❓ Hon. Norman Moore questions the government about the timing of coal supply contract renewals for Western Power and its entities, and challenges the justification for electricity price rises based on rising gas and coal costs given long-term contracts. The Minister's response clarifies contract renegotiations and explains the methodology used to forecast electricity retail tariffs, reflecting both market-based and Verve Energy's contract prices.
AnsweredQoN 6233Legislative Council
QuestionView source ↗
(2) When did the Government renew coal supply contracts for Western Power and its subsequent entities?
(3) Can the Minister explain why the Government is claiming rising gas and coal input costs as one of the main reasons for the proposed massive electricity price rises when the Government’s utilities have long term, stable price contracts?
(3) Can the Minister explain why the Government is claiming rising gas and coal input costs as one of the main reasons for the proposed massive electricity price rises when the Government’s utilities have long term, stable price contracts?
AnswerView source ↗
Answered
18 June 2008
Responded by
Leader of the House representing the Minister for Energy
Response time
43 days
The Office of Energy has provided the Minister for Energy with the following response.
(1) Government did not renew the gas supply contracts for Western Power Corporation or its subsequent entities. The former Western Power Corporation renegotiated its gas supply contract, and signed the contract with the North West Shelf Joint Venture on 4 March 2004. This contract was subsequently transferred to Verve Energy on disaggregation of Western Power Corporation.
(2) Government did not renew the coal supply contracts for Western Power Corporation or its subsequent entities. The former Western Power Corporation renegotiated its coal supply contract, and signed the contract with Wesfarmers on 17 August 2005. This contract was subsequently transferred to Verve Energy on disaggregation of Western Power Corporation.
(3) The Electricity Retail Market Review forecasted the cost-reflective levels for electricity retail tariffs. In the long term retail tariffs need to be based on market?based gas and coal prices if the wholesale and retail electricity markets are to operate efficiently and ensure future supplies.
The wholesale prices for tariffs for contestable customers were based on new entrant prices (i.e. market-based gas and coal prices).
The wholesale prices for tariffs for non-contestable customers (i.e. residential and small business customers) were based on a proportion of new-entrant generation prices and a "Verve Sustainable Price" (i.e. a lower-than-new-entrant price forecast to recover Verve Energy's supply costs, accounting for Verve Energy's coal contract, gas contract, and depreciated capital position).
The generation price was combined with other costs to determine the overall wholesale prices for non-contestable tariffs. The prices for other cost components were determined so as to provide Synergy with sufficient tariff revenue to pay market-based prices for these inputs. The benefits of Verve Energy's low-cost gas and coal contracts were therefore reflected in the final tariff forecasts for non-contestable customers.
Notice: This document is created or edited using unregistered or evaluation copy of rtLib valid for testing or development purposes only. To use it for productive or any other purposes please register it. You may purchase the license on
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(1) Government did not renew the gas supply contracts for Western Power Corporation or its subsequent entities. The former Western Power Corporation renegotiated its gas supply contract, and signed the contract with the North West Shelf Joint Venture on 4 March 2004. This contract was subsequently transferred to Verve Energy on disaggregation of Western Power Corporation.
(2) Government did not renew the coal supply contracts for Western Power Corporation or its subsequent entities. The former Western Power Corporation renegotiated its coal supply contract, and signed the contract with Wesfarmers on 17 August 2005. This contract was subsequently transferred to Verve Energy on disaggregation of Western Power Corporation.
(3) The Electricity Retail Market Review forecasted the cost-reflective levels for electricity retail tariffs. In the long term retail tariffs need to be based on market?based gas and coal prices if the wholesale and retail electricity markets are to operate efficiently and ensure future supplies.
The wholesale prices for tariffs for contestable customers were based on new entrant prices (i.e. market-based gas and coal prices).
The wholesale prices for tariffs for non-contestable customers (i.e. residential and small business customers) were based on a proportion of new-entrant generation prices and a "Verve Sustainable Price" (i.e. a lower-than-new-entrant price forecast to recover Verve Energy's supply costs, accounting for Verve Energy's coal contract, gas contract, and depreciated capital position).
The generation price was combined with other costs to determine the overall wholesale prices for non-contestable tariffs. The prices for other cost components were determined so as to provide Synergy with sufficient tariff revenue to pay market-based prices for these inputs. The benefits of Verve Energy's low-cost gas and coal contracts were therefore reflected in the final tariff forecasts for non-contestable customers.
Notice: This document is created or edited using unregistered or evaluation copy of rtLib valid for testing or development purposes only. To use it for productive or any other purposes please register it. You may purchase the license on
http://www.rtlib.com
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