Electricity Competition

In Western Australia, customers consuming in excess of 50,000 units (kWh) per year – around $15,000 per year - are eligible to choose their electricity retailer. Customers consuming less are by law supplied only by Synergy.

Western Power data indicates that there are around 17,500 contestable customers, although the Economic Regulation Authority estimates the figure at 26,000.

All electricity retailers are licenced by the ERA and are periodically audited for compliance.

Development of the market

Deregulation of the electricity market in Western Australia commenced in 1996, but for only customers connected directly to Western Power’s Transmission System – there are currently 28. At that time, Western Power was vertically integrated with what became the present day Gen-tailer Synergy. Western Power (Synergy) also administered the regulations, and 'Synergy' retained around 99% market share for the first decade of competition.

The first private retailer to supply an arms-length customer was the renewable energy pioneer Landfill Gas and Power (LGP), which through a special contract with Western Power outside of the general regulations supplied the Challenge Stadium from an onsite landfill gas fuelled generator. Goldfields Power, which was also partially exempted from the regulations in the eastern goldfields by a special state agreement, supplied the first deregulated customer - the >5MW airport - in the late 1990s.

Progress was slow until the contestability threshold (pdf, 600KB) was lowered to 300,000kWh per year in 2001, and the first sustained competition was mediated by the then start-up Perth Energy which began operations as the retail agent for both Alcoa of Australia and, for renewable energy, Landfill Gas and Power.

For the first decade of deregulation, the 'de-regulations', so to speak, required that contestable customers could only be supplied by parties that had contracted sufficient private generating capacity. In particular, they had to enter into an Electricity Transfer Access Contract containing at least one customer and at least one generator. Furthermore, the energy injection had to match the energy consumption every 30 minutes to within a Balancing Tolerance of 3% (or 1MW if larger).

Prior to commencement of the present Wholesale Electricity Market in 2006, representing the first decade of the deregulated market, there were around only 50 customers that had transferred away from Synergy, and the vast majority were managed by Perth Energy on behalf of Alcoa (by volume) and Landfill Gas and Power (by number), and also increasingly on its own account. Alinta entered the market in parallel with the development of the wholesale market, followed a few years later by Griffin Energy, ERM Power and Premier Power Sales.

A critical development occurred in 2013, when the Market Operator instituted the Balancing Market and published an estimate of the real-time 30-minute energy price. Until then, “Balancing” had been, effectively, a  Verve Energy (Electricity Generation Corporation) monopoly and it was much more difficult to forecast energy prices. Largely as a result of this development several small “boutique” retailers entered the market – Community Electricity, Amanda Energy, AER Retail, Bluestar Energy, Blair Fox and A-Star Energy.

Customer "churn"

The Economic Regulation Authority now publishes annually the number of customer “churns” (customer transfers from one retailer to another). The most recent data is shown below. The ERA estimates that a total of 1,650 churns took place in the 2013-14 financial year, which we estimate at 8% of the contestable market.From market start in 2006 to June 2014, there was around 9,500 churns, equivalent to a maximum around 55% of the market. However, contract terms are generally 2 to 3 years, and once customers become comfortable with the governance of the competitive market, they readily churn at the end of the contract. More realistically, only around 25% of the contestable market has transferred away from the legacy retailer (Synergy) and a large quantity of those that remain with Synergy are likely to still be supplied under the regulated retail tariffs.

Number of customers changing retailer, September 2006 to June 2014
Source: Economic Regulation Authority pdf 3.9MB