Synergy to choose new suppliers

THE board of state power retailer Synergy is expected to select the winners of its 2008 and 2009 power procurement process this week, underpinning the next phase of private investment in Western Australia's generation capacity.

But in a potential blow for private generators, the 2009 tender could be the last undertaken by Synergy in light of the recently completed review by electricity expert Peter Oates.

Since Western Power was broken up in 2006, Synergy has been required under its vesting contract to gradually replace some supplies provided by state generator Verve Energy with power from private suppliers.

That process has to date underwritten almost $2 billion in new private sector generation capacity. But it has also eaten into Verve's business by steadily reducing its customer and revenue base. Verve has in turn been forced to operate at reduced capacity and shut down plant to make room for supply from private suppliers.

In March, Synergy shortlisted eight groups to supply up to 686 megawatts of new supply from 2011. Synergy is also yet to decide the winner of its 2008 tender to supply an additional 200MW from 2011.

It is believed the winning bidders were to be finalised at a meeting of Synergy's board on Tuesday. The state government must ratify Synergy's decision once the preferred suppliers are determined, meaning a public announcement would be unlikely before mid October.

A Synergy spokesman said the retailer did not comment publicly on the agenda of board meetings, but that an announcement on the 2009 tender would be made soon.

The announcement is critical to Aviva Corporation and Griffin Energy's plans to build the Coolimba and Bluewaters III/IV base load coal fired stations at Eneabba and Collie respectively.

Verve Energy chief executive Shirley In't Veld said she expected Synergy's 2009 displacement tender would be the last undertaken given the findings of the Oates report.

The report, aimed at stemming the $454 million in losses racked up by Verve since disaggregation, recommended a number of changes including the suspension of all further displacement tendering while the vesting contract is revised. The report also noted the system already had 10 per cent more generating capacity than currently required.

"In our view now, displacement is finished and SP09 will be the last one," Ms In't Veld told WA Business News.

"Displacement will be suspended until our plant is fully utilised. That's just common sense. It does not make sense for the state to have Verve plant underutilised."

Instead, allowing Verve to fully utilise its existing capacity would result in lower cost electricity for WA consumers, she said.

Despite Verve's complaints about existing excess capacity, Ms In't Veld defended Verve's restart of WA's oldest coal-fired plant at Muja to provide up to 240MW of additional peaking capacity over the next decade.

Restarting Muja would both maximise returns on already sunk capital and provide WA with added cover should there be another major supply disruption such as that caused by last year's explosion at Varanus Island, she said.

Synergy's spokesman declined to comment on whether a suspension of future displacement tendering was on the agenda at this week's board meeting. However, Synergy boss Jim Mitchell last month told WA Business News that future procurement would be reviewed in light of Mr Oates' findings.