Perth Energy
Frequently Asked Questions
What is the structure of the Western Australian energy industry?
In the context of Western Australia, all details provided here refer to the South West Interconnected System (SWIS) which covers the main population centre of the state. The SWIS stretches from Kalbarri north of Perth, to Kalgoorlie-Boulder in the Eastern Goldfields and south to Albany. It represents 90% of the WA power market with total expected generation capacity of 4115MW in 2007-08. The estimated 07-08 system peak demand is just over 3800MW and is forecast to rise by 3.2% (120MW) per year over the next 10 years.Western Power Corporation, the previous integrated state owned utility, was in April 2006 disaggregated into separate generation (Verve Energy), retail (Synergy Energy) and networks (Western Power) businesses supplying the SWIS.
Alinta, which was split from Western Power's predecessor the State Energy Commission of WA to supply the gas market, was privatised in 2002 and is engaged in electricity retail and generation. It is building gas-fired generation plant in the SWIS. Besides Synergy and Alinta, Perth Energy is the only other electricity retailer licensed to supply small-use customers in the SWIS.
What is the market design?
The new market arrangements in WA commenced in September 2006. The model differs from the National Electrcity Market (NEM) by being a net pool based on separate capacity and energy markets. It is governed by the Wholesale Electricity Market (WEM) Rules 2004 as administered by the WA Independent Market Operator (IMO). WA is not interconnected to the NEM and will not be in the foreseeable future.
The WEM's capacity market is based on a system of capacity credits allocated by the IMO to all generators in the SWIS. Capacity must be certified by the IMO in order to receive the credits, which are a form of guaranteed capacity payment made by either contracted customers or the IMO. Energy is traded in the Short Term Energy Market (STEM), a net pool arrangement, in that it is used mainly for trading uncontracted energy that is generated beyond the bilateral contract arrangements between generators and retailers/loads.
All retailers and large users must purchase capacity credits to match their peak demand plus a reserve capacity margin set by the IMO. This ensures sufficient capacity will be installed for the forecast peak demand in future years which the IMO issues annually. This model eliminates the requirement for extreme spot energy prices to signal the need for new capacity entry (as in the NEM). STEM prices are therefore capped at lower levels than in the NEM, around $150/MWh for gas fired and $300-500/MWh for liquid fired energy.
For further details see www.energy.wa.gov.au and www.imowa.com.au.
What are the retailing opportunities for Perth Energy?
The total number of contestable customers is approx 12,500, out of a total SWIS customer base of 850,000. The contestable load demand threshold is 50,000kWh per year (average 5.7kW)consumption, about the size of a suburban deli. This market represents roughly two-thirds of total SWIS demand in volume and value terms, or about $1 billion.
Perth Energy currently has long term off-take arrangements with eight landfill gas based generators in the SWIS. The company supplies this renewable energy to a number of commercial and industrial customers covering hundreds of sites, including a third of all local government councils in the SWIS. It also has long term off-take contracts with Verve Energy for power which it uses to supply part of its customer portfolio. Perth Energy's ability to expand its customer base has to date been constrained by the lack of available third party generation capacity, a limitation that will be rectified through its own generation project development.
Full retail contestability is expected to be introduced in 2010. Perth Energy will be well especially well placed to take full advantage of FRC utiltising Infratil's experience in the Eastern states.
What generation opportunities are there for Perth Energy?
The WA Government has placed a cap on Verve Energy's total capacity at 3000MW, which means Verve is not permitted to install any further generation capacity given the company already has 3400MW. It is due to retire some of its oldest plant in the next several years. All new capacity must therefore be provided by private investors.The better known projects are currently undertaken by Alinta, Wambo Power Venture (WPV) and Griffin Energy. Alinta's gas plant are installed on Alcoa sites to supply Alcoa with process steam, with most of the electricity generation being sold in the SWIS. WPV is installing a combined cycle gas fired plant in Kwinana, the result of its winning the power procurement tender from Synergy in 2005. Griffin is installing a coal fired power station in Collie for the purpose of supplying the resurrected Boddington Gold Mine. The IMO's view is that supply and demand will be about in balance in 2009-10.
Perth Energy has executed contracts to develop and contruct a 120MW dual fuel power station which has been conditionally certified by the IMO for delivery in 2010. The site, in the Kwinana industrial strip, is large enough to take up to 400MW depending on plant configuration. It is adjacent to a gas compressor station on the Dampier Bunbury Pipeline and is also close to the alternative Parmelia Gas Pipeline. Kwinana is one of the strongest points in Western Power's transmission network and is among the least constrained parts of the system for access to network capacity.
How will the project be financed?
Perth Energy has credit approval from a strong financial institution to provide 65% of the project funding requirements. The majority of the equity wiil be provided by Infratil.Who are Perth Energy's management?
Ky Cao has been the Managing Director/Chief Executive since 2000. Prior to Perth Energy, Ky held senior management positions at Western Power Corporation (WPC) in energy trading and business marketing.
Ky has been intimately involved in the transformation of WA's electricity industry as a member of the Electricity Reform Task Force (ERFT) Market Design Working Group and the Electricity Industry Reference Group, established by the Government to provide it with advice on reform strategy. He was also on the Electricity Reform Implementation Unit's Market Rules Development Group and a number of subsequent technical committees and remains is a member of the newly formed Transitional Market Advisory Committee chaired by the IMO.
In 2001, Ky established and chaired the Independent Power Advisory Group (IPAG), which comprised most major companies with interests in WA's energy market. IPAG played a significant role in assisting the WA Government achieve its reform objective and program, mainly through educational campaigns targeted at stakeholders in government and industry and the energy consuming public.
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