WA’s economic watchdog has blasted electricity provider Synergy, accusing the State-owned firm of abusing its market power to artificially inflate power prices.

In a scathing report about the state of the electricity market, the Economic Regulation Authority said consumers were likely paying too much because Synergy was exploiting its dominance.

At the heart of the ERA’s concerns was the wholesale electricity market, where prices were rising despite stable or falling coal and gas costs and low demand.

Wholesale prices make up about 40 per cent of the typical household power bill.

Synergy has claimed the flood of green power on to the grid is raising its costs by forcing the utility to run its fleet of coal and gas-fired plants less efficiently.

But the ERA said there was no “strong evidence” to support these claims, although it acknowledged this may happen in future.

Instead, the ERA said it appeared Synergy was using its position as the biggest generator in the market to push wholesale electricity prices higher than they otherwise would be.

It noted Synergy either owned or controlled 80 per cent of the generation in the market and could use elevated prices in the wholesale segment to offset losses in the retail segment for big users, where it was subject to competition.

The ERA “is concerned that Synergy has market power and that there was not enough competition for Synergy in the wholesale energy market to keep wholesale prices down”.

“In the absence of competitive pressure, Synergy’s market power needs to be reduced to limit the extent to which Synergy can misuse its market power to push up wholesale prices,” the ERA said.

A Synergy spokesman said the utility would respond to the paper but noted it operated in a heavily regulated market.

The spokesman insisted demand for rooftop solar, which rose 25 per cent last year, was having major effects on Synergy’s profitability.

“The shift away from centralised, scheduled generation has profound consequences for Synergy,” the spokesman said.