❓ Opposition asks the Premier about a letter from Verve Energy and Synergy regarding a potential merger. The Premier initially equivocates, then quotes from the letter, outlining concerns about the electricity market and potential benefits of a merger.
AnsweredQoN 722Legislative Assembly
QuestionView source ↗
VERVE ENERGY AND SYNERGY — CORRESPONDENCE
WITH PREMIER
722. Mr W.J. JOHNSTON to the Premier:
I refer to the Premier's comments in the house yesterday that
he has a letter from the chairmen of Verve Energy and Synergy requesting that
he merge the two companies.
(1) Will the Premier table this letter or letters, as he has said that
they are not a secret?
(2) On what date did the Premier receive this letter or these letters?
(3) Can the Premier confirm that one of the
people who signed the letter is Mr David Eiszele, the chairman of Verve, who
shares responsibility for the $330 million Muja AB disaster?
WITH PREMIER
722. Mr W.J. JOHNSTON to the Premier:
I refer to the Premier's comments in the house yesterday that
he has a letter from the chairmen of Verve Energy and Synergy requesting that
he merge the two companies.
(1) Will the Premier table this letter or letters, as he has said that
they are not a secret?
(2) On what date did the Premier receive this letter or these letters?
(3) Can the Premier confirm that one of the
people who signed the letter is Mr David Eiszele, the chairman of Verve, who
shares responsibility for the $330 million Muja AB disaster?
AnswerView source ↗
(1)–(3) The opposition cannot resist
attacking public servants and former government employees; it does it
repeatedly. It is improper and inappropriate.
Mrs M.H. Roberts : You used to do it when you were in
opposition. You would do it all the time. You made an art form of it.
The SPEAKER : Member for Midland!
Mr C.J. BARNETT : Perhaps what I said yesterday might have
been a slight overstatement. I have the letter and I will quote from it.
Mr M. McGowan : You said ''letters''.
Mr C.J. BARNETT : No; I have a letter. The letter does not
actually call for an amalgamation but certainly makes comments along those
lines.
Mr P.B. Watson : You make it up as you go along.
Mr C.J. BARNETT : There is no point; it is a joke.
The SPEAKER : Member for Albany, I call
you to order for the first time.
Ms M.M. Quirk interjected.
The SPEAKER : Member for Girrawheen, I call you to order for the third time.
Mr C.J. BARNETT : I am very happy to not answer the question,
but I believe the member asked a genuine question.
The letter was sent
to me. It was unsolicited. It came freely from the two organisations, Verve and
Synergy. It is dated 30 March 2012—we need to bear in mind that this
was 18 months ago and that a lot has happened since then. The letter refers to
the implications of a possible merger of the two corporations, Verve and
Synergy. It refers to that having been discussed by the respective boards. The
letter confirms that the boards are willing to cooperate with the government.
It makes it clear by implication that it is a government decision. I will quote
some sections of it. The letter states in part —
the changes made to the electricity industry in the past ten years
have not been well managed and have not been a success.
That is a very clear
statement from the two corporations: it has not been well managed and it has
not been a success. The letter goes on to refer to some of the issues. Indeed,
they are very similar to the issues about which the Minister for Energy has
been talking: market operations, interests of private suppliers and
contestability—the sorts of issues that would come up if we were
considering a merger of the two. Indeed, the letter has with it an attachment
of identified issues. I do not think anyone would argue with some of the issues
they say would need to be addressed if a merger were to happen. The letter also
makes the point that a merger would reduce conflicts, achieve economies of
scale, lead to more effective advice to government, reduce the reporting
mechanisms that are in place, reduce overheads, create a substantial corporation,
and allow the optimisation of Verve's energy portfolio. The letter made
it clear that any existing contracts between Synergy and private producers
would need to be honoured. Towards the end of the letter it states —
It
was noted that the private sector has had its opportunity to participate in the
market with the result that of the market participants —
Bear in mind that this was 18 months ago —
Alinta
is struggling financially, Griffin is in Administration, Perth Energy is on the
market, Wesfarmers is no longer active and ERM has withdrawn as a result of
their inability to absorb capacity refunds. This has led to instability in the
market and significant collateral damage to both Verve Energy and Synergy.
It also went on to
say —
The
ongoing viability of the IMO —
The Independent
Market Operator —
is
also an issue, bearing in mind that 93% of the market is based on bilateral
contracts with only about 7% actively traded.
That is the letter.
As I said, it was an unsolicited letter. It was provided 18 months ago.
Mr F.M. Logan : Signed by Chairman Mao.
Mr C.J. BARNETT : What a foolish, foolish comment.
The SPEAKER : Thank you, member for Cockburn!
Mr F.M. Logan : It is an example of a justification for a
merger.
The SPEAKER : Member for Cockburn, I call you for the first time for shouting out,
and I call you for a second time for speaking when I am on my feet—you
are called twice.
Point of Order
Mrs M.H. ROBERTS : Is the Premier going to table the letter?
Mr C.J. BARNETT : I am just answering the question.
Questions without Notice Resumed
Mr C.J. BARNETT : The letter was signed by David Eiszele,
then chairman of Verve Energy, and Michael Smith, chairman of Synergy—two
very respected people. I will repeat the quote that I think matters —
changes made to the electricity industry in the past ten years have
not been well managed and have not been a success.
The letter was signed
by the chairmen of the two major corporations. It was unsolicited. It was sent
to me. I have notes on this copy of the letter, so I will table a clean copy.
[See paper 1121.]
attacking public servants and former government employees; it does it
repeatedly. It is improper and inappropriate.
Mrs M.H. Roberts : You used to do it when you were in
opposition. You would do it all the time. You made an art form of it.
The SPEAKER : Member for Midland!
Mr C.J. BARNETT : Perhaps what I said yesterday might have
been a slight overstatement. I have the letter and I will quote from it.
Mr M. McGowan : You said ''letters''.
Mr C.J. BARNETT : No; I have a letter. The letter does not
actually call for an amalgamation but certainly makes comments along those
lines.
Mr P.B. Watson : You make it up as you go along.
Mr C.J. BARNETT : There is no point; it is a joke.
The SPEAKER : Member for Albany, I call
you to order for the first time.
Ms M.M. Quirk interjected.
The SPEAKER : Member for Girrawheen, I call you to order for the third time.
Mr C.J. BARNETT : I am very happy to not answer the question,
but I believe the member asked a genuine question.
The letter was sent
to me. It was unsolicited. It came freely from the two organisations, Verve and
Synergy. It is dated 30 March 2012—we need to bear in mind that this
was 18 months ago and that a lot has happened since then. The letter refers to
the implications of a possible merger of the two corporations, Verve and
Synergy. It refers to that having been discussed by the respective boards. The
letter confirms that the boards are willing to cooperate with the government.
It makes it clear by implication that it is a government decision. I will quote
some sections of it. The letter states in part —
the changes made to the electricity industry in the past ten years
have not been well managed and have not been a success.
That is a very clear
statement from the two corporations: it has not been well managed and it has
not been a success. The letter goes on to refer to some of the issues. Indeed,
they are very similar to the issues about which the Minister for Energy has
been talking: market operations, interests of private suppliers and
contestability—the sorts of issues that would come up if we were
considering a merger of the two. Indeed, the letter has with it an attachment
of identified issues. I do not think anyone would argue with some of the issues
they say would need to be addressed if a merger were to happen. The letter also
makes the point that a merger would reduce conflicts, achieve economies of
scale, lead to more effective advice to government, reduce the reporting
mechanisms that are in place, reduce overheads, create a substantial corporation,
and allow the optimisation of Verve's energy portfolio. The letter made
it clear that any existing contracts between Synergy and private producers
would need to be honoured. Towards the end of the letter it states —
It
was noted that the private sector has had its opportunity to participate in the
market with the result that of the market participants —
Bear in mind that this was 18 months ago —
Alinta
is struggling financially, Griffin is in Administration, Perth Energy is on the
market, Wesfarmers is no longer active and ERM has withdrawn as a result of
their inability to absorb capacity refunds. This has led to instability in the
market and significant collateral damage to both Verve Energy and Synergy.
It also went on to
say —
The
ongoing viability of the IMO —
The Independent
Market Operator —
is
also an issue, bearing in mind that 93% of the market is based on bilateral
contracts with only about 7% actively traded.
That is the letter.
As I said, it was an unsolicited letter. It was provided 18 months ago.
Mr F.M. Logan : Signed by Chairman Mao.
Mr C.J. BARNETT : What a foolish, foolish comment.
The SPEAKER : Thank you, member for Cockburn!
Mr F.M. Logan : It is an example of a justification for a
merger.
The SPEAKER : Member for Cockburn, I call you for the first time for shouting out,
and I call you for a second time for speaking when I am on my feet—you
are called twice.
Point of Order
Mrs M.H. ROBERTS : Is the Premier going to table the letter?
Mr C.J. BARNETT : I am just answering the question.
Questions without Notice Resumed
Mr C.J. BARNETT : The letter was signed by David Eiszele,
then chairman of Verve Energy, and Michael Smith, chairman of Synergy—two
very respected people. I will repeat the quote that I think matters —
changes made to the electricity industry in the past ten years have
not been well managed and have not been a success.
The letter was signed
by the chairmen of the two major corporations. It was unsolicited. It was sent
to me. I have notes on this copy of the letter, so I will table a clean copy.
[See paper 1121.]
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