THIS week’s shelving of legislation to break up Western Power has left the business community divided over the future direction of energy reform.
The Western Australian Government is planning to proceed with a second piece of legislation that provides for the establishment of a wholesale electricity market.
The Chamber of Commerce & Industry, which has advocated the break-up of Western Power for more than a decade, has not yet formed a view on whether the ‘industry’ bill should proceed in isolation.
Director Bill Sashegyi said the chamber’s members had expressed divergent views on the bill.
Some saw it as a step in the right direction, as part of an evolutionary reform process.
Others were concerned that creation of a wholesale market and associated regulatory arrangements would lift costs but with little prospect of more competition.
Mr Sashegyi suggested debate on the bill should be deferred to allow for more consultation.
The Government’s decision to shelve the break-up legislation followed a policy backflip by Opposition leader Colin Barnett, who said the Liberal Party would not support any element of the break-up plan.
He claimed the main reason for last month’s power crisis was the Government’s focus on breaking up Western Power into four separate businesses rather than running it.
This came just a few months after Mr Barnett said “a logical next step for real energy reform that would probably get the support of parliament is the separation of Western Power’s transmission system from the utility”.
In the absence of a legislated break up, one option for the Government is to introduce much stricter ‘ring fencing’ of the four core business units that comprise Western Power.
This approach is designed to ensure the business units within Western Power deal with each other on an ‘arms length’ basis and facilitate the entry of new competitors.
The Government and Western Power have already laid the groundwork for this option by aligning management with the planned break up model.
Specific initiatives to achieve effective ‘ring fencing’ include the creation of subsidiary companies under a Western Power holding company.
Transmission and distribution staff could be physically relocated away from other business units, and the Economic Regulation Authority could be given responsibility for charges and access rules for the transmission and distribution system.
The revenue would be retained within the networks business, while Western Power’s retail business would be allowed to buy power from the most competitive generators.
This proposal is comparable to the structure of Alinta, which has mechanisms to ensure an arms length separation of its retail and distribution arms.
This includes policies to stop the dissemination of confidential information obtained by the distribution arm from retailers.
Independent Power Advisory Group chairman Ky Cao said he suspected the entrenched culture of Western Power would overwhelm any attempts to achieve effective ring fencing.
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