Synergy and Verve Energy merger a step closer

The Western Australian State Government has taken a key step towards restructuring its energy sector with the introduction of legislation to merge electricity corporations Synergy and Verve Energy.

Energy Minister Mike Nahan said the merger would create a financially stronger utility, which would boost the state’s energy security.

Dr Nahan also acknowledged the split of Western Power by the Labor State Government in 2006 had resulted in significant cost increases through an inefficient market structure.

“The disaggregation of the old Western Power resulted in an oversupply of power production and an inefficient market structure, which ended up costing the state and ultimately households, hundreds of millions of dollars every year,” he said.

“Under the existing system, we have Synergy and Verve Energy making decisions in isolation and that has ultimately increased the cost of the power that they on-sell to household and business customers.

“The merger of Synergy and Verve Energy, in conjunction with other changes, will drive efficiencies that will include the new entity being able to optimise its portfolio of power generation and energy purchases.”

The minister said the new Synergy would have an increased strategic planning ability, ensuring competitively priced long-term gas, coal and renewable energy contracts were entered into at the right price, at the right time and for the right quantities.

“The new Synergy will have greater buying power in the gas market and will provide a counterbalance to the negotiating power of global petroleum companies. This should, over time, limit fuel costs and put downward pressure on energy prices,” he said.

“It will also have greater flexibility with its gas supplies, especially when combined with Verve Energy’s foundation stake in the Mondarra gas storage facility.

“This will help the government protect power supplies, ensuring the state is better prepared to deal with crises such as the Varanus Island explosion.”