RAJ REPORT

Electricity Priviatation needs to happen in Queensland, or you get “GOLD PLATING “and Government wastes taxpayer money—–Every dollar that Western Power spends on expanding its network capacity, whether it is needed or not, provides a return to the state government. Therefore, there is a tendency for the government owned network business to over-invest in capacity. This leads to a phenomenon known in the field of regulatory economics as “gold plating”.

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Every dollar that Western Power spends on expanding its network capacity, whether it is needed or not, provides a return to the state government. Therefore, there is a tendency for the government owned network business to over-invest in capacity. This leads to a phenomenon known in the field of regulatory economics as “gold plating”.

Under the current regulatory system in Western Australia, gold plating results in higher electricity tariffs than those that would occur if Western Power was not rewarded for its over-investment. It is in this way that government revenues derived from gold plating of the network are equivalent to a state tax; a state tax with an extremely high cost of administration.

Since 2006, Western Power’s expenditure and its guaranteed risk-free profit have been approved by the Economic Regulation Authority under regulatory rules approved by the Minister for Energy. Recently the CEO of the ERA’s secretariat denied any gold plating of the Western Power Network, stating, “our view is that there has certainly not been gold plating overall of Western Power’s network. Indeed, we saw a period of significant catch-up expenditure needed to meet the service standards.”

A similar, perhaps more cautious, denial came from the Deputy Director General of the government’s principle energy policy agency, the Public Utilities Office, who said, “the view of government here is that … [gold plating] is probably not the case for the Western Australian network businesses.”

These views are not consistent with the available evidence. Take the most recent financial year as an example. A total of 5,493 MW of generation capacity was assigned to the South West Interconnected System in 2011-12. However, the peak generation for 2011-12 which occurred on Australia Day was only 3,868 MW.

 

 

 

 

The sorry state of WA’s electricity market reform.

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