Synergy split flagged again

The release of a discussion paper on how to fix the electricity market has reignited the debate over whether Synergy and Verve should be split into two separate generator-retailers.

Turning the recently merged entity into two gentailers is one of several contentious suggestions contained in the 55-page discussion paper released yesterday.

With the costs of electricity projected to rise up to 20 per cent over the next four years, the discussion paper has been designed to garner plenty of responses.

Industry and the public have until September 12 to comment on the paper, which asks whether fundamental change to the industry’s structure are needed.

While a number of options which could dramatically alter the industry are on the table, the WA Independent Power Association and Perth Energy have called for a softer approach incorporating tweaks to the system so as not to create uncertainty and turn off existing and potential private investors.

The paper found taxpayers currently underwrite three quarters of electricity capacity in the market.

Encouraging greater private investment and decreasing taxpayer support is a major driving force of the review, which sparked the discussion paper.

The paper found Synergy’s dominance and the absence of full retail contestability, which would allow residential users to shop around, had strained competition that could drive efficiencies and placed downward pressure on costs.

As Business News reported exclusively yesterday, the paper revealed the cost to produce electricity is highest in Western Australia.

It is between 125-200 per cent more expensive than typical production costs elsewhere in Australia.