Taxpayers to give Synergy $769m

Five years after the state government declared it wanted to make electricity prices cost reflective, Synergy is set to receive about $1.7 billion of subsidies over the next four years.

In the 2023 financial year alone, $769 million will be allocated from the central budget to Synergy. 

A big part of that is the government’s signature cost of living relief measure: a $400 electricity bill credit for Synergy and Horizon Power customers.

The part of that flowing to Synergy's customers will cost about $420 million, according to the budget.

Premier Mark McGowan said the plan would mean people who never ask for anything, or put their hand out, will be rewarded.

There are a whole range of other payments being made from the state’s treasury to its power generator and retailer to prop it up, labelled “financial viability subsidies”.

Those subsidies support a range of initiatives, and lead to lower power prices for consumers.

They include the System Security Transition Payment of $217 million, intended to reflect Synergy’s position as the provider of last resort; and $370 million for the Tariff Equalisation Contribution scheme, which lowers power prices for regional users.

The SSTP payment was needed because “the costs of operating its electricity generation fleet (exceed) the benefits it receives from the market,” the budget said.

The government plans to shut one unit at the Muja C coal power station in Collie by October this year, with the other unit to follow two years later.

That would save taxpayers $350 million, the government estimated in 2019, because the old generating units are being hit by volatile demand levels as new renewables come onto the market.

Excluding the credit, power prices will rise by 2.5 per cent in the 2023 financial year, or about $44 for the average household.

The $400 electricity credit will roll out within months, and follows a $600 credit in 2020 during the earlier stages of the pandemic.

There’s a long history of political battles over whether power prices reflect the costs for Synergy to produce the electricity and sell it to customers.

Prices were frozen for a period under the Gallop government, with the Barnett government then hiking prices to reduce the cost to taxpayers.

In 2017, then energy minister Ben Wyatt had said he wanted Synergy’s prices to reflect costs, and had hoped to introduce competition into the market for households.