East powers ahead of WA

A CLOSE analysis of figures released by the Electricity Supply Association of Australia comparing electricity prices in real terms shows WA is a big loser, particularly in terms of costs to large business, according to the WA Chamber of Commerce and Industry.

CCI director industry policy Bill Sashegyi said electricity prices had risen about 30 per cent more than prices in New South Wales and Victoria – WA’s main competitors for large business over the seven years the ESAA survey covered.

The ESAA’s Electricity Prices in Australia 2002 report, featured in last week in WA Business News, shows that, while power prices were increasing in WA, they were actually increasing more slowly than the inflation rate and therefore decreasing in ‘real terms’.

It rated large businesses as those consuming more than 13,140 mega-watt hours per year.

“We’re 30 per cent further behind the eight ball than we were in 1996-97 and we were still losing business then,” Mr Sashegyi said.

“If this differential is sustained there will be major problems for WA manufacturers.”

He said the main businesses WA was losing were those in large energy consuming sectors such as building products and food processing.

“I’m getting a lot of anecdotal evidence about the difficulties our manufacturing sector is having in sustaining operations here,” Mr Sashegyi said.

“There is increasing pressure to close branch manufacturing operations here and centralise them in the eastern States.

“The one thing we have going for us is that it is more expensive to ship goods from the east to WA than it is to ship stuff back the other way.”

WA’s electricity utility Western Power has long attested that any deregulation of WA’s electricity market must at least maintain the benefits that it had brought.

Indeed the ESAA survey shows electricity prices for both large and small WA businesses have been decreasing steadily in real terms.

However, Mr Sashegyi said that while prices were going down in WA, the prices in NSW and Victoria were going down faster. He attributed the speed of the eastern States’ price decreases to increased competition in those markets.

A Western Power spokesman said it was hard to compare the ESAA figures on face value.

“The type of customer the large business figures are based on does not exist in WA,” he said.

Mr Sashegyi said while WA’s electricity prices had been decreasing in real terms, the prices in the eastern States had been decreasing more quickly.

He said the benefits of electricity market deregulation were shown in 1997-98 and 1998-99. In those years Victoria’s large business electricity prices were 209 per cent and 222 per cent cheaper than WA’s.

Prices in NSW were 178 per cent and 179 per cent cheaper over the same period.

However, Mr Sashegyi said the ESAA survey also showed the volatility within the electricity market.

In the four years from 1999-2000 and 2002-03, Victorian prices for large businesses went from 5.74 cents per kilowatt hour up to 7.55 cents per kilowatt hour and back down to 5.49 cents per kilowatt hour.

Perth Energy director Ky Cao said figures he prepared for the Independent Power Advisory Group supported the ESAA findings.

“The gaps highlighted between WA and eastern States power prices conform with our predictions,” he said.

Mr Cao said it was unlikely WA would have the same price volatility that Victoria had suffered because the Electricity Reform Task Force was likely to recommend bilateral contracts.

The ERTF is the organisation charged by the WA Government with recommending the best options for improving the management of WA’s electricity industry.

In its interim report the ERTF suggested the vertical disaggregation of Western Power into separate re-tail, generation and transmission businesses.

Mr Cao said bilateral contracts would help maintain electricity price stability.

Both Mr Sashegyi and Mr Cao admitted conducting such analyses were fraught with danger because the ESAA figures did not adequately identify whether factors such as the introduction of the GST were taken into account.

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