Synergy boss ups ante on energy reform

Synergy chairman Lyndon Rowe has mapped out a detailed agenda for energy market reform, saying there would be catastrophic consequences if the government did not tackle market players with vested interests.

Speaking at a Committee for Economic Development of Australia event in Perth today, Mr Rowe proposed a range of dramatic changes, saying it would be catastrophic for Synergy if Western Australia introduced full retail contestability without reforming the tariff structure, as it would require taxpayers to continue subsidising electricity costs.

Mr Rowe said WA’s current electricity pricing structure needed to be completely overhauled from its current system, where users pay about 25 cents per kilowatt hour regardless of the time of day or how much power they use.

In line with recent Grattan Institute recommendations, Mr Rowe called for a tariff system that better reflected the cost of producing and distributing electricity by charging a fixed cost to be connected to the grid plus “time of use” variable costs making it more expensive to use power at peak times.

The media leapt on the recommendation, reporting that the move was likely to infuriate the renewable energy sector, as households with solar panels on their roofs would be forced for the first time to pay for shared network infrastructure upgrades and maintenance that the addition of their PV systems requires.

Solar Citizens consumer campaigner Reece Turner said Mr Rowe was proposing a discriminatory charge that penalised people who had been encouraged by the state government to invest in clean energy.

Mr Rowe defended the recommendation, saying he was pro solar PVs being installed, but added that the current tariff structure was inefficient, unfair, and would result in growing taxpayer subsidies if allowed to continue.

He said customers without solar PV systems on their roofs currently received less in subsidies than those with PV, and forecasts of what households with battery storage and PV would pay showed their subsidies would be even larger, because customers that generated their own power paid less, but their cost to Synergy increased.

“This is not about discouraging the growth of solar PV,” Mr Rowe said.

“Growth in PV is inevitable and has a positive future.”

However, he dismissed concerns his comments might have started a debate where people were getting off on the wrong foot.

“Can you tell me how you can have this debate and not offend people who think they’re going to have to pay more?” Mr Rowe asked.

“Renewables have got a future, there’s no question about that, but if there are people out there who say yes it’s reasonable for renewables to be paying for what they’re actually contributing to the costs of the system then that’s terrific, I suspect you haven’t heard many of them this morning.”

He said reform was necessary to ensure resources were being used efficiently and to create a fairer system.

“I shouldn’t be getting a $300 subsidy each year from the state government for my personal electricity consumption at my home in Perth, let alone an even larger subsidy for my house down south. Neither, with respect, should Mike Nahan or Bill Johnston,” Mr Rowe said.

Mr Rowe reiterated calls for the government to split up and sell Synergy to improve market competition. As part of ongoing electricity market review proceedings, he said, scrapping WA’s controversial capacity market system should be considered as it was a major contributor to expensive oversupply.

He said more than 550 megawatts of WA’s excess capacity came from demand side management, which cost $66 million per year but had only been called upon in eight of the past 3,300 days.

“In the last four years where we have had excess capacity, demand side management has only been called once in country WA for a total of three hours, which equates to a cost of about $90 million per hour,” Mr Rowe said.

“That’s one hell of an expensive insurance policy.”

He said if the government continued to reject suggestions to split and sell Synergy, it should consider alternate measures to give it more independence from the state government. These included increasing its shareholders or switching control of Synergy’s assets to an independent commercial board with a mandate to maximise shareholder (taxpayer) returns.

Energy Minister Mike Nahan said he did not agree with this suggestion, but agreed that tariff reform needed to be debated and the government was keen to make changes in this area and bring them in incrementally.

“There is a great deal of disagreement about (tariff reform) and we contemplated it not just last year but the previous year and we want to make sure we do it in the best and least disruptive way,” he said.

“Solar penetration is making it a much more pointed issue.

“We’re not penalising people who have solar panels. People who have solar panels use the grid more extensively than those who do not. They buy and sell."