On 11 July 2011, the State Treasurer asked the Economic Regulation Authority (ERA) to undertake an inquiry into the efficiency of Synergy’s costs and electricity tariffs.

Synergy is the State owned Electricity Retail Corporation, retailing electricity to customers supplied by the South West Interconnected Network (SWIN). The SWIN extends from Kalbarri in the north, to Kalgoorlie in the east and to Albany in the south.

The inquiry has been referred to the ERA under section 32(1) of the Economic Regulation Authority Act 2003, which provides for the Treasurer to refer to the ERA inquiries on matters relating to regulated industries.

In accordance with the Terms of Reference, the ERA is to consider and develop findings on:

• the efficiency of Synergy’s operating and capital expenditure;
• the efficiency of Synergy’s procurement of wholesale electricity; and
• the efficiency of Synergy’s renewable energy certificates. 

The ERA is also required to determine the efficient cost-reflective level for each regulated tariff under the Energy Operations (Electricity Retail Corporation) (Charges) By-Laws 2006 over the period 2012/13 to 2015/16, including:

• developing recommendations regarding the number of regulated electricity tariffs, and whether any tariffs should be amalgamated; and
• taking into account the competitive markets within which Synergy operates and the current operating subsidy arrangements when considering the cost-reflective level of each tariff.

The Terms of Reference also request the ERA to:

• develop a methodology to regularly re-determine the efficient cost-reflective level for each tariff and recommend a period for the review of efficient cost-reflective tariffs;
• consider whether regulated tariffs for contestable large business consumers should be phased out, with reference to the competitive nature of this segment of the electricity market; and
• if regulated, large contestable tariffs are to be phased out, provide recommendations on which tariffs should be phased out and over what timeframe.

On 11 August 2011, the ERA published an issues paper to help interested parties understand the matters under review and to facilitate public submissions. Details on how to make a submission are available in the issues paper and available on the ERA website.

After considering the responses to the issues paper, the ERA will publish a draft report and call for further public submissions.

This final report is to be delivered to the Treasurer by 1 June 2012 after which the Treasurer has 28 days to table the report in Parliament. Once the Treasurer has released the final report, it will be published on the ERA’s website.