Power boss ready for split

Western Power chief executive Tony Iannello has foreshadowed a series of major changes, including his own planned departure and the creation of new corporate brands, as the utility prepares for a four-way break-up next year.

Mr Iannello has also reaffirmed Western Power’s support for the state government’s disaggregation policy, in which the utility will be split into four separate companies covering its generation, retail, networks and regional activities.

The rebranding program, which will give each of the four companies a “unique brand”, will be the public face of the many changes to be introduced by Western Power.

Mr Iannello has also expressed concern about the rules established by the Gallop government to govern competition in the electricity and gas markets, which he believes unfairly advantage Alinta.

The competition thresholds currently in place allow Alinta to try and poach 12,000 electricity customers but Western Power only 600 gas customers.

“We don’t like it,” Mr Iannello told WA Business News.

“If a customer is contestable, they should be contestable for both electricity and gas.”

However, he acknowledged this was the reality facing Western Power, which is looking forward to a review of the current rules in July 2007.

Mr Iannello believes Alinta also has a strong advantage in the electricity generation market.

In particular, Western Power has installed generation capacity of about 3000 megawatts but for most of the year uses only about half that amount.

In contrast, Alinta will be able to achieve 100 per cent utilisation of its cogeneration power stations.

“Capacity is not the measure of revenue,” he said. “What generates revenue is usage.”

He added that each cogen unit would be able to service 8-10 per cent of the contestable market.

“That’s why we see it as a real threat.”

Alinta’s first 140-megawatt cogen unit is nearing completion at Alcoa’s Pinjarra alumina refinery and it recently awarded contracts for construction of a second 140-megawatt cogen plant.

Mr Iannello said renegotiation of Western Power’s coal supply contracts with Wesfarmers’ Premier Coal and Ric Stowe’s Griffin Energy was vital to its ability to compete.

“We can’t burden the business with things that happened in the past,” he said.

The current contracts are due to expire in 2010 but Mr Iannello said Western Power was “heavily involved” in discussions with both companies on contract negotiations.

The new contracts would have two goals: to make the generation business more efficient; and to ensure there was continuing competition between coal and gas as fuel sources.

In the networks business, general manager Doug Aberle has commenced a review designed to improve safety, customer service, reliability and value for money.

Sydney consulting firm Port Jackson Partners has been appointed to assist.

In regard to branding, Mr Iannello said the current single brand meant problems in one part of the business, such as networks, adversely affected other parts of the business, particularly retail.

The retail business is currently assessing whether it wants to retain the Western Power brand and, if not, what brand it should adopt for the future. That will be followed by rebranding by the other business units.

On the topic of his own future, Mr Iannello said he did not want to run one of the successor businesses.

“I think my future options will lie elsewhere,” he said.

“This has been a very large and broad role and it’s very difficult … to step into a smaller role with a narrower focus.”