Country power customers to lose in privatisation move

Friday 28 Oct 2016

Power customers in regional WA could be forced to pay more for electricity if the Tariff Equalisation Fund is axed under the privatisation of Western Power, a new report says.

The report, compiled by Orion Consulting Network for the Electrical Trades Union WA and the Australian Services Union WA, analyses the impacts of a potential sell-off of Western Power.

The report found any discontinuation of the fund “would likely result in Horizon Power having to recover the lost revenue from its customers by increasing its retail prices”.

It estimated Horizon Power would have to recoup around $141 million a year – the equivalent of an extra $528 for an average household with a power consumption of 6000kWh – if the TEF was discontinued.

Horizon Power, WA’s regional electricity supplier, services more than 47,000 customers across northern WA from Coral Bay and Exmouth, to Karratha, Port Hedland, Broome, Derby and Kununurra as well as some of the most remote towns and indigenous communities.

Under the Tariff Equalisation Fund, Western Power pays a proportion of its profits to the fund, which is used to supplement Horizon Power’s revenue to ensure price parity for Horizon customers in country WA. Last financial year, Horizon Power received $141 million from the TEF – the equivalent of 29 per cent of its revenue.

The Orion report said the “vast remoteness of the Horizon Power network means that significant infrastructure is required to service customers, resulting in higher cost per connection than the urban networks”.

“The majority of the increase in required revenue would presumably be recovered directly form the customer through increases to the consumption charge (tariffs),” it said.

“Privatisation of Western Power could have a significant impact on the financial sustainability of Horizon Power unless the Tariff Equalisation Fund contributions are legislated to also be met by the new owner of Western Power, or the State Government chooses to fund the revenue shortfall out of general revenue.”

Currently it costs $966 for Western Power to connect each customer, yet $9305 for each Horizon Power connection.

Electrical Trades Union WA Branch Secretary Les McLaughlan said the Liberal-National Government needed to come clean and acknowledge that higher power prices for regional customers were a certainty.

“The question is: ‘Who is going to subsidise the hefty costs to connect country customers to WA’s electricity network under a privatised power system?” Mr McLaughlan said.

“It remains to be seen if Horizon Power will increase prices or if the State Government will continue to subsidise the Tariff Equalisation Fund from consolidated revenue.

“This means $141 million of consolidated revenue could be diverted from vital West Australian services like hospitals, schools, funding for police and emergency services to prop up the fund.

“Somehow, someone has to pay.

“There are absolutely no guarantees that the State Government will foot the bill and no guarantees that a private provider will continue the fund the ensure country customers are not worse off under a privately run electricity system.”

Australian Services Union WA Branch Secretary Wayne Wood called on WA Nationals Leader Brendon Grylls to recognise the impacts of a Western Power sell-off on regional electricity customers when the Nationals meet for their annual state conference in Geraldton this weekend.

“Brendon Grylls needs to be upfront with country power customers and acknowledge that his party plans to support a privatisation plan that will hurt thousands of people living in country WA, including hundreds already battling to keep pace with the state’s high cost of living,” he said.

“Instead of selling out country power customers, Brendon Grylls needs to move to safeguard the very families he is meant to stand up for to ensure they are not disadvantanged in any way or forced to pay more for vital electricity supplies.

“They reality is regional customers are subsidised almost $3000 a year and if Western Power is privatised they may be forced to wear that added expense.

“In 2015-16, Western Power contributed $141 million to the Tariff Equalisation Fund, which subsidises the average household power bill by almost $3000 a year, to ensure families in regional WA pay the same for their electricity as families in Perth.

“Under private ownership, the number one priority of Western Power will be to make a profit, meaning they will be doing everything they can to stop subsidising regional power prices.”