The West

WA reviews pay capacity

The Barnett Government has moved to limit its liability over changes that could stem from the electricity market review, suspending the process that allocates future capacity.

In a notice published this week, it emerged Energy Minister Mike Nahan had deferred "most aspects" of the upcoming capacity payment cycle.

Citing "excess" supply in the South West electricity grid, the notice said this would "continue through to 2015-16, and is likely to continue into 2016-17".

"In these circumstances, the certification of capacity for the 2016-17 Capacity Year can be deferred without risk of insufficient capacity to meet energy demand in the 2016-17 Capacity Year," it said.

The decision puts on hold a process that would have seen the Independent Market Operator (IMO) register generation capacity for the period between October 1, 2016 and September 30, 2017.

Under the South West network's operating model, generators are paid for the notional capacity they provide to ensure there is sufficient back-up power.

They are also paid for energy produced and sold.

So-called capacity credits are worth hundreds of millions of dollars a year and can be a critical part of a generator's income.

The root-and-branch review of the wholesale electricity market announced by Dr Nahan in March has thrown doubt over whether the capacity market will be kept in future.

Dr Nahan has indicated an interest in scrapping capacity payments and moving the South West system to an energy-only market, like the Eastern States.

Such a move could also see the abolition of the IMO and responsibility for running the wholesale electricity market handed to national bodies.

It is understood the decision to suspend the 2016-17 capacity cycle could also have been taken to avoid future compensation payouts because capacity, once allocated, becomes an effective property right.

Richard Wilson, a spokesman for EnerNOC, which represents energy users paid capacity credits to switch off during peak demand, urged the Government to keep the capacity market.

Perth Energy boss Ky Cao said the review should improve the way generators were treated.

The West Australian

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