Report shows competition could slash power bills for WA businesses

A power plant at night

Small to medium-sized Western Australian businesses using up to 50 megawatt hours (MWh) of electricity a year, at a cost of about $15,000, could slash up to $1,870 off their annual power bill if the State Government completes the necessary reforms.

The analysis by leading advisory firm KPMG, commissioned by Alinta Energy, has revealed more than 24,500 businesses in the South West Interconnected System in WA – which covers Perth and extends to Kalgoorlie, Kalbarri and south-east of Albany – stand to benefit from increased competition if the Government lowers the threshold to 20MWh.

WA businesses and energy retailers have been calling for the changes for several years. In July last year the State Government advised it would ask Energy Policy WA to look into changing the rules.

Alinta Energy MD & CEO Jeff Dimery acknowledged the significant work done by the McGowan Government in supporting small and medium business during the difficult times of the pandemic, and encouraged the government to move quickly on the electricity competition threshold.

“This is another lever to pull for a Government that has already demonstrated they are committed to supporting business, the economy and the people of WA through the pandemic,” Mr Dimery said.

“Accelerating the lowering of the threshold to 20 MWh, from 50MWh, to support small and medium-sized businesses in Western Australia is a great step forward.”

Under the Electricity Corporations Act 2005, only Synergy, the Government-owned retailer, can supply electricity to customers using below 50 MWh a year. Large businesses, mainly industry, using more than 50 MWh are contestable, which means retailers can compete with Synergy to offer to sell them electricity.

“Many WA businesses have been doing it tough, particularly with the uncertainty of COVID. We think small to medium businesses need all the help they can get. They’re already dealing with staff shortages, supply chain challenges and increasing costs across the board.

“Our experience over East shows that, as WA moves into this next stage of the pandemic, the pressure on small business will only increase – so the issue of competition and savings has become urgent.

“We need to explore every possible avenue to make their lives easier because they play such a crucial role in the WA economy.”

Mr Dimery said Alinta Energy believed all businesses, regardless of size, should be able to realise the benefits of competition through lower electricity bills as soon as possible.

“Given the ongoing impact on businesses caused by COVID, now is the right time for the McGowan Government to continue their great support for small business and deliver choice and savings to WA businesses doing it tough.”

“This is another lever to pull for a Government that has already demonstrated they are committed to supporting business, the economy and the people of WA through the pandemic.“

According to the KPMG analysis, businesses using 20 MWh of electricity a year can save anywhere between $481 and $802 a year, depending on the prices offered in the competitive market. For business customers using up to 50 MWh, the annual savings are estimated to be between $1,217 a year to $1,878 a year.

The KPMG report found the benefit to business post-COVID-19 was even greater, particularly given the losses endured by businesses during the pandemic. While all industries would benefit from a lowering of the threshold, the entertainment, food, and accommodation sectors stand to gain the most.

Christian Salerno, the owner of one of Perth’s busiest coffee shops Swish Coffee Brewers, said the challenges brought on by the pandemic, both financially and from a leadership perspective, had been extremely unique and quite difficult to say the least. 

"Given the level of uncertainty Perth’s CBD small businesses have endured, any savings and or support would certainly be welcomed sooner rather than later," Mr Salerno said.

The peak business group CCIWA also supports the contestability threshold being lowered from 50 to 20 MWh.

The KPMG report also shows a significant benefit to the State’s economy, because electricity prices have a flow-on effect. Reductions in electricity costs of up to 12.5 per cent a year for thousands of businesses are estimated to add an additional $548 million to the local economy over the next 15 years.

“Five years after the contestability threshold is lowered, this increase in GSP (Gross State Product) is expected to result in an additional 194 permanent FTE jobs,” the report says.

The total direct cost savings on annual electricity costs across the sector range from almost $18 million a year to approximately $30 million a year depending on the savings businesses realise following the introduction of competition.

View KPMG Report

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