THE state government says the release of its plan to overhaul state electricity generator Verve Energy is imminent.
THE state government says the release of its plan to overhaul state electricity generator Verve Energy is imminent.
Since September, a specially convened committee has been considering how to implement a raft of recommendations made by electricity sector expert Peter Oates to stem Verve’s heavy ongoing losses.
Mr Oates’s recommendations included a shift to full cost reflective tariffs, an overhaul of market rules and an urgent rewrite of the vesting contract that governs Verve’s activities and its relationship with state energy retailer Synergy.
The review also found that re-amalgamating Verve with Synergy would address the utility’s financial difficulties but would be anti-competitive and discourage private sector investment.
It also recommended against structural changes that would allow Verve and Synergy to compete head to head in both generation and retailing.
Almost a year after Mr Oates made his recommendations, Energy Minister Peter Collier said the long-awaited action plan would be released shortly.
“It’s imminent – we’re certainly working on that at the moment and it’s coming to a rapid conclusion,” he said.
Mr Collier declined to provide details other than to suggest a complete overhaul of the vesting contract was likely.
“I think the vesting contract is problematic and that’s probably the pretty significant component of what we are looking at,” he said.
Crucially, one area unlikely to be eased is the 3,000-megawatt cap on Verve’s allowable generation capacity that was imposed to encourage new entrants to the generation sector.
Mr Collier drew heavy fire last week for allowing Verve to exceed the cap in order to restart the ageing Muja A/B coal-fired power station to provide back up supplies during peak demand periods.
Restarting the 240MW Muja A/B plant, which was decommissioned in 2007 and is WA’s oldest coal-fired generator, will lift Verve’s total generating capacity to 3047MW.
State Labor energy spokesperson Kate Doust said the move was “proof the Liberals’ plan for Western Australia’s electricity industry belongs in the last century”.
“This direction and investment puts the prospects of private sector plants in Collie using modern technology at risk,” she said.
But Mr Collier said the cap would be eased only as a temporary measure and Verve would not be given freedom to further breach the cap.
“There’s certainly no intention to relax the cap any further,” he said.
“Muja A/B, is basically a short-term stop-gap measure to provide additional coal-fired power during a period where we’ve got a lot of uncertainty in terms of fuel mix.”
However, he conceded the stop-gap measure would be in place for “10 to 15 years”.
With the cap to largely remain in place, a key area likely to be redrawn is Synergy’s requirement to progressively displace supplies from Verve with new third party contracts.
Displacement has been credited as the driver of more than $2 billion in private generation investment since Western Power was broken up in 2006, but the process was effectively put on hold late last year.
Mr Collier said he believed change could be achieved without unduly discouraging private investment.
“I think we can find a common medium between competition and direct government involvement,” he said. “(But) we need to have significant changes.”
