No remerger for Verve, Synergy: Gov

26/08/2009 - 13:07

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The state government has announced that publicly-owned generator Verve Energy and electricity retailer Synergy would not be re-amalgamated, as part of a strategy to secure Western Australia's future energy needs.

The state government has announced that publicly-owned generator Verve Energy and electricity retailer Synergy would not be re-amalgamated, as part of a strategy to secure Western Australia's future energy needs.

Speaking to industry members attending an energy conference this morning, Energy Minister Peter Collier said the remerger would not take place, going against Premier Colin Barnett's indications in recent months that a possible remerger of the two utilities could help the underlying fiscal situation.

Following a review to identify the underlying causes of Verve Energy's financial position, the government has mooted some significant market changes to help the generator's bottom line.

"However, significant changes to the market rules and Vesting Contract will be required," Mr Collier said in a statement.

"The Government, on behalf of the taxpayers of Western Australia, cannot continue to subsidise Verve's losses.

"Similarly, it is unacceptable that the State's investment in Verve Energy has been significantly eroded since disaggregation."

Mr Collier said in the three years prior to disaggregation, Western Power Corporation achieved a total profit before tax result of almost $1 billion, and when the Liberal-Nationals coalition came to power the government soon realised that a subsidy of $1.5 billion would be required over three years to keep Verve Energy viable.

Mr Collier said the development of a Strategic Energy Initiative will ensure a co-ordinated direction for the state's future.

"While non cost-reflective tariffs have contributed significantly to Verve Energy's financial position, the flawed design of the market and the Vesting Contract arrangements implemented by the former Labor government has had a major impact on Verve's performance," he said.

Opposition Minister for Energy Kate Doust has called for the report completed by energy consultant Peter Oates to be released.

"The Oates report into Verve Energy needs to be made public to further allay concerns that this Government has a secret agenda for energy," Ms Doust said in a statement.

"The Minister has also announced changes to Synergy and Verve Energy's vesting contract and other market rules which will now be subject to consultation.

"With these changes potentially affecting jobs in the industry and the diversity of our energy supply, the Minister must ensure a full and thorough dialogue with industry."

The state's peak organisation representing local business, the Chamber of Commerce and Industry of Western Australia, believes the Government has acted in the best interests of the state by announcing it will not remerge Verve and Synergy.  

CCI Chief Executive James Pearson said consumers, generators, and suppliers all stand to benefit from developing a strong, competitive and open energy sector.  

"It would have been a mistake to abandon reform of the electricity sector and re-merge Verve and Synergy," Mr Pearson said in a statement.

"Doing so, would setback efforts to attract new investment, greater competition and lower prices for power."

And Mr Pearson has also called on the Government to fulfil its promise to publicly release the findings of the inquiry into Verve's finances headed by consultant Peter Oates.

"Releasing the findings, before further decisions are made on the State's energy future, will help to make the decision making process transparent, and enable industry to understand the Government's approach to dealing with the challenges facing Verve," he said.

The Chamber of Minerals and Energy has also welcomed the news as CME chief executive Reg Howard-Smith said any re-merger of Synergy and Verve Energy could have discouraged new players from entering the wholesale energy market.

"In recent times we have seen increasing competition in the wholesale generation market with a number of new players looking to enter the sector," Mr Howard-Smith said.

"This decision will ensure that investor confidence in these new energy projects will be enhanced.

"CME believes a comprehensive State Energy Strategy is fundamental to the long-term competitiveness and viability of industry and the well-being of the greater WA community"

Ms Doust said the industry can now breath a sigh of relief after being "plunged into turmoil" while the state government "dithered for 12 months on this issue".

"This decision, which vindicates Labor's energy reforms, should have come much sooner to allow industry players to plan for future projects without a remerger hanging over their heads," she said.

"The energy industry has had a win today and can start to look to supplying Western Australia's future energy needs.

"With a Premier who still thinks he is Minister for Energy, the industry holds out little hope this Government will ever have a proper plan for Western Australia's energy future."

 

 

 

Full announcement from CCI below:

 

Electricity reform seen as the right way forward

Statement by CCI Chief Executive James Pearson

Months of uncertainty surrounding the future direction of the State's electricity system has been lifted with the WA Government deciding to keep the State's two major power utilities separate.  

The State's peak organisation representing local business, the Chamber of Commerce and Industry of Western Australia, believes the Government has acted in the best interests of the State by announcing it will not remerge Verve and Synergy.  

The Western Australian business community, led by CCI, has been urging the State Government to continue the yet to be completed reform process.  

Consumers, generators, and suppliers all stand to benefit from developing a strong, competitive and open energy sector.  

It would have been a mistake to abandon reform of the electricity sector and re-merge Verve and Synergy. Doing so, would setback efforts to attract new investment, greater competition and lower prices for power.  

The decision gives private sector energy suppliers and retailers greater confidence to invest in Western Australia, and help meet the growing energy needs of the State.  

CCI looks forward to working with the State Government on the development of its proposed Strategic Energy Initiative to ensure the State has a strong energy system.  

With Western Australia preparing for a new wave of economic growth and prosperity, it is critical that business and industry have access to a reliable and efficient energy network.  

CCI calls on the Government to fulfil its promise to publicly release the findings of the inquiry into Verve's finances headed by consultant Peter Oates. Releasing the findings, before further decisions are made on the State's energy future, will help to make the decision making process transparent, and enable industry to understand the Government's approach to dealing with the challenges facing Verve.

In deciding not to re-merge Verve and Synergy, the Government has listened to the views of the business community, and mounting evidence, of the need to continue reform, before making an important decision about the future of our energy system.

 

 

 

Full announcement from the Chamber of Minerals and Energy:

 

CME WELCOMES GOVERNMENT'S 'NO MERGE' DECISION FOR SYNERGY - VERVE
26 August 2009
MEDIA RELEASE NO. CME49-09

The Chamber of Minerals and Energy (CME) has welcomed the State Government's decision not to re-merge Synergy and Verve Energy.

Commenting on the decision announced by the Minister for Energy, Peter Collier at the Energy in Western Australia Conference today, CME Chief Executive Reg Howard-Smith said: "This is the right path to take. Over the past few years we have seen the emergence of a competitive energy market, and today's announcement will ensure that this is allowed to continue to develop.

"This is a major decision to support future private sector investment in State's energy market," said Mr Howard-Smith. "It is essential that any new operating arrangements are given time to be effective."

Any re-merger of Synergy and Verve Energy could have discouraged new players from entering the wholesale energy market.

"In recent times we have seen increasing competition in the wholesale generation market with a number of new players looking to enter the sector. This decision will ensure that investor confidence in these new energy projects will be enhanced."

CME has also welcomed the minister's commitment to develop a coordinated energy strategy for WA.

"CME believes a comprehensive State Energy Strategy is fundamental to the long-term competitiveness and viability of industry and the well-being of the greater WA community," Mr Howard-Smith said.

"A comprehensive energy strategy should provide a vision for the total energy solution for the future needs of the state."

Mr Howard-Smith said CME would be taking up the minister's offer to work with the government and other stakeholders providing input to the development of the strategy.

 

 

 

 

Full announcement from the state government below:

 

State's energy future outlined

Energy Minister Peter Collier has outlined a strategy to ensure the reliability and security of Western Australia's future energy needs.

Speaking at the 9th Energy in Western Australia conference in Perth today, Mr Collier announced the development of a Strategic Energy Initiative to ensure a co-ordinated direction for the State's future.

"When the Liberal-National Government took office last year, we were left with an energy sector that was in tatters because of a totally flawed disaggregation process - a legacy left by the previous Labor government," he said.

"In the three years prior to disaggregation, Western Power Corporation achieved a total profit before tax result of almost $1billion.

"When the Liberal-National Government took office last year, we were left with the reality that a subsidy of $1.5billion would be required over three years to keep Verve Energy viable.

"In order to move the energy sector forward, we must address the failures of the previous Labor government and fix the fundamentals of reliability and energy security.

"Once we have the basics right, we can deliver a cleaner energy future through the development of renewable energy supplies and our commitment to the national target of 20 per cent renewable energy by 2020."

One of the first major steps of delivering reliability and fixing the energy sector is to stem the haemorrhaging of Verve Energy.

The Minister announced at today's conference that the Government would not remerge Verve and Synergy, following a review to identify the underlying causes of Verve Energy's financial position.

"However, significant changes to the market rules and Vesting Contract will be required," he said.

"The Government, on behalf of the taxpayers of Western Australia, cannot continue to subsidise Verve's losses.

"Similarly, it is unacceptable that the State's investment in Verve Energy has been significantly eroded since disaggregation.

"While non cost-reflective tariffs have contributed significantly to Verve Energy's financial position, the flawed design of the market and the Vesting Contract arrangements implemented by the former Labor government has had a major impact on Verve's performance.

"The State Government wants to ensure a reliable and secure electricity supply for all Western Australians, a supply that is sustainable into the future."

 

 

Full announcement from the Opposition below:

 

Barnett's energy remerge dead at last

Western Australia's energy industry can breathe a sigh of relief after the Minister for Energy finally announced that Verve Energy and Synergy would not be re-amalgamated, Shadow Minister for Energy Kate Doust said today.

"Ever since the election of this Government, the industry has been plunged into turmoil," Ms Doust said.

"The Government has dithered for 12 months on this issue, but common sense has finally prevailed.

"This decision, which vindicates Labor's energy reforms, should have come much sooner to allow industry players to plan for future projects without a remerger hanging over their heads."

Ms Doust said it was imperative that Energy Minister Peter Collier now release the report completed by energy consultant Peter Oates.

"The Oates report into Verve Energy needs to be made public to further allay concerns that this Government has a secret agenda for energy," Ms Doust said.

"The Minister has also announced changes to Synergy and Verve Energy's vesting contract and other market rules which will now be subject to consultation.

"With these changes potentially affecting jobs in the industry and the diversity of our energy supply, the Minister must ensure a full and thorough dialogue with industry.

"The energy industry has had a win today and can start to look to supplying Western Australia's future energy needs.

"With a Premier who still thinks he is Minister for Energy, the industry holds out little hope this Government will ever have a proper plan for Western Australia's energy future."

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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