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Short circuit on privatised power

WHILE talk of blackouts and brownouts may seem to be exaggerated, the fact remains that if WA’s electricity market is not reformed, privately-owned generation will not enter the market until a new electricity regime has been in place for at least three years.

Electricity industry experts say the WA Government’s power procurement policy has ensured there should be no shortfalls in supply but they also agree that investors will want to see the new system operating for at least three years before committing funds.

The Government has said it wants residential consumers to be able to choose their electricity supplier by 2005, however, without independent generation in the marketplace, that choice is still likely to be limited to Western Power and possibly AlintaGas.

AlintaGas has announced it will enter into a joint venture with Alcoa. It will install 120 megawatt generators at Alcoa’s alumina refineries that will be used to generate steam and electricity. Any power that is surplus to Alcoa’s requirements can be supplied to the South West Interconnected System. The first such module is planned to go in at Alcoa’s Pinjarra refinery and be operating by 2004. Other such units could follow.

It has also indicated a willingness to become an electricity retailer.

WA is the only Australian market that has not made any moves towards changing its main electricity market away from a State-owned monopoly.

The Electricity Reform Taskforce, chaired by John Hyslop, is almost certain to recommend breaking the State’s dominant electricity utility Western Power into separate generation, retail and network management arms when it hands down its final report later this month.

Those were the main recommendations in a discussion paper it released in April. Other recommendations from that paper included the creation of a bilateral sales contract market that would be supported by a retail trading market.

A spokesman for Energy Minister Eric Ripper said the Government would not speculate on how quick-

ly it would enact any of the re-commendations in the ERTF report.

“However, Mr Ripper is keen to put recommendations from the report to Cabinet by the end of the year,” the spokesman said.

ERTF project manager Bob Bosler refused to speculate on the contents of the final report.

“It would be fair to say the findings in the final report are heading in the same direction as the findings from our discussion paper in April and our other reports,” Mr Bosler said. Wesfarmers’ Premier Coal general manager marketing and business development Barry Kelly said investors had to know how a contestable market would operate.

Premier is planning a coal-fired power station to compete for the next tranche of power procurement due in October. The Government will be asking for a 300MW plant.

“We’re certainly looking at entering the generation market but the numbers have to stack up,” Mr Kelly said.

“The things we are concerned about include whether Western Power will give us a suitably long-term contract for power and secondly, whether it will be at a price that will cover our costs and give us a good rate of return.

“At the end of the day Western Power may not buy all of our power, in which case we have to sell onto the open market. Therefore we want to know the rules as to how they will affect the market.”

Perth Energy director Ky Cao said the Government needed to provide the market with rules as soon as possible or any new independent generation could be 10 years away.

“The challenge for Government is to make it attractive for plants to be built solely to supply the grid,” he said.

“The investment community is ready to invest in power plants but they will only do it if they see the Government is dinkum about re-form.”

Griffin Energy general manager power generation Wayne Trumble said under the present system independent power producers could only sell electricity onto the SWIS if they held sales contracts – either with Western Power or with business customers.

He said it was hard to convince bankers to fund projects on a con-tract-only basis.

“If the task force recommends the break up of Western Power we will go through a legislative time, there will be an implementation time and then the bankers will want to see some trades going through before they’ll come on board,” Mr Trumble said.

“We could be talking about some time in 2004-05 when the funding starts flowing in.”

Griffin plans to build a 350MW to 400MW coal-fired power plant near the existing Collie A power plant. It has applied to the Environmental Protection Authority for a green-fields site and its public consultation process began this week.

Chamber of Commerce and Industry manager industry and resources, Bill Sashegyi, said the implied effects of competition were already being felt.

“Western Power has already said it will drop the price of power it sells to small businesses by 10 per cent,” he said.

“If that’s what they’re doing now, imagine what it’ll be like when we get full competition.”

Besides the Griffin and Premier plans, Alcoa’s expansion and the possible expansion of the TransAlta and Worsley power stations, there are a host of renewable energy generators waiting to get into the market.

The rules governing their operation, such as requirements to balance the amount of electricity they put onto the market, have proved a disincentive for many projects to get off the ground.

Only Landfill Gas and Power has a station actually selling power onto the SWIS.

Besides that operation there are at least three more renewable generators waiting to enter the market.

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