Coal price review

THE price paid for Collie coal may not remain such an issue because Premier Coal and the State Government are due back at the negotiating table next March.

Informed local observers believe the government must give considerable ground on the price.

The state’s power supply is too reliant on coal for the mines to be squeezed so tightly they can no longer operate, they say.

When Premier and its production workforce reached their pay and conditions agreement last month, CFMEU mining and energy section secretary Gary Wood said the company was facing significant issues, “particularly the contract with Verve and the effect that has on operations”.

“It tests — stretches — the viability of the operation,” he said.

“There needs to be some commitment to renegotiate over the next 18 months.”

Griffin Coal has its own headaches with the contested Perdaman agreement.

It is reportedly asking WA utilities Synergy and the Water Corporation for up to $60 million extra a year.

Collie-Preston MLA Mick Murray and Collie Chamber of Commerce chief executive officer Richard Jackson said there had to be state government movement on price.

Uncertainty about the scheduled closedown of 42-year-old Kwinana plant — scheduled for 2015 — only emphasised the state’s reliance on coal, Mr Murray said this week.

Mr Jackson said that if mining in Collie stopped, at least 40 per cent of the state’s power would disappear.

Mr Murray said that if Premier was called on to produce more coal, it could do so more cheaply because of economies of scale, he said. “The more you sell, the cheaper it is to produce. You have to move so much soil no matter how much you sell.”

Even allowing for economies of scale, a higher price was necessary.

“My understanding is that March 2013 is crunch time, when there are the next price talks,” Mr Murray said.

At a gas industry function on Friday night, he got the impression that state government moves to “push back the disaggregation of Western Power” were worrying private operators.

“Nobody wants to invest in electricity because of the lack of stability,” Mr Murray said. “They won’t even invest in gas turbines while all this is going on.”

Mr Jackson said the government would not let the mine “fall over”.

The Griffin and Premier mines were both strategic assets, Mr Jackson said. “All I know is that Premier is a smart organisation and it would not have signed the agreement if it could not renegotiate the price further down the track,” he said.

“I believe there is going to be some movement by the government on price.”

The need for reinvestment in the mines had to be a negotiating point for both Collie coal mines, Mr Jackson said.

They should argue that if their customers wanted them to continue to produce they must build an inflation allowance into the price.