Western Power will benefit from the terms of a new contract under which it will be freed of the penalties now at the heart of legal action against WA's independent gas regulator, as well as Epic dropping $22 million in accrued billing claims.

In a leaked mid-year review, the former state-owned energy retailer revealed that it has agreed on a new commercial package with Epic, which is yet to be formally signed but will save it as much as $22 million a year.

Under the proposed deal with Epic, Western Power would pay a minimum of $36 million in 2004 and up to $5 million more in penalties for exceeding its contracted volumes.

In comparison, the utility would pay a base charge of $28 million under regulator Ken Michael's ruling and an extra $20 million to $35 million in penalties.

It is thought that Epic has also offered to drop its disputed billing claims against Alinta in the hope of negotiating a similar contract, while Alcoa has revealed it had secured a rollover of its existing contract with Epic.

Epic is hoping to finalise its bilateral agreements with its major customers to shore-up the value of the DBNGP prior to its sale date in March when $1.85 billion owed to its bankers falls due.

Finalising the agreements would also allow Epic to commit to the much needed expansion of the pipeline, which is already running at capacity.