Attempts by the WA Government to limit power price rises could lead to inflation-busting bill hikes or taxpayer-funded bailouts down the line for the state’s stricken power retailer, energy experts warn in the ABC’s report of 8 October.
State-owned Synergy last month handed down the biggest financial reverse ever reported by a WA Government trading enterprise, booking a $657 million loss for the 12 months to June 30.
The dire performance prompted Synergy to announce in August that it would bring forward the partial closure of its biggest coal-fired generator, Muja in Collie, from 2022.
On the back of the decision, Synergy wrote down the value of its plant and equipment by a massive $430 million.
Over the same time, cash and cash equivalents plummeted from $508 million in 2014 to $128 million last year.
More worryingly for the utility was the decline of its net cash flows, which plunged from a surplus of $60.6 million in 2017–18 to a $93 million loss on a cash basis in the past financial year.
Price hike vs bailout
Adam McHugh, an honorary research associate at Murdoch University, said Synergy would eventually face a reckoning.
He said taxpayers were already paying for the deterioration in Synergy’s bottom line, given this year’s loss meant it would not provide a dividend to the State.
“If something is not sustainable, by definition it’s not sustained,” he said.
“When you’re Government-owned, you’ve always got the recourse of asking for the Government to borrow … to make up any revenue shortfall. And Synergy’s obviously Government-owned.
“That’s one way of sustaining an increasingly large gap between revenue and costs. The other is increasing prices.”
The cost of keeping the lights on
Mr McHugh said plans to modernise WA’s electricity system and make the switch to renewable energy depended on such “ancillary” services like voltage and inertia that keep the system stable being properly recognised.
“Those services have been provided for free for a long period of time…We’ve now got to rethink how those services are provided and, most importantly, at least cost.”
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