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Synery bailout costs $558m
Synery bailout costs $558m

WA taxpayers are facing a massive bailout of State-owned electricity retailer Synergy after the Barnett Government ruled out raising power tariffs to cover a blowout in its operating subsidy.

Treasurer Troy Buswell rev-ealed on Wednesday that falling demand for electricity forced the Government to allocate an extra $558 million in operating subsidies to Synergy over four years.

The increase, which includes an extra $105 million this year alone, comes on top of the $388 million the Government was expected to give Synergy in 2013-14.

It also takes to a staggering $1.9 billion the amount the Government will have to pay in subsidising the cost of electricity in Perth and the South West over the next four years.

Mr Buswell admitted the increase was a problem for the Government, describing the energy sector as a "heavy burden" for taxpayers.

However, asked what were the implications for electricity tariffs, he said: "None."

"What effectively has happened is taxpayers are having to write a bigger cheque to subsidise the operations of Synergy," Mr Buswell said.

The Government now faces wearing the increased subsidy or writing down the value of its multibillion-dollar electricity assets - both of which will hit its bottom line.

Industry sources said though the Government would accept some of the increase, it might also use the carbon tax repeal to raise prices higher than it would have otherwise next year.

At the heart of the blowout is an unprecedented fall in electricity demand caused by the rapid uptake of solar panels, higher tariffs and more efficient energy appliances.

Treasury's mid-year review said the utility was also caught out by more competition in the wholesale electricity market.

Synergy is also paying the price for long-term contracts under which it is being forced to buy more electricity than it needs with little hope of onselling the energy profitably.

The contracts were drawn up at a time when forecasters expected energy demand to continue increasing.

Instead, Treasury noted, average electricity consumption was now expected to fall more than 20 per cent between 2009-10 and 2016-17.