Western Australia Minister for Energy Peter Collier
New Vesting Contract Provides Security For State’s Electricity Supply
Victor P Taffa
The State Government has endorsed a plan to help ensure the long-term security and reliability of Western Australia’s Energy Sector.
Energy Minister Peter Collier said the Vesting Contract between Verve Energy and Synergy had been replaced to provide greater financial stability for Verve and save the State up to $1.5 Billion over 10 years.
This was a key recommendation of a review, initiated by the Minister and led by Peter Oates, into the State’s Energy Sector and to arrest the slide of Verve’s Financial Performance.
Mr. Collier said there were a number of issues with the previous Vesting Contract, which left Verve’s power plants sitting idle and the corporation unable to plan for its long-term financial future.
“Changes to the Vesting Contract will play a major role in securing Verve Energy’s financial position, which is essential to the long-term economic growth of WA and to ensure the lights stay on.” the Minister said.
“Improving the financial position of the corporations may also ultimately reduce the subsidy paid to cover the difference between the cost reflective price of electricity and the price paid by consumers taxpayer funds that could be used on other priority areas such as schools, hospitals and roads.”
“As a responsible Government, on behalf of the taxpayers of WA, we cannot continue to subsidise Verve’s losses.”
“The State Government is committed to a financially stronger Verve because of its importance as the backbone of the WA energy market.”
Mr. Collier said the Government inherited an Energy Sector that was in tatters because of a totally flawed disaggregation process, a legacy left by the previous Labor Government.
“In the three financial years prior to disaggregation, Western Power Corporation achieved a total Profit before tax result of almost $1 Billion.” the Minister said.
“When the Liberal-National Government took office, we were left with the reality that a subsidy of almost $1.5 Billion would be required over three years to keep Verve Energy viable.” Mr. Collier said.
“Replacing the Vesting Contract alone will not solve Verve’s issues but it is a significant step towards strengthening the State’s Energy Sector.”
Mr. Collier said the Oates Review identified several key factors driving the need for change.
“Recommendations related to the need to address market design issues, improve reliability arrangements and amend the Vesting Contract arrangements.” the Minister said.
“Mr. Oates is leading a program of work to implement a number of the recommendations, allowing the Government to fulfil its responsibility to deliver a reliable Electricity Supply.” Mr. Collier said.
The new contract takes effect on October 1, 2010.