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Synergy looks for $450m cuts

Treasurer Mike Nahan. Picture: Michael O'Brien/The West Australian

Synergy will cut staff, renegotiate contracts and change the way it provides services as part of efforts to strip $450 million in costs from the taxpayer-owned utility over the next four years.

Ahead of moves to end its monopoly over the household electricity market within three years, Synergy has revealed details of an ambitious cost-cutting drive steered by management consultants McKinsey & Company. The cuts are expected to reduce significantly the pressure pushing up household electricity bills, though Treasury has warned a failure to achieve them could be a risk to the State Budget.

At a parliamentary Budget estimates hearing last week, Synergy boss Jason Waters said the so-called business efficiency program would look to trim fat from all areas of the utility's $3 billion-a-year business.

It would be on top of the $590 million reduction in the subsidy expected to be paid by the State Government to offset Synergy’s electricity production losses after other initiatives.

Specific measures the State-controlled group was putting in place included redrawing contracts with major suppliers amid views Synergy was paying mining boom-like rates despite the slowing economy.

Synergy will also shift its retail focus online and away from the traditional call centre in a move Mr Waters said was already “significantly” lowering the costs of servicing customers.

But Mr Waters acknowledged the push could also involve job losses, though he said it was too early to say how many that might be or in what areas.

He noted that as part of the review Synergy might also end some outsourcing arrangements with private contractors and bring functions back within the utility.

Energy Minister Mike Nahan and Mr Waters said though the savings had not been “banked” they were confident Synergy would achieve them.

“Nothing that we have identified yet would give us any cause for concern about our ability to achieve the target,” Mr Waters said.

Shadow energy minister Bill Johnston doubted the savings target was credible, saying that “if they can achieve those cuts it will be an extraordinary feat”.