Business forced to wait on power changes

Businesses will be forced to wait until at least early next year before the WA Government puts in place legislative changes to improve competition and help reduce prices in the State’s electricity market. Noel Dyson reports.

WHILE the Electricity Reform Task Force’s recommendations are now in the hands of the WA Government, no new legislation is likely for some time.

The ERTF’s main recommendation was that Western Power be split into four entities – State Generation, State Retail, State Networks and an entity to look after power to regional areas not on the State’s main power grid, the South West Interconnected System. It also recommended a residual trading market and use of an Economic Regulation Authority to oversee the operation of that market to help overcome the access regime many electricity market players say Western Power is imposing on them.

Business groups largely welcome the ERTF’s 79 recommendations.

Energy Minister Eric Ripper has keenly touted the 8.5 per cent average cut in retail electricity prices, $300 million boost to gross State product by 2010 and the potential creation of 3,900 new jobs the ERTF report says its recommendations will bring.

However, before the Government decides to discuss legislation that will bring any of the ERTF’s recommendations into reality, a committee called the Energy Reform Review Group, made up of four energy union and three Labor Party representatives, will study the report.

A spokesman for Mr Ripper said it was unlikely anything would be presented to cabinet until late this year, which means new legislation would not go before parliament until next year.

However, once that legislation is passed, things are expected to move quickly.

Perth Energy director Ky Cao said once a legislative framework was in place business would be able to start planning to make the most of the opportunities.

The ERTF has taken steps to address industry concerns that Western Power’s access regime was limiting access to the SWIS by proposing an interim residual trad-ing market to allow competition before a wholesale trading market begins in 2006.

Another of its recommendations addresses the concern that the Government’s power procurement process could undermine any attempts to introduce competition into the generation market.

Western Power is seeking an extra 300 megawatts of baseload power. It is thought the company that secures the contract will have the generation market sewn up for some time.

In Recommendation 36 the ERTF says: “State Generation should not invest in any additional fossil-fuelled generation plant until the government, on the advice from the Economic Regulation Authority, determines that such investments by State Generation would not hinder the development of a competitive generation sector”.

It is understood Western Power has put off its next tranche of power procurement – an order for an extra 300 megawatts of baseload power – until next year.

The ERTF also called for more emphasis to be given to supporting renewable energy generation.

In recommendation 69 the ERTF calls for government to consider placing a requirement on large power users to source a certain amount of their electricity from green sources, or to place a greenhouse reduction requirement on electricity retailers licensed in WA.

Other ERTF recommendations also give the renewable energy industry some preferential load balancing treatments.

The Federal Government already has a green energy requirement in place. Under its Mandatory Renewable Energy Target, 2 per cent of WA’s electricity has to come from green sources by 2010.

Sustainable Energy Industry Association of WA president Matthew Rosser said that, to meet this target, WA had to produce 300 megawatts of green electricity to meet its MRET requirements.

“If we don’t meet the 2010 deadline, there are mechanisms in place for the renewable targets to be met in the eastern States, except WA taxpayers will pay for it,” he said.

Mr Rosser said recommendation 69 would give the renewable energy sector a much-needed boost.

He said it had been one of the sectors hardest hit by Western Power’s “draconian” access regime.

The ERTF has also suggested that a new regulatory framework should be developed in preparation for the proposed interim step in con-testability on January 1 2005.

AlintaGas manager electricity strategy Andrew George said that tranche of increased contestability would allow companies to sell electricity to 12,000 new customers – an opportunity the gas utility was looking forward to entering.

The gas giant has plans to enter the electricity market through a cogeneration deal with Alcoa.

Some consumers have been asking whether the whole reform process was worthwhile.

In an information paper the ERTF says that Western Power’s published prices for large businesses were about 25 per cent higher than the Australian capital city average.

Indeed, the ERTF says its recommendations will result in a 6.5 per cent price drop for large business and an 8.5 per cent drop in prices for small business and retail consumers.

Chamber of Commerce and Industry director industry policy Bill Sashegyi said the ERTF had taken a very conservative approach to electricity market deregulation, which was why the seemingly low average prices over 10 years was being mooted.

“In the eastern States there was a more open approach that allowed big reductions in power prices,” he said.

“The ERTF is ensuring that there won’t be any down side for WA. Its approach will also limit the upside.”

However, Mr Cao is more optimistic about electricity price improvements for WA businesses.

“I think once the legislation is locked in we will see a 10 per cent to 15 per cent price fall,” he said.

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