MULTIPLE reviews of the state energy sector are creating widespread uncertainty that could threaten future investment, according to the state’s chief independent regulator.
MULTIPLE reviews of the state energy sector are creating widespread uncertainty that could threaten future investment, according to the state’s chief independent regulator.
The warning came as state Energy Minister Peter Collier announced the government would prepare a ‘Generation Outlook’ initiative to outline the type, size and timing of future power generation needed to ensure Western Australia has adequate, cost-efficient electricity supply.
The generation outlook will sit alongside the annual statement of opportunities for the generation sector that is prepared by the Independent Market Operator into generation opportunities.
Mr Collier said the outlook would identify significant risks and deficiencies in the electricity supply chain and develop strategies to address them.
This latest initiative comes hot on the heels of Mr Collier’s creation of a special committee to determine how to implement the recommendations of the long-running Oates review into Verve Energy’s ailing financial performance.
At the same time, Mr Collier is pursuing plans to create an all-encompassing strategic energy initiative as the basis of a coordinated long-term state energy policy. As part of that initiative, the Office of Energy is managing an extensive consultation process in a bid to complete a detailed report for the minister by the end of the year.
However, the multi-faceted approach has rung warning bells at the Economic Regulation Authority, the state’s chief economic regulator.
In its annual electricity market review, the ERA said the break-up of Western Power had generally encouraged greater private investment, andcompetition between generators.
But it warned there was a level of confusion among industry participants due to the number of competing reviews of energy sector issues currently under way.
“The authority notes that there is a continuing lack of clear and coordinated policy approach to a range of key market design, regulatory and structural issues,” the regulator said.
“The authority is concerned that with multiple reviews and processes currently under way, there is a potential for confusion among stakeholders as to the evolution of policy on key issues.
“Industry participants have expressed the view ... that the uncertainty created by the multiple reviews and processes currently under way will impact on investment decisions.”
One of the key areas of concern identified by the regulator was proposed changes to existing market rules and the vesting contract governing Verve Energy’s operation in a bid to resolve the state generator’s financial problems.
The regulator stressed that any move to re-amalgamate Verve with its electricity retail sibling, Synergy, would undermine competition and deter the entry of new players and private investment in the sector.
Consequently, it would not back any changes to Verve’s vesting contract that would result in an outcome “effectively equivalent to the merger of these two dominant government-owned market participants”.
Currently, the main inducement for private sector generation is a 3,000-megawatt cap on Verve’s generation capacity, and Synergy’s requirement to contract a proportion of its supplies from third parties. Changes to both conditions are believed to be under evaluation by the Oates implementation committee.
Mr Collier said any current uncertainty would be resolved by the finalisation of the strategic energy initiative at year’s end
