The West

The State Government's shaky Budget surplus is set to come under growing pressure amid revelations Western Power could need almost $800 million more than it has been allocated over the next four years.

Treasury's midyear financial review shows the gap between what the economic watchdog says Western Power may spend until July 2016 and what the Government has budgeted stands at $790 million.

If Western Power spends the money the difference can be met in one of only three ways: through a Government cash injection, increased borrowings or redirecting the utility's profits.

Any of those measures would further erode the Government's financial position, which has slipped from a projected $196 million surplus in May's Budget to just $140 million in the midyear review.

According to Treasury, the latest update of the Budget's bottom line could not take account of the extra funding pressures, meaning its true state is likely to be worse.

The problem has been compounded by the Economic Regulation Authority, which in November slashed the profit Western Power will be able to generate from customers using its network of poles and wires.

Under the decision, the electricity distributor has been given a revenue cap of $6.8 billion over the five years to 2017.

Western Power had initially asked for $10.3 billion over the same period, only to seek $9.1 billion when that request was rejected.

While noting the funding shortfall, Treasury also flagged further problems for the State's net financial position courtesy of the ERA's decision.

Treasury said slashing Western Power's income would blow out public sector debt $451 million, leading to an overall debt of $24.8 billion by July 2016.

It said a slight change to the ERA's decision on how much the utility could spend, which had not been rolled into the midyear review, was unlikely to make the situation any better.

"These impacts are likely to be detrimental to the general government operating balance, with preliminary assessments suggesting these could be in the order of $30 million per year," Treasury said.

The West Australian

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