03/02/2016 - 14:27

Synergy a barrier to investment: Tesla

03/02/2016 - 14:27

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Two niche operators in Western Australia's electricity market have accused the state government of being more concerned with protecting its own interests than creating a truly competitive industry

Synergy a barrier to investment: Tesla
Synergy's Muja power station, an asset many electricity industry players have called for the government to retire.

Two niche operators in Western Australia's electricity market have accused the state government of being more concerned with protecting its own interests than creating a truly competitive industry.

In fresh submissions to the Economic Regulation Authority, two market players have voiced scathing critiques of Synergy’s continuing market dominance more than 12 months into a root and branch reform of WA's wholesale electricity market.

Local player Perth Energy and Singaporean-owned Tesla Corporation were the only two companies to provide comments on the latest stage of the review, an annual report from the ERA to Energy Minister Mike Nahan.

Tesla’s submission spoke of experiencing a challenging three years after making investments in peaking power stations, only to find itself operating in a ‘deteriorating’ market.

“A government predilection for changing market rules to suit its own commercial position highlights to us that private sector investment in power generation is not welcome in Western Australia,” Tesla said in its statement.

After announcing the review in March 2014, Dr Nahan has refused to accept review recommendations that Synergy be split up and sold off.

Tesla said it had anticipated the state government’s review would address the fundamental problems of Synergy’s market dominance and excess generation while incentivising private investors to reduce the amount needing to be drawn from state finances.

“In reality, the (electricity market review) appears to be focused on protecting the value of the state’s energy assets and preventing further investment by private sector investors in WA,” Tesla said.

Tesla said planned changes to the way providers of electricity capacity are paid, which aim to minimise excess capacity in the future, were a distraction not a solution.

“The current (reserve capacity price) formula is not responsible for the persistent surplus of capacity in the WEM," it said.

"The RCP is simply being used as a smokescreen for poor commercial decision-making and policy settings from government and its agencies.

"The way forward for an efficient market is less regulation, less prescription and less government ownership in the electricity market." 

Perth Energy managing director Ky Cao said good reform ideas such as introducing retail contestability (flagged for mid 2018) had been overwhelmed by negative developments on the structural policy side.

Synergy’s market power and the (tariff adjustment payment) subsidy accorded the utility are causing major distortions in the retail market,” Mr Cao said in his submission.

Synergy has tried to hold on to excess capacity only to place the entire industry in a loss making environment.

“But Synergy is willing to do this only because the government has been willing to give it billions in TAP subsidies over the years ($495m in 2013-14 and $386m in 2014-15).

"The effect in the contestable market is akin to predatory pricing.”

Mr Cao called on Synergy to remove 600 megawatts of power by closing old inefficient power plants and for the state-owned entity to be more transparent with its subsidy collection, and profit and loss reporting.

Perth Energy has grave concerns over the general structure of the (wholesale electricity market),” he said. 

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