21/09/2004 - 22:00

Joe Poprzeczny - State Scene: A historic opportunity to reform

21/09/2004 - 22:00


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Last week’s State Scene lifted the veil on the unwitting moves by Premier Geoff Gallop and Energy Minster Eric Ripper that are helping Alinta further tighten its stranglehold over Western Australia’s domestic and industrial gas markets.

Last week’s State Scene lifted the veil on the unwitting moves by Premier Geoff Gallop and Energy Minster Eric Ripper that are helping Alinta further tighten its stranglehold over Western Australia’s domestic and industrial gas markets.

It was pointed out that Alinta had acquired its grip over WA’s gas market because predecessors Premier Richard Court and former Energy Minister Colin Barnett had foolishly sold not only the once government-owned Altina Gas’s retail arm, but also its entire South West gas distribution pipeline network in one deal.

This has scared off potential gas retailing competitors because they’d have to negotiate access to the now privately owned Alinta network, something few have done or are likely to do because of the huge disadvantage of having to compete against Alinta’s retailing activities.

The outcome, pure and simple, is that Western Australian gas users now face a privately owned gas selling monopoly rather than the once publicly owned one.

This was an unforgivable mistake by the Court-Barnett duo, especially since the 1993 Carnegie energy report specifically recommended introduction of competition into WA’s energy – gas and electricity – markets.

The duo’s other blunder was privatising the once government-owned Dampier-to-Bunbury Natural Gas Pipeline (DBNGP).

This should have remained a publicly owned asset.

By selling the DBNGP for a bloated price of $2.4 billion to Epic Energy Messrs Court and Barnett simply created a private monopoly, which meant Western Australians lost control over it, something that’s proven to be a costly error in light of Epic’s persistent legal challenges to the State’s gas regulator.

State Scene next highlighted that both these blunders were set to be compounded by the Gallop-Ripper duo, which is passively watching Alinta – in partnership with Alcoa and a Macquarie Bank Trust, DUET, (20-20-60 per cent) – buying the DBNGP, thereby further entrenching and expanding Alinta’s monopoly position.

What this means is that WA’s gas market, which is already so dominated by Alinta, will be even more locked-up by that company.

This is monopoly with a vengeance – private ownership of the market’s single gas retailing arm to domestic and industrial users, ownership of the entire South West gas distribution pipeline network, and now control of the single gas transmission line from the Pilbara.

But what’s even worse is that the Alinta-Alcoa-DUET group – called Alinta Network Holdings – is being created, in part, with Western Australian taxpayer funds.

The Gallop-Ripper duo is offering its negotiating boffins about $300 million worth of sweeteners, including a $110 million stamp duty refund, because Epic’s receivers are demanding $1.8 billion for the DBNGP that’s now worth only $1.5 billion.

It’s a mystery why the duo has decided to stand by and encourage the strengthening of the Court-Barnett-created private Alinta monopoly that’s set to acquire the DBNGP.

A likely reason is that the premier and his treasurer fear the possibility of another electricity blackout, as occurred last February, and will do anything to ensure it’s not repeated.

But giving Alinta even greater monopoly powers in perpetuity isn’t going to affect the electricity market this or next summer, or the one after for that matter.

Because of the fear over blackouts, which so grips the Gallop-Ripper duo and Labor’s cabinet members, they’ve completely lost all sight of the need to ensure that WA acquires a desperately needed competitive gas market.

As a result, all the t’s and i’s are to be crossed and dotted over the coming fortnight or so, with the State’s industrial and domestic gas consumers set to be confronted by a formidable Alinta monopoly for years to come.

However, the tragedy of the Gallop-Ripper decision to subsidise Alinta Network Holdings into an even stronger monopolising position is that it need not happen.

If both Labor leaders and their advisers stopped allowing themselves to be panicked by the Alinta, Alcoa and DUET boffins, or anyone else for that matter, they could still so easily institute a more competitive gas market.

Here’s how it can be done.

Dr Gallop and Mr Ripper should firstly tell Western Power to discontinue negotiations with the Alinta-Alcoa-DUET team for several weeks.

During that time they should allow Western Power, which is a huge shipper of Pilbara gas for its South West power stations, to call tenders for the supply of long-term (20 or more years) gas transmission capacity at competitive prices.

Such a bold move would immediately prompt bids to construct another Pilbara-to-South West pipeline, especially if other existing and new shippers, not Alinta or Alcoa, were willing to go with Western Power to provide the gas volume needed for such a pipeline.

Construction of a second pipeline has been dreamed of by both government and industry for years.

It would mean South West consumers would no longer be at the mercy of a single pipeline.

The security of energy supply to the South-West would be improved immeasurably, while more competitive tariffs not burdened by past private sector investment decision mistakes would fuel industrial development and job growth.

Some may question the timeframe required for a new pipeline to be built.

A report for Western Power indicates that even if the DBNGP sale to Alinta was settled today new capacity on this line would still not be available until mid-2006.

This means there’s no point in fretting over the 2005-06 summer – for which Western Power has already incurred liquid fuel costs to ensure peak supply on top of demand management. A long-term solution for summer 2006-07 and beyond should be the policy focus.

A second pipeline could be built and completed well before then, especially if it would run from Dampier to Dongara as a first stage, where it could connect to the capacity surplus Parmelia Pipeline, which was owned by CMS Energy and recently acquired by Australian Pipeline Trust.

The Parmelia Pipeline runs from Dongara to Pinjarra parallel to the southern third of the DBNGP.

If Western Power was ever seen by conservative and Labor politicians alike as a vehicle to be used as a catalyst for development in WA, here’s the historic opportunity to do so.

Let’s hope the Gallop Labor Government doesn’t miss the opportunity.


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