Synergy
Ms Lorna Clarke, Chair.
Ms Amber-Jade Sanderson, Minister for Energy and Decarbonisation.
Mr Kurt Baker, Chief Executive Officer.
Mr Hayden Thomas, Chief Financial Officer.
Mrs Lesley Walker, Executive General Manager, Customer.
Mr Jason Froud, Executive General Manager, Strategy and Corporate Affairs.
Mr Cameron Barnes, Chief of Staff, Minister for Energy and Decarbonisation.
(The witnesses were introduced.)
The Chair: This estimates committee will be reported by Hansard. The daily proof Hansard will be available online as soon as possible within two business days. Questions must relate to the operations and budget of the off-budget authority. The Chair will allow as many questions as possible. Questions and answers should be short and to the point. A minister may agree to provide supplementary information to the committee. I will ask the minister to clearly indicate what information they agree to provide and will then allocate a reference number. Supplementary information should be provided to the principal clerk by noon on Friday 11 July 2025.
If a minister suggests that a matter be put on notice, members should use the online questions on notice system to submit their questions.
I give the first question to the member for Oakford.
Mr Yaz Mubarakai: I refer to page 767 of budget paper No 2, which contains the line item "Operating Subsidies". Does that figure includes subsidies to cover losses from running coal-fired power operations? What is the size of the subsidies? Can the minister explain?
Ms Amber-Jade Sanderson: The member is correct to observe that in this budget we have booked operating subsidies for coal-fired power stations. This budget has booked $278 million in operating subsidies over three years to cover the uneconomical costs for the state of running coal-fired power. I note that these figures would be much higher were we not proceeding with a sensible and managed transition out of our coal-fired power stations by 2030. I have always said that our transition out of coal is about economics as much as environment. With world-leading uptake of rooftop solar, our grid was always going to have to work with significant intermittent renewables. This means that we need flexible generation units to reliably meet the system demand. Coal does not fit this mould and, as a result, Synergy's coal plants are significantly underutilised, with utilisation dropping below 30% in the financial year 2025–26. Compounding this, coal quality is deteriorating while fuel prices are rising, further reducing operational efficiency. The amount of energy per unit is consumed. Coal plants also carry high fixed maintenance costs, averaging $235,000 per megawatt and while earning less than $150,000 per megawatt in capacity revenue. This imbalance requires subsidies to keep these plans operational until they are phased out and replaced by more flexible and cost-effective generation sources. Over the medium term it is a reasonable cost to pay to ensure that we can exit coal in a staged way to meet the needs of our grid and to deliver a just transition for Collie. If circa 2021 the Liberals had had their way, we would be exiting coal this year, which would have been completely unrealistic and unfair on the community. If the Liberals of 2025 had had their way, we would be throwing billions of dollars to keep uneconomical coal-fired power running indefinitely, with no clear exit strategy and no certainty for a community that needs clarity about its long-term future.
Mr Liam Staltari: I refer to part 12 "Synergy" on page 767 of budget paper No 2, volume 2, and the line item "Total Borrowings" towards the bottom of the table under the heading "Government Trading Enterprise Information". I note the increase from the budgeted borrowings from $380.1 million for 2024–25 to the estimated actual borrowings for that year. There has been an increase of $380 million. Can the government explain the reasons behind that increase?
Ms Amber-Jade Sanderson: That debt is carefully balanced but accounts for a number of rising costs, including rising market costs; high fuel prices, particularly for coal; increased operating costs; falling contestable sales; limited cost-recovery tariffs; rising interest costs; and rising depreciation costs.
Mr Liam Staltari: Within that breakdown, is that level of increasing debt attributable to the green energy transition and, if not, why not? What components would flow into that blowout in debt?
Ms Amber-Jade Sanderson: I will ask the chief executive officer, Kurt Baker, to answer that.
Mr Kurt Baker:
The way we fund our renewable investment portfolio is through government equity, so it is an equity injection to Synergy. That covers all of our new investments. That includes our battery projects, Kwinana battery energy storage system 2 (KBESS 2) and Collie battery energy storage system 1 (CBESS 1), and also our renewable projects. There is also King Rocks wind farm, which we announced late last year, going ahead. Synergy has a share of the equity contribution into the Warradarge 2 wind farm, which we are jointly developing with Bright Energy Investments (BEI). Those injections do not impact our debt levels.
Ms Amber-Jade Sanderson: I will just close. Battery storage is profitable. Synergy loses money on thermal energy.
Mr Liam Staltari: Sticking on the line item of total borrowings, there is $746 million budgeted for the 2025–26 year that is projected in the 2028–29 out year to increase to $1.3 billion. How does the government intend to address that significant increase in borrowings over that period?
Ms Amber-Jade Sanderson: Synergy's Treasury management standard mandates the maintenance of a targeted liquidity buffer of $194 million. This buffer ensures that Synergy has sufficient liquidity to meet its financial obligations and manage unexpected cashflow needs. Western Power costs approximately $120 million every month, which is more than half the buffer maintained. By targeting a specific cash balance, Synergy demonstrates prudent financial planning and ensures that the organisation maintains enough reserves to operate efficiently without overextending its resources. Synergy utilises borrowings as one mechanism to maintain the targeted liquidity buffer, and this borrowing strategy includes obtaining new debt from WA Treasury Corp (WATC), re-profiling existing WATC debt.
Mr Basil Zempilas: I refer to the same division and budget paper No 2, but just moving now to page 768, and significant initiative 2, "Commonwealth Energy Bill Relief". Did the state government contribute any funding to the 2025–26 electricity bill relief for Synergy residential customers or is the entire $168.1 million package funded by the Commonwealth?
(12:10 pm)
Ms Amber-Jade Sanderson: The state government significantly subsidises residential tariffs. We subsidised that to keep it under CPI, something the Liberal government never ever managed to do. There is a significant taxpayer subsidy already for the residential tariff and we are providing cost-of-living relief through a range of mechanisms, particularly targeted cost-of-living relief for families and households who are financially challenged. This includes the Hardship Utility Grant Scheme; the residential battery scheme; the Energy Ahead scheme, in which we partner with Anglicare to work with low-income households to help them get control of their energy costs; the Social Housing Energy Performance Initiative; Esperance gas-to-electric conversion to support some of the outliers of the grid; the Sunshine Saver in Horizon Power to support Horizon customers; the Switch Your Thinking program; and the Smart Energy for Social Housing program supports 500 social housing properties to benefit from solar panels. The state government provides a range of supports for energy and bill relief, and one of the most important things that we can do is to keep those price rises below CPI.
Mr Basil Zempilas: How much of the $168.1 million package was funded by the state government?
Ms Amber-Jade Sanderson: That is the Commonwealth package. The state government's package is far broader than that and is a far bigger investment than the Commonwealth's package, which is also very welcome.
Mr Basil Zempilas: If the state did not contribute financially, why has the program been promoted as part of the government's cost-of-living measures?
The Chair: Member, we may be bordering on repetition. I am conscious of the time and other people's questions, but I will leave it to the minister.
Ms Amber-Jade Sanderson: The program is a cost-of-living measure. It is one of a range of cost-of-living measures and we have partnered with the Commonwealth on a range of measures including the residential battery scheme, which is also a joint cost-of-living measure. I will note that the average debt of hardship customers in Western Australia is lower than on the east coast. In the national energy market—the east coast market—it is 23% higher than in Western Australia. Synergy is an outperformer in the way it supports customers in hardship. That has been demonstrated by the national Financial Services Council's report, which held Synergy up as by far one of the best operators in terms of supporting customers in hardship. Second to Synergy was Horizon, also a Western Australian–owned utility.
Mr Basil Zempilas: I have a follow-up, please.
The Chair: Member for Churchlands, I am conscious other members also wish to ask questions and we have only got till 12:20 pm with Synergy. As long as it is not as repetitious as the last three questions, that were essentially the same question, yes.
Mr Basil Zempilas: I will try my luck, Chair. Why have state government ministers and communications referred to the bill relief as—
The Chair: Member for Churchlands, that is exactly the same question you just asked three times.
Mr Basil Zempilas: It is not exactly the same, Chair.
The Chair: No, it is in substance. Member for Mid-West.
Mr Shane Love: I refer to page 768 and significant initiatives. Paragraph 4 refers to a $15.5 million subsidy to be provided to Synergy to conduct a feasibility assessment into replacement generation assets. What specific generation assets is Synergy assessing for replacement as part of this $15.5 million feasibility study? Does it include the Kwinana facilities?
The Chair: Thank you, member, for the specificity of that question and the page numbers. I know exactly where you are in the budget papers. Minister.
Ms Amber-Jade Sanderson: Synergy has a contract with NewGen Power in Kwinana for the supply of electricity. As with all parties that Synergy contracts for the provision of energy, Synergy has ongoing dialogue to ensure that the obligations of the contract are met. The details of the contract or negotiations are subject to confidentiality clauses and it is noted that there has been broad media speculation about these issues, but it is being resolved in commercial confidentiality between Synergy and NewGen.
Mr Shane Love: Thank you. Without breaching any confidentiality, can the minister say whether gas is being considered as part of that generation?
Ms Amber-Jade Sanderson: It is a feasibility study into replacement facilities, but ultimately it is up to the Independent Market Operator to determine what the optimal mix is and up to the private sector to determine whether they want to be part of that capacity credit. We already have 303,100 megawatts of existing gas generation in the system.
Mr Shane Love: When does the minister expect that feasibility study to be completed for assessment?
Ms Amber-Jade Sanderson: It is at the end of this year.
Mr Basil Zempilas: I refer to the same area; page 768 and paragraph 5 under significant initiatives. On the $15 million payment to Bright Energy Investments Warradarge stage 2 impact, what specific financial impacts on Warradarge stage 1 are being offset by the $15 million payment to Bright Energy Investments?
Ms Amber-Jade Sanderson: I will ask the chief executive, Kurt Baker, to respond.
Mr Kurt Baker:
The Warradarge wind farm stage 2 is what we call an infill project. Essentially we seed the new turbines in amongst the existing turbines. As a result of putting those new turbines in, it creates a small impact on the performance of the existing turbines. The $15 million payment is to offset that impact from stage 2 to stage 1. Keep in mind that stage 1 and stage 2 are owned by the same entity, Bright Energy Investments, of which Synergy is a 19.9% participant in that joint venture arrangement. It is just a way of actually balancing the financials for stage 1 and stage 2.
Mr Basil Zempilas: Excuse my poor pronunciation of Warradarge. Was the impact of that stage 2 and stage 1 forecast at the time of the investment or project approval; and, if not, minister, why not?
Mr Kurt Baker:
Yes, it was. That was all considered as part of the business case.
Mr Basil Zempilas: Were any commercial or contractual arrangements required for compensation? Was there any compensation as part of that?
Mr Kurt Baker:
The stage 2 investment into Warradarge wind farm has quite a few contractual arrangements in place because there is a joint venture arrangement, contracts for the original equipment manufacturer to build or expand the wind farm and there are contracts with lenders, being a privately held wind farm with a 19.9% interest of Synergy. There are many contractual arrangements associated with that wind farm.
The Chair: The member for Carine has a question. I am conscious we have two minutes left on Synergy.
Mr Liam Staltari: Apologies, member. Thank you, Chair. I might go to the same area, but at the bottom of page 768. Under significant initiatives in paragraph 6.2, it notes support for Synergy customers experiencing financial hardship, obviously intended to prevent disconnections. How many disconnections occurred in the 2024–25 financial year?
Ms Amber-Jade Sanderson: There were 9,746 residential disconnections.
The Chair: Do you have a follow-up question?
(12:20 pm)
Mr Liam Staltari: It is a quick question. How does that compare with the 2020–21 financial year?
Ms Amber-Jade Sanderson: I do not have that financial year in front of me.
Mr Liam Staltari: I will ask that on notice, thank you.
The Chair: I am conscious that we are literally 14 seconds away from 12:20 pm, so I now close the section on Synergy. That completes the examination of Synergy and we are not required to vote on that.
