Raise price to pass on carbon cost: Synergy

West Australian
Friday 4/7/2008 Page: 4

WA's electricity retailer will lobby the State Government to allow it to pass onto residents the full cost of a carbon trading scheme, estimated to be an extra $200 a year per household. Synergy Energy boss Jim Mitchell said a price rise was the only way to ensure customers limited their energy use, which was the aim of a carbon tax. Energy Minister Francis Logan said yesterday any extra cost of climate change above the amount which had already been factored into planned rate increases from July next year would "probably" be passed on to residential customers.

But he said a final decision on how to cover the cost of carbon permits had not been made and would depend partly on long-awaited recommendations to be released today by the Federal Government's key adviser on climate change, Ross Garnaut. Mr Logan said a direct subsidy to Verve Energy, the utility's generating arm, was still a possibility. But Mr Mitchell said a taxpayer funded subsidy would not be true to the spirit of a carbon tax scheme.

"We've been arguing that we must have cost-reflective tariffs because our customers ultimately have to pay," he said. "Rather than it just coming out of general taxes, we should target users. That actually then encourages customers to do some terrific stuff in energy efficiency. We don't know what that (extra) cost will be but there is a recognition that one must pass through that cost as it happens." There is mounting speculation the State Government underestimated the cost of a carbon-trading scheme when it set a schedule for a 72 per cent increase in power rates over the next six to eight years, starting with a 10 per cent increase from July next year.

The increases were based partly on an estimate that the carbon trading scheme would add 17 per cent to the cost of power production over two years. But Verve Energy chief executive Shirley In't Veld has previously revealed that the real cost of a carbon scheme would add an extra 25 per cent annually. Mr Mitchell's comments echo those from the Business Council of Australia, which yesterday argued that businesses must be allowed to pass on to consumers the costs they incur under the scheme and that consumers must prepare for significant rises when it starts in 2010.

BCA president Greg Gailey said the nation's biggest employers, including building products manufacturers and minerals processors, would be forced to close or move their operations offshore unless they got special treatment under the emissions trading scheme.

Treasurer Wayne Swan has indicated that "every cent" of the revenue from the trading scheme will be spent on compensating households and businesses for the higher prices. The Greens, whose support will be vital in getting the legislation through the Senate, want some of the revenue spent on clean energy sources.