10/09/2002 - 22:00

Split decision on power break-up

10/09/2002 - 22:00


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LAST week WA Business News previewed the forthcoming electricity task force, which is set to hand down its final recommendations in the coming weeks.

Split decision on power break-up
LAST week WA Business News previewed the forthcoming electricity task force, which is set to hand down its final recommendations in the coming weeks.

It was noted that, while the split of Western Power into three distinct segments – generation, transmission and retail – remains on track, there are alternatives being put forward with some different numbers attached.

One option is a two-way split up, which removes transmission from the other pair.

Another is a four-way split, which separates all three and then carves transmission into two areas again, with the creation of what is called a systems operator.

Apparently, the argument going around is that there are numerous examples in the US and Europe where a three-way split has not survived the test of competition and, inevitably, generators have re-entered the retail business.

The fact is, it seems, that stand-alone retailers find it tough.

One needs only to look at the telephony business to see that.

Competitors and big consumers might find this suits their needs. With a three-way break up changing the dynamics of the market so severely, nimble players with a plan could do well from the upheaval that will come.

The big question is, will the government, or its key constituents, the general population, be as well off as they are today?

At the moment, Western Power uses its electricity monopoly to subsidise various users, with small business having long been a loser in that equation.

But that set up has allowed the power giant to provide a huge dividend to the State, in the order of hundreds of millions a year, not to mention to pad out the employment ranks of the WA bureaucracy.

A change, which threatens that structure and leaves various new players fighting for survival in a restructured market, may result in a much lower dividend for government.

By rights, that is exactly what business wants from this whole exercise.

So where will the WA Government find new money to make up for any shortfall?

I can’t help wondering if the other big cash cow might not be the answer.

The Water Corporation

is already a huge contributor to State coffers.

In the middle of a water crisis, the messages being put out is that we are all going to have to pay much more for the water we use.

Are we being softened up for a rise in water prices to help offset the looming reduction in revenue from power?

Performance in perspective

WITH the bulk of profit season out of the way, a few people I have spoken to have noted just how well the local companies have done.

There have been very few horror stories. One highlighted was Hire Intelligence, which missed its profit forecast by a fair bit to record a loss, but, in the main the news has been largely positive.

Let’s hope global investors get impatient for good news stories and decide to bring their capital here.


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