05/08/2009 - 11:04

Verve-Synergy merger a mistake: CCIWA

05/08/2009 - 11:04


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The Chamber of Commerce and Industry WA says it would be a "mistake" to abandon reform in the state's electricty market by re-amalgamating Verve Energy with Synergy.

Verve-Synergy merger a mistake: CCIWA

The Chamber of Commerce and Industry WA says it would be a "mistake" to abandon reform in the state's electricty market by re-amalgamating Verve Energy with Synergy.


The announcement is below:


The State Government should heed mounting evidence that shows the State's energy system would be compromised if the State's two major power utilities were to be re-amalgamated.

The State's peak business organisation, the Chamber of Commerce and Industry of Western Australia, believes it would be a mistake to abandon reform of the electricity sector.

The Western Australian business community, which includes energy producers and consumers, urges the State Government to continue the reform process, and allow Verve and Synergy to remain separate. It is not in the State's best interests to re-merge the two power utilities.

CCI calls on the Government to fulfil its promise to publicly release the findings of the soon to be completed inquiry into Verve's finances headed by consultant Peter Oates. Releasing the findings before a decision is made will ensure the decision making process is transparent, and give industry a chance to comment on the findings.

There is mounting evidence as to why the Government should continue the yet to be completed reform process.

The current financial difficulties faced by Verve do not represent a failure of the reform process. Rather, it is the result of successive governments forcing Verve to sell electricity at a price for less than it costs to produce.

It has recently been revealed that one of the Government's main arguments for re-merging Verve and Synergy no longer exists.

State Parliament, during this year's estimates hearings, was told that Verve will be in the black and returning a dividend to the State as a result of the Government's decision to allow Verve to move towards charging the true cost of production. Verve will return an $8.7 million dividend this financial year, rising to $67.6 million by 2012-13. (Parliamentary Hansard - p469b-473a)

In addition, a recently released independent report into the Western Australian electricity market provides further evidence that ongoing reform of the sector is in the best interests of the State.

The Independent Market Operator (IMO) found the reform process is working and should continue. It concluded that even at this early stage, the reforms to date have delivered many benefits for business, industry and households, including breaking up anti-competitive power monopolies, providing greater transparency in the electricity market, and encouraging new private sector investment in power generation and retail.

The report also found that the State's electricity needs will be met through to the middle of the next decade as a result of new private sector investment in the electricity sector. This has occurred thanks to the reform process.

The IMO considers that there is sufficient electricity capacity up to 2011 and estimates that with new capacity coming on-board, supply should meet demand through to 2014-15.

These findings echo those contained in an earlier report into the electricity market by the Economic Regulation Authority (ERA).

On behalf of the local business community, CCI urges the State Government to consider all the evidence in deciding the future of the State's electricity market.


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