Power vow a Budget sinkhole
Treasurer Troy Buswell's State Budget faces a black hole of at least half a billion dollars if the State Government keeps Colin Barnett's electricity price promise for the next three years.
The Premier promised to hold electricity price rises to "at or around inflation" in last year's televised election leaders debate.
The Government lifted power prices 4 per cent last July, when Treasury's official measure of inflation was 2.75 per cent.
The State Budget assumes power prices will rise 7 per cent a year for the next three years - a decision the Government made as part of last year's Budget despite Mr Barnett's promise.
That decision, embedded in the forward estimates, artificially boosts the Budget's bottom line hundreds of millions of dollars.
This is because the price people pay for electricity is below the cost to generate, transmit and retail it, meaning the Government subsidises the electricity system each year.
The smaller the price rise, the bigger the gap and the bigger the subsidy gets.
In Treasury's pre-election financial projections statement a year ago, under-treasurer Tim Marney estimated each one per cent change in electricity prices was $53 million.
On that basis, if Mr Barnett was to lift power prices 4 per cent in each of the next three years - which would still be above the current inflation rate of 2.5 per cent - the Budget would take a $530 million hit based on last year's modelling.
In reality, the hit could be much bigger because the gap between cost and price has widened since the election.
This was underscored in the December mid-year review, after which the Government had to top up its electricity subsidy projections a further $558 million to June 30, 2017.
That top-up assumes power prices will rise 7 per cent a year - a scenario that would shatter Mr Barnett's promise.
Shadow treasurer Ben Wyatt said the Government had "form" booking revenue in the Budget over and above what it collected.
A spokeswoman for Mr Buswell said a decision on electricity prices would be made as part of the Budget process.
She said their impact on WA's finances would be revealed with the Budget in May.
