03/06/2010 - 00:00

Utility chiefs under pressure to deliver

03/06/2010 - 00:00

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THE state government expects an almost 70 per cent increase in nominal income from the various public corporations it owns – making them a very important part of balancing the budget in the years approaching the state election.

Utility chiefs under pressure to deliver

THE state government expects an almost 70 per cent increase in nominal income from the various public corporations it owns – making them a very important part of balancing the budget in the years approaching the state election.

A small number of utilities are expected to deliver the lion’s share of this revenue growth, which earns the leadership of those organisations the dubious distinction of being influential by default.

According to the budget delivered by Premier Colin Barnett two weeks ago, revenue coming from the Water Corporation and three energy utilities, Synergy, Western Power, and Verve Energy will be expected to deliver a 75 per cent increase across the board by 2013-14 based on increased income and a greater share paid to government in taxes and dividends.

The Water Corporation is forecast to increase revenue 35 per cent to government to $862 million in 2013-14 from $636 million in 2010-11.

Synergy is estimated to increased revenue to government to $188 million from $138 million over the same period, a rise of 36 per cent; Verve will go to $93 million from $38 million (an increase of nearly 2.5 times); while Western Power jumps to $321 million from $24 million (an increase of more than 13 times).

No other entities provide this level of income to government and none is as politically sensitive as water and power. That makes the CEOs and their boardroom leaders particularly influential in the government’s future.

Arguably, Western Power, run by Doug Aberle with Mark Barnaba as chairman (see story page 18), is the most sensitive of these four utilities.

The power distribution system it is charged with overseeing has the most potential for disruption and, therefore, political consequences. Blackouts, brownouts and bushfires all have the potential to engulf Mr Barnett as they did his Labor predecessors.

There are also the costs of providing services to new land developments, which are bound up in the debate over housing affordability, and the challenge of delivering adequate power to metropolitan fringe or partially remote communities and the mining projects they want to see started.

With all that, the utility has to deliver a return to the state, which is a multiple several times over of its current dividends and taxes.

Verve Energy managing director Shirley In’t Veld has a similar issue. Operating as the generator of last resort, Verve has been the political whipping boy in the debate over power prices and certainty of supply for the past year or more.

Ms In’t Veld has as her chairman David Eiszele, former managing director of the pre-disaggregated Western Power, who brings experience in navigating bureaucracy and government.

Helping the Verve team is the recent news of a return to profitability, posting an after-tax return of $86 million for the nine months to March 31.

Finally, in the energy trio, is Synergy headed by Jim Mitchell and chaired by Michael Smith (see story page 18).

As a pure retailer with the huge infrastructure costs, Synergy would normally escape some of the pressure associated with power utilities. But this budget makes things different with electricity prices up 10 per cent with more forecast in the future – and Synergy will be delivering the bills.

Water Corporation CEO Sue Murphy will have similar issues to deal with, given water charges for an average household are expected to rise by 17.7 per cent in 2010-11.

 

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