25/03/2009 - 22:00

Gas concerns remain

25/03/2009 - 22:00

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ALMOST nine months after the Varanus Island incident, which cut the state's gas supply by a third and cost Western Australian businesses almost $2.

ALMOST nine months after the Varanus Island incident, which cut the state's gas supply by a third and cost Western Australian businesses almost $2.5 billion, the debate surrounding energy security and a state energy policy rages on.

The gas crisis bought issues of energy shortages, and the diversification of energy supply, to the fore in WA.

Industry groups agreed that the government needed to work towards developing a long-term energy security strategy to ensure the state is not left vulnerable to similar incidents.

The reliability of supply for both industry and retail consumers encompasses a number of factors, some of which are likely to come under review as a result of the crisis.

The Senate report into the incident, released in December, referred to the state's lack of "mature, diverse and competitive market" with regards to energy supplies.

The report says the reliance on limited sources of gas production and supply for the domestic market is a significant impediment to the continuity of supply of energy for WA consumers and industry.

"There is no short-term capacity to provide significant amounts of reliable and affordable supplies of alternative energy sufficient to mitigate against a similar crisis if another major gas failure is experienced," the report says.

Rising gas prices have also become a major issue. According to the Domgas Alliance, wholesale gas prices have more than tripled during the past 18 to 24 months, making natural gas less competitive with coal for base-load power generation and resource processing.

The spotlight has also been put on the concentration of gas supply from two major players, with the North West Shelf joint venture alone supplying two-thirds of the total market.

The Domgas Alliance, which represents some of the state's largest gas users, has long argued the high concentration of supply and the joint selling arrangements by the NWS significantly lessened competition.

The issue of competition is likely to come under further scrutiny, after electricity generator Verve Energy last week filed a writ in the Supreme Court seeking between $30 million and $40 million in damages from NWS.

Verve alleges that NWS breached the gas supply agreement on two occasions last year, once in January and again between June and September, and claims NWS charged a higher gas price on both occasions compared to the contracted gas price.

Verve said NWS was overpaid and "unjustly enriched as a result of the failure of their conduct to supply gas as required".

Verve has also alleged the NWS breached the trade practices act and is seeking to clarify the gas supply agreement.

"Verve Energy has had a long-term successful relationship with the North West Shelf Gas sellers," managing director Shirley In't Veld said.

"We are disappointed that the NWS sellers have, in response to the Varanus gas crisis and to our serious financial detriment, chosen to adopt a capricious and opportunistic interpretation of the gas supply agreement."

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