25/06/2020 - 15:57

Synergy to pay Newgen after court ruling

25/06/2020 - 15:57

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Synergy has lost a Supreme Court judgement this week which will require it to pay the owners of the Newgen Power Kwinana power station for periods when the gas plant was ready on standby to supply the grid.

Synergy to pay Newgen after court ruling
The Newgen power plant in Kwinana.

Synergy has lost a Supreme Court judgement this week which will require it to pay the owners of the Newgen Power Kwinana power station for periods when the gas plant was ready on standby to supply the grid.

While the cost of the decision to Synergy is unclear, an industry source speculated the bill may run into millions of dollars.

The dispute dates back to an agreement between Newgen and a predecessor of Synergy signed in November 2005, before Newgen built the 310 megawatt gas fired power station in Kwinana.

That long-term contract included a payment for the owners of the Kwinana plant, Energy Infrastructure Trust and Sumitomo Corporation, to provide a spinning reserve.

A spinning reserve is extra generation capacity rapidly available to the system to keep the grid stable and safe.

But what was unclear was exactly how many periods the payment would cover.

Newgen’s interpretation was that it would be paid for every period the plant was available to support the grid.

Synergy argued the payments should only be made when the reserve capacity was actually used.

In her judgement, Justice Jennifer Hill agreed with Newgen.

Justice Hill said Synergy was liable to Newgen for all available extra capacity for all periods it was available.

One other aspect of the dispute was whether Synergy would inherit liability for the contract from Western Power after the Western Power business was disaggregated.

Synergy claimed it would not.

Justice Hill determined it did.

A spokesperson for Synergy said it was reviewing the decision and considering its options.

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