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Negativism frustrates change

Chamber of Commerce and Industry chief executive Lyndon Rowe speaks out on the need for the Opposition to back the WA Government’s electricity laws.

 

 

IT should be of wide concern to all that Western Australia is gaining a reputation interstate and abroad as being averse to economic reform and inclined to the view that tried and proven policy principles don’t apply here because, quote, ‘WA is different’.

Certainly it is not the mark of a go-ahead State for ‘reform’, ‘competition’ and ‘deregulation’ to be dirty words, as they are in some corners of the community and among our politicians.

An anti-reform disposition exists even in some business circles where a traditional culture of free enterprise has given way to neuroses about market power issues and what may or may not constitute unconscionable conduct by dominant players in a market.

The cynicism towards competition policy that the negativists encourage has not made the task of necessary economic improvement in WA easy.

Curiously, it is exactly because of issues of market power and domination of the electricity industry by the under-challenged State monopoly utility Western Power that there is at last a firm program for reform of the sector.

As things stand, Western Power holds all the cards in the power supply business in WA, hence private investment in power generation has not been taken up on sufficient scale to create a genuinely competitive market. There is a virtual absence in the electricity market of the forces necessary to ensure efficiencies and innovation and to drive prices down.

Reforms in the eastern States – in some cases made a decade ago – have brought real reductions in electricity prices there, especially for industry. Although prices have been relatively stable in WA, they are falling behind nonetheless and at an unsustainable rate.

If the reform legislation fails or is compromised, WA faces the like-lihood of lost investment and reduced employment through industries relocating to the eastern States where similar reform has made power up to 60 per cent cheaper.

Disappointingly, this risk did not emerge as a concern among non-Government MPs during debate of the bills, except in the statement by Kalgoorlie Liberal, Matt Birney, who crossed the floor to support the change.

Instead, the Opposition focused on everything other than the needs and difficulties of the employment sector, the major customers for electricity.

The Opposition arguments are contradictory and easily rebutted, such as criticising the initial cost and the ‘rushed” timeframe for implementation, claiming also that WA is too small for a competitive market structure, that it would slash Western Power’s asset value and leave the Government business uncompetitive and saddled with expensive fuel purchase contracts.

A major consideration that MPs have all but ignored is the reality that growing demand for electricity in WA will require investment of close to $1.5 billion over the next decade in infrastructure and new power generation.  Allowing private providers into the market will relieve Western Power’s shareholders – we taxpayers – of that debt, and free such borrowings for other pressing Government needs.

Oddly, the chief complaint voiced by regional MPs in the debate was the run-down state of the country network and resulting supply interruptions – a reflection of Western Power’s conflicting expenditure priorities.

The Nationals’ condemnation of the bills is hard to fathom. The reforms greatly improve the outlook for country people by proposing separate new utilities to operate (and maintain) the network and to service regional customers not connected to the grid.

The Opposition, of course, has actually agreed to all this, and it is the separation of the remaining parts of Western Power – generation and retail – that is the Liberal leader’s chief bone of contention. 

However, the whole efficacy of the reforms hinges on State Generation and State Retail being separate. 

If they are not independent entities, able to trade free of each other with new industry entrants, the same issues of market domination by a monolithic state utility will still apply. 

Private energy companies will not be drawn to enter the market and invest in new generation, and there will be no pressures to drive prices down.

The Liberals argue there is not enough benefit in the reforms for householders and small business.  This dismisses the importance of industry to employment and WA’s economic prospects.

Only a proliferation of new electricity retailers in an open market place will deliver opportunities for small businesses to shop around and for innovative specialists to aggregate their custom and tailor lower-priced deals to meet their needs.

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