Energy Minister Peter Collier says there is a "very real possibility" the Barnett Government will merge State-owned electricity companies Verve and Synergy before next year's March election.
In the strongest indication yet that the power generation and retail utilities will be stitched back together in coming months, Mr Collier said he was no longer reluctant to push ahead with the plan.
"There is nothing formal at the moment but putting Verve and Synergy together by March next year is a very real possibility," Mr Collier said. "It would need legislation for it to happen."
He said the Government could justify the merger because "hundreds of millions of dollars" were being wasted under the current system of supplying power to WA homes and businesses.
He gave a recent example in which State-owned generators were brought to a standstill because Verve had to honour contracts with private operators.
His comments will add to unrest in the energy sector and comes after Verve's managing director Shirley In't Veld said she would not be seeking a renewal of her contract when it expires next month.
That decision comes after Western Power managing director Doug Aberle brought his resignation forward and chairman Mark Barnaba announced he was leaving at the end of his term next month.
Mr Collier denied Mrs In't Veld's departure was linked to any merger intentions and also disputed claims by industry groups that a merger would be of no benefit to the WA public.
"The displacement of power generation to private operators happened too fast," Mr Collier said.
"We now have 500 megawatts of excess capacity in the market.
"So you have a State-owned generator in Kwinana, for example, that we're paying for to sit idle when it should be running 24/7."
He said at the same time "hundreds of millions of dollars in capacity credits" go to private power suppliers.
"It's ridiculous," he said. "You have those in the energy sector and business that say it's terrible if you remerge them.
"That's not the case. We can still have private investment in the energy market but is it really necessary to have two separate entities?"
Mr Collier said he agreed with Premier Colin Barnett that it was also a "ludicrous" situation to have Verve and Synergy trying to outbid one another for gas contracts to supply power.
"It's absurd," Mr Collier said.
"You also have peripheral things like two boards and all the administration. But the real issue is if you remerge do you knock out the private sector? No, you don't."
Mr Barnett told _The West Australian _last week he remained frustrated by the electricity generation and supply structure in WA.
"People (in the energy supply market) want the State Government to have a dysfunctional State-owned electricity system so they can get the cream, but those days are gone," Mr Barnett said.
The Premier's and Mr Collier's comments set the stage for fierce debate between the Government, energy industry and Labor Party, which split Western Power in 2006 into four corporations to meet WA's electricity supply and infrastructure needs.
Shadow energy minister Bill Johnston said a merger would inflate power bills - already up 57 per cent since the Barnett Government took office - even more.
WA Chamber of Commerce and Industry chief executive James Pearson challenged the Government to show how the decision would put downward pressure on electricity prices and pointed to a 2009 report that recommended against the merger. <div class="endnote">