Dear Members
It is now over six weeks since the gas crisis began, and I want to update you on recent developments, and what CCI is doing to help small, medium and large business.
I met with the Premier earlier this week and emphasized to him the difficulties that many member companies are facing as they contend with shortages of gas and the consequent higher price of energy. The CCI proposed strategies that might assist affected companies with managing their cash flow during this period, which the government has agreed to examine.
I stressed the importance of the government continuing to deliver a strong message to households to conserve energy use wherever possible in order to free up more gas for business and industry, as message that CCI has reinforced throughout the crises. The Premier advised me that some coal fired power generation capacity is being brought on line slightly sooner than expected, which should free up more gas over the next few weeks ahead of the anticipated partial resumption of gas supply from Varanus Island around 15 August.
We discussed the operation of the Gas Bulletin Board set up by the Office of Energy just over two weeks ago. Gas that is surplus to requirements or that has been freed up through use of alternative energy for generation is being made available either on the Board or through direct negotiations between parties. The government recognises that although the electricity system has been stabilized and more gas is being made available, we will not be out of the woods until full supplies are resumed from Varanus Island, expected in December 2008. The Premier acknowledged the role that the CCI has played in the response to the crisis, and I acknowledged the efforts of the government to engage with business and industry representatives in the planning of the response and recovery.
I suggested it would be valuable for government, business and industry to work together to consider the lessons that can be learned from the gas crisis and the way in which the response has been managed. This would, I believe, better prepare the State for any future energy crisis. I also repeated our call for a State energy policy to be developed.
As to the overall impact of the crisis, CCI estimates the current cost of the crisis to the WA economy as $2.4 billion and the likely overall impact to be around $6.7 billion. The Reserve Bank this week estimated that the impacts would be to reduce economic output in WA by around three per cent for the duration of the disruption while Australia's GDP growth is expected to be reduced by 1/4 per cent.
CCI has raised with government the need to consider the secondary and longer term impacts of the crisis. For example, several members have reported difficulties in obtaining supplies from directly affected companies, or reduction or loss of market caused by their customers being directly affected by the shortage. There are also pricing and cost impacts that are working their way through supply chains.
I would be interested in hearing from you an assessment of what may arise in the coming months as a consequence of supply chain constraints. As an example, I understand that the housing sector is anticipating short supply of aluminium window and door frames as the impact of gas shortage on the powder coating industry takes effect. The impact of this may be seen in costs associated with delays to building projects or in cost increases to projects as a result of limited supply options.
CCI is meeting regularly with government, energy suppliers and the industry sectors hardest hit to make sure that government and energy suppliers understand the predicament facing many businesses and industries as this crisis extends. We are in regular contact with the most-affected business members of the CCI. The information that CCI members are giving to us, on a regular basis, is helping us to keep the focus of government and other key players on the needs of business.
I want to stress to affected members the importance of discussing their energy needs, and ways of addressing them, with energy suppliers, as more gas is expected to become available in the coming weeks.
I encourage you to visit www.cciwa.com for our latest information on the gas shortage and for links to government and energy supplier websites which provide updates.
James Pearson
Chief Executive