MINISTER SIGNALS PAYOUT FOR WESTERN POWER GRID
5 November 2008
PETER KERR
The State Government may compensate Western Power millions of dollars if it rejects its plan for a $6 billion upgrade to its ageing network, according to Energy Minister Peter Collier.
The taxpayer-owned utility, which supplies electricity to homes and industry, asked for approval last month from the Economic Regulation Authority for a steep price rise for customers such as Synergy to use its network so it could recoup the cost.
The three-year program seeks a 40 per cent price increase in 2009-10 and a 30 per cent rise in each of the next two years.
If approved, the charges would add about 30 per cent to the cost of household electricity and pile pressure on the Government to approve big rises in power bills.
Under the previous government, electricity bills were set to rise 72 per cent over eight years from next July to bring tariffs in line with the cost of generating power.
The 30 per cent increase would be above those rises.
But Colin Barnett cast doubt on Western Power’ plan, saying the proposed works were “extraordinarily aggressive”
While the Government must accept any ERA recommendation, it can also direct Western Power not to increase its network charges to soften the blow to domestic power bills.
But this could expose the Government to a Verve-style bailout for Western Power.
Mr Collier said the Government might fund some of Western Power’ capital works with an increase in the “community service obligation” payment to the electricity industry to deflect pressure to raise electricity tariffs.
“I have to say though, the notion of increasing the community service obligation (to delay price rises) does not sit well with me. We (would be) talking about the obligation burgeoning out to above $1 billion,” he said.
The Carpenter government had to provide $780 million in April via these special payments to subsidise electricity generator Verve’ losses, which stem from a requirement that it sell most of its electricity to Synergy at below cost to ensure domestic power bills remained low.
Mr Collier said any long-term fix of the industry’ difficulties lay in increasing electricity prices to bring them into line with the true cost of producing power.
He said no decision would be taken on residential tariffs until an Office of Energy review finished late this year. The watchdog’ initial report in April was the basis for Labor’ decision to raise tariffs 72 per cent.
Western Power managing director Doug Aberle has warned of risks to public safety and the reliability of supply if its plans to upgrade were not approved.
(c) 2008,West Australian Newspapers Limited
The West Australian
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