can support the sustainability of their operations."
The annual report sets a targeted after-tax profit of $117 million for the current financial year, with a $61 million dividend to the state government.
TasNetworks also plans to spend $188.8 million on capital investment during the year.
"There are still requirements for network expenditure to renew assets and securely meet forecast peak demand, and to safely operate the network," Dr Norton said.