Westar/Kinetik Energy privatised

The Victorian Government has sold the first of its first gas distribution and retail companies, Westar and Kinetik Energy, to Texas Utilities for $1.617 billion.

The Treasurer, Mr Stockdale, said the sale result was a good outcome for the state in the current market conditions.

The sale brings the total proceeds to date from Victoria's energy reform program to more than $24 billion.

Texas Utilities also owns Eastern Energy, one of the five Victorian electricity distribution businesses, located in the eastern suburbs of Melbourne and eastern part of the State. Texas Utilities also recently acquired the right to build the underground gas storage (UGS) facility in the Otway Basin.

The UGS facility will provide backup gas to supplement the existing Bass Strait gas supply from Esso/BHP, which currently provides more than 95% of the State's gas.

Westar/Kinetik is one of three gas distribution/retail companies created from the disaggregation of the former Gas and Fuel Corporation in 1997.

Mr Stockdale said that competition within the Victorian gas businesses will encourage exploration and development of sources of gas supply in addition to Bass Strait gas.

"The reforms also provide a strong impetus for an integrated national pipeline system that will promote growth in interstate trade in gas, thereby increasing wholesale gas market competition and improving diversity of supply."

This first sale also achieves the Victorian Government's vision of creating an integrated energy market with retailers filling multiple energy products, electricity, gas and other products and services. The acquisition of Westar/Kinetik by Texas Utilities represents the emergence of Australia's first multi energy company with coverage across the state.

The Government expects that customers will benefit as competing private companies increase innovation and investment in new technologies to deliver the cheapest and most effective sources of delivered gas, electricity and other products.

Westar's gas distribution network serves the western and north western Melbourne metropolitan area together with 19 country localities in central and western Victoria.

Kinetik Energy is a full service natural gas retail company with 396,000 customers in western Victoria, outer western and north east metro Melbourne including the CBD. The main regional centres are Geelong, Ballarat , Bendigo, Warrnambool, Portland and Horsham.

Mr Stockdale said that as a result of Government reforms, gas prices are pegged below the rate of inflation. By 2001, an average Victorian household will save about $45 on their annual gas bill based on current inflation forecasts.

"By 2001, all customers will be able to choose their energy retailer based on best price and service,"

A new regulatory framework has been established to monitor the industry and provides customer protection. There are four tiers of customer protection - the ACCC monitors transmission pricing, while the Office of the Regulator General monitors service and pricing. The Office of Gas Safety ensures the gas industry follows existing stringent safety measures, and the Energy Ombudsman provides a complaints and dispute resolution scheme.

Mr Stockdale said the Government will continue to meet all existing community service obligations, including the Winter Energy concession, and the Energy Relief Grant Scheme.

(News Release, Office of the Treasurer, 31 January 1999)