Power break-up push

BUSINESS groups and independent electricity providers are pleased with a discussion paper released by the WA Government’s Electricity Reform Taskforce suggesting Western Power be broken into generation, distribution and retail businesses.

The taskforce suggests breaking Western Power into three public enterprises – something most business groups have been advocating for years.

More importantly, State Energy Minister Eric Ripper has indicated the Government supports the taskforce’s findings.

Private operators can bid to supply power to companies drawing an average load of 230 kilowatts, or 34 kilowatts if power is supplied through renewable energy means.

Government regulation has “ring fenced” Western Power’s generation and retail arms from its distribution and transmission arms, but electricity retailers competing with Western Power claim the ring fencing is ineffective.

While business groups agree the vertical disaggregation of Western Power is necessary, there are concerns that a further horizontal break up will be required to ensure competition.

A similar disaggregation in the UK resulted in two dominant electricity generators, which were able to control the market. California’s electricity shortages have been linked to a similar problem.

Chamber of Commerce and Industry chief executive Lyndon Rowe said the taskforce was asking the right questions.

“The model the taskforce’s first discussion paper postulates for the disaggregation of Western Power into separate businesses is sensible and appropriate,” Mr Rowe said.

“The politically sensitive option of privatisation is not a primary issue here.”

Chamber of Minerals and Energy chief executive Tim Shanahan said his organisation was happy with the way the Government was handling electricity deregulation.

“The State Government seems to be nailing its colours to the mast by indicating the separation of Western Power will go ahead,” Mr Shanahan said.

“However, the break up of the power industry needs some thought put into it because a number of countries have had problems with it.”

Perth Energy managing director Ky Cao said the discussion paper’s recommendation was positive.

“I believe the preliminary views of the taskforce are in line with what the energy industry wants,” he said.

“Our key concern would be the market power in the generation and retail markets that could be created by any break up, though.”

Western Power acting managing director Garry Gillies said the initial discussion paper was a critical step in the electricity market change process.

“Western Power is reviewing the taskforce’s paper and will be making its submission before the deadline,” he said.

“It has been demonstrated in electricity market reform elsewhere that the costs of change can be greater than the benefits of reform.”

Public comment on the taskforce’s discussion paper closes on December 14.

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