Notes to the financial statements (continued) Section 1: Basis of preparation (continued) 3. Critical accounting estimates and judgements (continued) Climate-related risk Western Power is exposed to climate-related risk, being the risk of financial loss due to the negative effects of climate change, including from: • increasing frequency and severity of extreme weather events, such as storms, floods and bushfires, damaging assets and interrupting supply • changing stakeholder expectations on climate actions • uncoordinated uptake of distributed renewable energy resources putting power system security and network reliability at risk • transition to climate change policy requirements, such as net-zero emissions. Even though we believe our business model will still be viable after the transition to a low-carbon economy, climate-related risks increase the uncertainty in estimates and assumptions underpinning several items in the financial statements. There is no evidence of a material impact of climate-related risks on the financial performance or financial position in the reporting years presented. The items and considerations that are most directly impacted by climate-related matters include: • useful life of property, plant and equipment. When reviewing the residual values and expected useful lives of assets, Management considers climate-related matters, such as climate-related legislation and regulations that may restrict the use of assets or require significant capital expenditures • rehabilitation provisions. The impact of climate-related legislation and regulations is considered in estimating the timing and future costs of decommissioning of our assets at the end of their useful lives.
Underpinning this is: • compliance with Australian Accounting Standards – under which financial losses from uncertain future events (such as extreme weather events) cannot be provided for • Western Power’s principal activity is as a transmitter and distributor of electricity – rather than as a generator, with the latter activity expected to be most negatively impacted by transitional climate change policy requirements (such as asset retirements and carbon pricing/taxing) • the critical role Western Power’s network is expected to play in realising net decarbonisation benefits for the State – including as a key enabler of electrification, and integrator of new and emerging renewable technologies.
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Western Power Annual Report 2025
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