The West

Power  gap subsidy hits Budget
Power play: Electricity costs hit Budget bottom line. Picture: Sharon Smith/The West Australian

The gap between the price WA households pay for their electricity from Synergy and the cost to generate, transmit and retail that electricity is growing, costing the State Budget nearly half a billion dollars a year in subsidies.

Figures provided by Synergy to the Upper House financial estimates committee yesterday show residential power prices - which have risen 70 per cent since the Barnett Government came to power - would have needed to increase a further 33.5 per cent in 2012-13 to match the cost of production.

That gap has grown from a 31.5 per cent difference when the Economic Regulation Authority looked at the issue in July 2012, revealing how Premier Colin Barnett's promise to hold future electricity price increases to "at or about inflation" during the election campaign is affecting the Budget bottom line by requiring the Government to pay higher subsidies.

Yesterday's appearance before the committee was the first time Synergy executives have been publicly grilled after the merger of the old Synergy electricity retail company with generating company Verve on January 1.

Chief financial officer Karl Matacz told the committee that solar panel installations, which have grown from zero to 130,000 in just five years, continue to grow at a rate of 2000 a month.

Committee chairman Ken Travers asked new Synergy chief Jason Waters how vulnerable the merged utility was to a "death spiral" scenario.

"I don't have an answer to that question until we get the ability to properly consolidate this business, bearing in mind that we're now 27, 28 days into the merger," Mr Waters said.

"We've got to put a lot of work into this company. Before I make any comments about death spirals or those kind of terms that you've bandied around, we've got to unpack this business and get a handle on our own cost position and to work out what efficiencies we can bring to bear in light of the merger structure."

The West Australian

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