WA energy supply in limbo: Barnett

Premier Colin Barnett says he cannot guarantee reliable power supply for Western Australia for the next three years, as he delivers his "school report" into his first 79 days in office.

In a speech delivered to the state's business and industry leaders today, Mr Barnett said that after consulting with the heads of relevant energy bodies, WA's power supply will be unreliable for the next few years.

Energy security has loomed large as a major state issue since the blackouts of 2004 but the matter has really hit home with the Varanus Island crisis this year.

In recent months, the global financial crisis and withdrawal of capital have threatened the next phase of energy infrastructure development, both in energy production and generation.

This week a joint venture between Apache Energy and Santos shelved the development of the Reindeer gas field which was to feed the Devil Creek gas plant, a facility expected to produce as much as 20 per cent of the state's domestic gas within the near term.

A critic of the former government's disaggregation of the former Western Power electricity monopoly, Mr Barnett again refused to rule out remerging generator Verve Energy and retailer Synergy, saying he would leave it for another day.

Disaggregation, and the strict rules created by it to promote competition, has left much of the loss making elements of state energy supply with Verve.

Verve has been deliberately restricted in what it can do to provide a better opportunity for private power players to the enter the market but the current capital squeeze and growing concerns about emissions regulations have cast doubts on how much new investment will be committed in the medium term.

Even the future plans of existing power players like Alinta, owned by the ailing Babcock & Brown group, are uncertain.

Mr Barnett cited monetary and design issues as major problems with delivering energy to the state and highlighted Verve's financial losses over the past year and the expectation the utility will double its loss next year.

Additionally, Mr Barnett re-confirmed the state government will contribute the funds required to build the outer harbour of the $700 million Oakajee deepwater port development.

He said the income stream that will be generated from the port will pay off the government's commitment.

Mr Barnett said the port will be the state's most important project for WA for the next 20 to 30 years.

Additionally, Mr Barnett today earmarked the possibility of splitting the Department of Environment and Conservation into two separate departments, with one focusing on approvals and research and the other to develop broader environmental ideas.

Discussing the controversy surrounding the export of lead carbonate from the Esperance port which first came to light 15 months ago, Mr Barnett highlighted the involvement of Diedre Willmott, his current chief of staff and former president of the Chamber of Commerce and Industry Western Australia, as a crucial element in fixing the problem.

Mr Barnett said that 9000 tonnes of lead carbonate was still at the port and needed to be removed.

While there may be a significant cost to do so, he emphasised the problem "will be fixed".