WA business may pay 55% more for power

The Office of Energy has recommended a 55 per cent increase in small business electricity prices, even higher than the increase it proposed in a draft report released last year.

Households will be slugged more, with electricity prices recommended to rise 78 per cent over the same two-year period.

The price increases are part of the Office of Energy's final recommendations into its review of electricity retail tariff arrangments.

The Office of Energy said a 29 per cent increase in prices is needed in fiscal 2010 to bring small business electricity prices up to cost reflective levels, with a further 26 per cent increase needed the following year.

For households, an increase of 52 per cent was recommended in the 2010 financial year, followed by a further 26 per cent in 2010-11.

In April last year, the Office of Energy released its draft report, recommending then that residential electricity prices should increase by 62 per cent over the next two years.

The increase was rejected by the former Labor government with Premier Alan Carpenter saying the government would not expose families and householders to such big increases all at once.

Today Energy Minister Peter Collier attacked that decision saying the previous government had held prices artificially low for too long.

"Their market electricity reforms were supposed to lower the price of electricity, so why are we now faced with the prospect of increased prices at a time when many Western Australians are facing financial difficulty?," he said.

"This underlines the previous government's mismanagement and bungling of energy reforms in the past eight years."

The federal government has also played its part in the higher forecast prices with the Carbon Pollution Reduction Scheme forcing Western Power to revise its network tariff recommendations.

The network contirbutes 40 per cent of the retail tariff.

The scheme is due to come into force from the start of next year.

Meantime Mr Collier said the proposed recommendations by the Office of Energy were a key component of the rescue package required to address the financial performance of Verve Energy.

"Verve Energy will continue to have poor financial performance until it is able to receive revenues that support its costs," he said.

"The level of electricity tariffs must support the continued development of electricity supply to ensure investments are made to meet demand.

"Otherwise, security of future supplies will be threatened."

The government will consider the recommendations over the coming months.

The Economic Regulation Authority has yet to approve the network tariff increases as submitted by Western Power in October last year.

The government announcement is below:

Energy Minister Peter Collier today released a report which outlines the Office of Energy's (OOE) final recommendations into the review of electricity retail tariff arrangements.

The OOE forecast that a 52 per cent increase would be required in 2009-10 to bring household electricity prices in line with the costs of supplying electricity, with a further 26 per cent increase for 2010-11.

The OOE also forecast that a 29 per cent increase would be required in 2009-10
to bring small business electricity prices up to cost-reflective levels, with a further
26 per cent increase required for 2010-11.

Mr Collier said the increase in tariffs required to reflect the cost of supplying electricity was a direct result of the former Labor government's refusal to address this issue in the eight years it was in office.

"The previous government held prices artificially low for too long as part of the disaggregation process," he said.

"Their market electricity reforms were supposed to lower the price of electricity, so why are we now faced with the prospect of increased prices at a time when many Western Australians are facing financial difficulty?

"This underlines the previous government's mismanagement and bungling of energy reforms in the past eight years."

The Minister said the State Government was still to consider the recommendations outlined in the report and would provide a response to these in due course.

"Releasing the report now is part of this Government's commitment to be open and accountable," he said.

"We are mindful of the current economic situation and the financial pressure many families, householders and businesses alike are feeling.

"This will be taken into consideration as we make a responsible long-term decision."

Mr Collier said the proposed recommendations were a key component of the rescue package required to address the financial performance of Verve Energy.

"Verve Energy will continue to have poor financial performance until it is able to receive revenues that support its costs," he said.

"The level of electricity tariffs must support the continued development of electricity supply to ensure investments are made to meet demand.

"Otherwise, security of future supplies will be threatened."

The OOE's forecast tariff increases are based on cost estimates of the components to supply electricity - generation, networks, retail, and greenhouse gas mitigation costs.

"The introduction of the Federal Government's Carbon Pollution Reduction Scheme and the continued projected rise in Western Power's network tariffs are key drivers of the tariff increases in 2010-11," the Minister said.

"The forecast retail tariff increases are higher than in the Office of Energy's draft recommendations report that was released by the previous government in April 2008, because Western Power has revised the required network tariff increases since the draft report was released.

"These network tariff increases are yet to be approved by the Economic Regulation Authority."

Full details of the OOE report and a report by Frontier Economics outlining the methodology used to determine the tariff levels are available on the Office of Energy website http://www.energy.wa.gov.au