Alinta Energy believes it can cut small business power costs by up to 12.5 per cent if competition is expanded in the state’s electricity market.
It follows Alinta’s release yesterday of a KPMG report which projected a $548 million boost to Western Australia’s Gross State Product over 15 years, if power prices were cut 12.5 per cent for about 24,500 small businesses.
Almost 200 jobs would be created within five years, KPMG predicted.
In WA, government-owned Synergy has a monopoly over all customers who use less than 50 megawatt hours of electricity a year.
That includes households, and small businesses below the size of an independent supermarket.
KPMG’s modelling was based on lowering the threshold to 20MWh per year, bringing about 24,500 business customers into the contestable market.
The consultant’s report stopped short of forecasting the price decline if competition was introduced, instead modelling the economic impact for a range of assumed price reductions between 7.5 per cent and 12.5 per cent.
Nonetheless, a spokesperson for Alinta confirmed to Business News that the company would target reductions of up to 12.5 per cent.
“Based on the tariff structures that exist today, we would see no reason that those discounts wouldn’t be in the order of 7.5 to 12.5 per cent,” she said.
The biggest winners, according to the KPMG report, would be hospitality, mining, and manufacturing.
KPMG said prices fell 25 per cent for businesses in New Zealand after deregulation, and 30 per cent in Texas.
Business News has previously reported the government was considering lowering the threshold to 20MWh, and Energy Minister Bill Johnston confirmed that was still the case.
Mr Johnston recently told journalists that the change would be a slow process, and would also require reforms to how businesses buy power in shopping centres and other systems.
But he said the long timeframe was not to protect Synergy.
“It’s not expected that these changes would have any significant impact on Synergy,” he said.
“Synergy is not concerned about the retail contestability threshold for small businesses.”
The utility is under pressure through the energy transition, with the government’s most recent budget forecasting almost $400 million of subsidies for the enterprise this financial year alone.
The big impediment for changing the contestability threshold was reform around embedded networks, such as those in shopping centres, Mr Johnston said.
Those are systems where businesses buy from the centre’s owner or operator, which itself buys power from the retail market, and potentially charges a markup.
“Most businesses that are paying very high rates for their power are in shopping centres and other embedded networks, and it’s very difficult to give them an opportunity to buy from the retailer of their choice,” he said.
Fixing that would be a precondition of lowering the threshold, Mr Johnston said.
The Chamber of Commerce and Industry of WA said today it supported lowering the threshold.
About 60 per cent of businesses in the state were concerned about operating costs, CCI said, and about 75 per cent believed reform would help them grow their businesses.
“Reform would particularly benefit the small and medium businesses who have been under such pressure during the pandemic, with increased competition bringing about lower prices,” chief economist Aaron Morey said.
