❓ Opposition questions the Premier on the re-merger of Synergy and Verve, challenging a prior commitment. Premier defends the decision citing inefficiencies and strategic advantages.
AnsweredQoN 9Legislative Assembly
QuestionView source ↗
SYNERGY
AND VERVE — RE-MERGER
9. Mr M. McGOWAN to the Premier:
I refer to the promise of the Premier's government on
26 August 2009 to not re-merge Synergy and Verve after the findings from the
2009 Oates report that the Premier commissioned rejected the idea, estimating
that the cost of new generation capacity up to 2028 is in excess of $10 billion.
(1) Why did the Premier break his promise?
(2) Can the
Premier name any independent economic, mining or energy industry figures who
support this re-merger?
(3) What are the exact savings that will be achieved by the
re-merger?
AND VERVE — RE-MERGER
9. Mr M. McGOWAN to the Premier:
I refer to the promise of the Premier's government on
26 August 2009 to not re-merge Synergy and Verve after the findings from the
2009 Oates report that the Premier commissioned rejected the idea, estimating
that the cost of new generation capacity up to 2028 is in excess of $10 billion.
(1) Why did the Premier break his promise?
(2) Can the
Premier name any independent economic, mining or energy industry figures who
support this re-merger?
(3) What are the exact savings that will be achieved by the
re-merger?
AnswerView source ↗
(1)–(3) I am not sure which promise the Leader of the
Opposition is referring to —
Mr M. McGowan : The
promise by your energy minister.
Mr C.J. BARNETT :
So, not my promise?
Mr M. McGowan :
Your energy minister; your government!
Mr C.J. BARNETT :
The Leader of the Opposition just left out that little detail, did he?
Mr M. McGowan : It
was your government.
Mr C.J. BARNETT :
The Leader of the Opposition chose to leave out that detail.
Mr M. McGowan : Oh,
it was just your minister; okay! What an important point.
Mr R.H. Cook : So
he doesn't represent the government?
Mr C.J. BARNETT :
There has been an election; this government won that election convincingly.
Mr B.S. Wyatt : Not
on the basis of this, though.
Mr M. McGowan : He
never revealed this.
Mr C.J. BARNETT :
As a new and strongly elected government it is open to us to make any decisions
that we think appropriate.
Several members interjected.
Mr C.J. BARNETT :
Indeed, during the first couple of cabinet meetings this issue was discussed,
and we have taken a decision to appoint a common board of directors for Verve
and Synergy. That should be in place by 1 July this year. There will be
required legislative change to bring Verve and Synergy together as a single
utility, but it will—as it has since the mid-90s—operate with
two ring-fenced businesses within it. That will ensure transparency and
accountability, which is important in terms of pricing.
We have debated this at length and I think members can go
back and read speech after speech that I, at least, and others have made. The
Labor Party split up the former Western Power into four different utilities.
The promise was a nine per cent real reduction in electricity prices. Did that
happen? No; no, it did not happen. It did not happen. During our first term of
government we tried to make the policy work, and indeed the former minister,
Hon Peter Collier, redirected the vesting agreement, which probably saved the
state around $1 billion into forward years. But, at the end of the day, what
was Western Australia left with? Three hundred megawatts of excess capacity. We
had a situation in which, almost on a regular basis, Verve was told to switch
off its highly efficient gas turbines at Kwinana so that a private generator,
at a higher price, could supply electricity because it was contracted for. And
that happened regularly. The major reason we have had cost increases is the
inefficient use of state-owned, state-funded—still with borrowings
attached to it—infrastructure; power stations that were not being used
to their best ability. We had a situation in which the lowest cost, most
efficient generators in this state were being switched off to bring on high-cost
private generation.
Several members interjected.
The SPEAKER :
Members!
Mr C.J. BARNETT :
We will bring them together under a common board, and we will make sure those
sorts of things do not happen; that will reduce the cost, or minimise cost
rises. We will also have a utility that is a strong enough entity to actually
do what matters in this state right now for energy. I will give members a
couple of examples. Is the member for Collie–Preston here? Yes. The
member for Collie–Preston is aware that the coal industry—the
two coal companies—is now in foreign ownership. Both of them are
reportedly running at losses. There is an urgent need to enter into new
long-term coal supply contracts; that is probably the single most important
issue in the member for Collie–Preston's town of Collie. Can a
divided utility do that? No. We had examples of Verve and Synergy competing
against each other for the same gas contract and ending up paying more. How
silly is that?
Several members interjected.
Mr C.J. BARNETT :
On the Gorgon project.
We will have the ability now for a utility to negotiate and
enter into long-term gas contracts, long-term coal contracts and long-term
renewable contracts. The opposition still cannot get over it. Its policy was to
reduce electricity prices; it added probably $1 billion to the cost of
providing electricity over a four-year period. Its policy failed. We gave it 12
months. We tried to fix it up; we could not, so we are going back to where we
should be.
Opposition is referring to —
Mr M. McGowan : The
promise by your energy minister.
Mr C.J. BARNETT :
So, not my promise?
Mr M. McGowan :
Your energy minister; your government!
Mr C.J. BARNETT :
The Leader of the Opposition just left out that little detail, did he?
Mr M. McGowan : It
was your government.
Mr C.J. BARNETT :
The Leader of the Opposition chose to leave out that detail.
Mr M. McGowan : Oh,
it was just your minister; okay! What an important point.
Mr R.H. Cook : So
he doesn't represent the government?
Mr C.J. BARNETT :
There has been an election; this government won that election convincingly.
Mr B.S. Wyatt : Not
on the basis of this, though.
Mr M. McGowan : He
never revealed this.
Mr C.J. BARNETT :
As a new and strongly elected government it is open to us to make any decisions
that we think appropriate.
Several members interjected.
Mr C.J. BARNETT :
Indeed, during the first couple of cabinet meetings this issue was discussed,
and we have taken a decision to appoint a common board of directors for Verve
and Synergy. That should be in place by 1 July this year. There will be
required legislative change to bring Verve and Synergy together as a single
utility, but it will—as it has since the mid-90s—operate with
two ring-fenced businesses within it. That will ensure transparency and
accountability, which is important in terms of pricing.
We have debated this at length and I think members can go
back and read speech after speech that I, at least, and others have made. The
Labor Party split up the former Western Power into four different utilities.
The promise was a nine per cent real reduction in electricity prices. Did that
happen? No; no, it did not happen. It did not happen. During our first term of
government we tried to make the policy work, and indeed the former minister,
Hon Peter Collier, redirected the vesting agreement, which probably saved the
state around $1 billion into forward years. But, at the end of the day, what
was Western Australia left with? Three hundred megawatts of excess capacity. We
had a situation in which, almost on a regular basis, Verve was told to switch
off its highly efficient gas turbines at Kwinana so that a private generator,
at a higher price, could supply electricity because it was contracted for. And
that happened regularly. The major reason we have had cost increases is the
inefficient use of state-owned, state-funded—still with borrowings
attached to it—infrastructure; power stations that were not being used
to their best ability. We had a situation in which the lowest cost, most
efficient generators in this state were being switched off to bring on high-cost
private generation.
Several members interjected.
The SPEAKER :
Members!
Mr C.J. BARNETT :
We will bring them together under a common board, and we will make sure those
sorts of things do not happen; that will reduce the cost, or minimise cost
rises. We will also have a utility that is a strong enough entity to actually
do what matters in this state right now for energy. I will give members a
couple of examples. Is the member for Collie–Preston here? Yes. The
member for Collie–Preston is aware that the coal industry—the
two coal companies—is now in foreign ownership. Both of them are
reportedly running at losses. There is an urgent need to enter into new
long-term coal supply contracts; that is probably the single most important
issue in the member for Collie–Preston's town of Collie. Can a
divided utility do that? No. We had examples of Verve and Synergy competing
against each other for the same gas contract and ending up paying more. How
silly is that?
Several members interjected.
Mr C.J. BARNETT :
On the Gorgon project.
We will have the ability now for a utility to negotiate and
enter into long-term gas contracts, long-term coal contracts and long-term
renewable contracts. The opposition still cannot get over it. Its policy was to
reduce electricity prices; it added probably $1 billion to the cost of
providing electricity over a four-year period. Its policy failed. We gave it 12
months. We tried to fix it up; we could not, so we are going back to where we
should be.
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