The release of a new report by the Western Australian Office of Energy recommending cost reflective pricing in electricity generation paves the way for new investment and greater competition in the state's electricity sector.

The state's peak business organisation, the Chamber of Commerce and Industry of Western Australia, welcomes the release of the report which embarks on a plan to end years of unsustainable pricing in the local electricity sector.

CCI also awaits the details of a national emissions trading scheme which will almost certainly further add to the cost of electricity production.

There is no question that electricity for residential customers has been kept at artificially low levels since 1997 when household electricity prices were frozen and a price cap introduced. The Office of Energy report rightly points out that "cost-reflective retail tariffs are essential for development of a competitive electricity retail market."

The long standing policy of capping prices in the face of rising costs of production has distorted the market and limited the ability for potential new entrants to supply customers who use relatively small amounts of electricity and do not have price contestability.

Over a number of years successive state governments have failed to review the cap, despite the cost of power production steadily increasing as a result of higher inputs. As a result, the state’s power utility is in the unwinnable position that the price it is forced to charge for electricity is substantially less that what it costs to produce.

Statement by CCI Director Industry Policy, Trevor Lovelle