13/10/2009 - 16:03

Synergy snubs private generators

13/10/2009 - 16:03

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State energy retailer Synergy has snubbed private energy generators by selecting state generator Verve Energy to supply at least 638 MW of supply under its 2008 procurement tender and named it a preferred tender for its 2009 procurement tender.

Synergy snubs private generators

State energy retailer Synergy has snubbed private energy generators by selecting state generator Verve Energy to supply at least 638 MW of supply under its 2008 procurement tender and named it a preferred tender for its 2009 procurement tender.

Synergy last year deferred its 2008 tender for 200MW of new capacity and chose to run it in conjunction with its 2009 tender to secure at least 686 MW in new capacity from 2011/12.

The win by Verve will be seen as a major blow for the seven other groups shortlisted for the 2009 tender, notably Aviva Corporation and Griffin Energy.

Both were looking to contracts with Synergy to help underwrite development of their Coolimba and Bluewaters 3/4 coal-fired plants proposed for Eneabba and Collie respectively.

Synergy chief Jim Mitchell said the tender was scrutinized closely to ensure that Verve was not favoured in the process, but it had simply been the most competitive bidder.

"We have undertaken a competitive tender process, and the selection of Verve Energy was made after consideration of cost, risk and reliability of supply", Mr Mitchell said.

"The fact of the matter is, this time around Verve Energy was by far the preferred option for the benefit of WA electricity consumers."

In addition to the Verve contract, Mr Mitchell said Synergy was still "actively considering various wind farm proposals" in keeping with the state government's target of sourcing 20 per cent of its energy needs from renewable suppliers by 2020.

Synergy had also signed memoranda of understanding with geothermal and wave power technology developers, with a view to purchasing electricity from geothermal and wave power sources, providing important support for those technologies to become commercially viable.

Verve's success is a reversal of recent procurement tenders, whereby Synergy has effectively underwritten $2 billion in new private sector generation investment by awarding supply contracts to new private generators such as NewGen and Griffin, mostly at the expense of Verve.

Verve has been a vocal critic of the displacement tendering requirements placed on Synergy under the vesting contract enacted when the old Western Power was disaggregated in 2006.

Under the contract, Synergy must put an increasing volume of supply provided to it by Verve out to public tender in order to boost competition and reduce Verve's dominant position in the generation sector. While Verve is not precluded from participating in the tender process, it is subject to specific provisions, including supervision by probity auditors, to ensure it does not receive favourable treatment.

Aviva is expected to issue a formal response to Synergy's decision early tomorrow, having called for trading of its shares to be halted this morning ahead of the Synergy announcement. Griffin was also unavailable for comment.

In addition to being seen as a blow to both Griffin and Aviva, Synergy's decision will also be seen as a blow for the Mid West region in general.

While primarily aimed at servicing the South West Interconnected System, Aviva's 450MW Coolimba plant will also boost capacity at the fast-growing Geraldton end of the power grid where demand is expected to surge on the back of new mining developments. It could also significantly reduce the huge transmission losses suffered by Mid West customers reliant on power transmitted from plants in the south west.

 

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