Power price pain certain to grow

Household electricity prices would need to rise 20 per cent over the next four years just to keep pace with the rising costs of producing the essential service, it has emerged.

A blueprint aimed at overhauling WA's electricity system outlined the pain in store for consumers who have already been hit with tariff rises of 86 per cent since 2008.

It said electricity prices, which were currently about 30 per cent below the cost of production, would need to rise 5 per cent a year until 2018 to prevent the gap blowing out.

At the heart of the issue are historic contracts for coal and gas - fuels which fire most of WA's electricity production - that are set to be renewed at significantly higher costs.

The looming changes means average annual electricity bills will need to rise almost $300 over the next four years to keep pace with the increasing costs in the system.

Alternatively, the State Government subsidy that is paid to offset the cost of producing power would need to increase.

Given the subsidy's growing cost - it will amount to $600 million this year including concessions and allowances - such a move would put more pressure on a State Budget already straining under ballooning debt.

The steering committee behind the review, led by respected Eastern States-based businessman Paul Breslin, said this alone should be enough to spark change.

"Short of any significant changes in the cost outlook or the expected trajectory of tariff increases relative to that announced by the Government, the annual subsidy from the Government will be over $600 million . . . on a business-as-usual case," a review discussion paper said.

"This is a major impetus for reform in itself."

Nicky Cusworth, a member of the steering committee, told an industry briefing session recently that costs for fuels such as coal and gas were only going to rise.

"We want to be technologically neutral in terms of neither encouraging nor discouraging particular forms of fuel in the market," she said.

"But the reality is that whichever way the market goes, it's going to be increasingly expensive fuel-wise."

The West Australian

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