Electricity consumers in Perth and the South West are set to be delivered a reprieve after the State's economic regulator slashed the amount of money it would allow Western Power to spend over the next five years.
As part of its latest spending plan submitted in September last year, Western Power had asked for $10.3 billion between 2012 and 2017 in a move that would have lifted retail prices by almost $500 a year.
But the Economic Regulation Authority yesterday handed down its final decision on the spending proposal, saying Western Power would only be allowed to claw back $6.7 billion from its customers over the period.
The decision means network costs, which account for about 40 per cent of the average household electricity bill, will barely rise in real terms over the next five years apart from inflation-related increases.
ERA chairman Lyndon Rowe said the decision would significantly ease cost pressures on power prices, which have risen 62 per cent since the Barnett Government came to power in 2008.
However, today's announcement by the ERA is a blow to Western Power, which had been hoping for billion of dollars in extra cash.
It wanted the money partly to expand its vast network of poles and wires in the State's southern half but also to boost the amount of profit it was delivered to Government.
Mr Rowe said the biggest reason for the difference between what Western Power was seeking and what it was given was the decision to grant the utility a much lower rate of return on its assets.
Under Western Power's proposal, it would have collected about 8 per cent return on its capital up to 2017, which would have delivered a series of bumper profits over the coming years.
Mr Rowe said this figure had been slashed to just 3.6 per cent, which he still believed was an acceptable return for Western Power and would allow the utility to service demand growth as well as maintain a safe and secure network.
Another key plank of today's announcement revolves around Western Power's ageing wood pole network.
Mr Rowe said the ERA had decided to increase by $365 million the amount of money Western Power would be allowed to spend on replacing and reinforcing wood poles, taking the total amount allocated to the task to about $1.1 billion.Western Power was tight-lipped on the overall decision, saying it would do modelling to see how it affected the grid's safety and reliability and ability to cope with growth.
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