Privatisation Articles:

Record shows privatised power is cheaper

Published in The Australian, 17 March 2015

THE poles and wires of electricity networks are natural monopolies, accounting for 60 to 70 per cent of household consumers’ costs. Their ownership remains highly politicised 20 years after the Kennett government in Victoria opened the book on Australian privatisations. At the time, claims were made that private owners would milk the consumer and cut corners by avoiding necessary reinvestment and maintenance ....

A hefty efficiency dividend to come from selling poles and wires

Australian Financial Review, 13th June 2014

Thirty years ago, at the dawn of the Australian reform era, there was a lively debate about the merits of public versus private ownership. At that stage, conscious of its support from featherbedded unions, Labor argued it was competition, not ownership, that drove efficiency.

Sale means cash for state and better power for people

Courier Mail, 22nd March 2013

Privatisation has never been popular electorally. There is a range of reasons for this. Many people believe a business that is under political control can be forced to provide services below cost, some feel a sense of satisfaction in shared ownership, and others consider private ownership may unduly cut costs. In a recent survey published by Essential Media, 58 per cent of Australians disapproved of privatisation. While ALP and Greens voters were more opposed than average, this view was also shared by 54 per cent of Liberal or National voters. The survey indicated that Queenslanders were even more antagonistic to privatisation than others. Similar views are seen in opinion polls across the world. But, although such polls intimidate governments, there is no case of privatisation policy contributing significantly to an election loss and no case where privatisation has been reversed when a government lost office. Across all countries - even communist ones such as China - governments have divested businesses they once owned. In some cases, as with Labor's privatisation of the Commonwealth Bank in 1991, government ownership is recognised as serving no purpose and, instead, hamstringing management.

Privatised power cheaper and better than alternatives

Herald Sun, 16th November 2012

Energy issues are rivalling political scandals as a preoccupation of the news cycle in both America and Australia. In the US, reduced costs of extracting gas and oil from shale are delivering cheap domestic oil and gas - with implications for renewable energy policy, global gas prices and the US Navy in the Persian Gulf. Cheaper US fossil fuels have also increased the fretting about greenhouse gas emissions, including by the Paris-based International Energy Agency's climate change activists. Global energy developments have unpredictable implications for Australia, where electricity prices have risen 72 per cent over the past four years (50 per cent more than general inflation) and the industry's productivity has declined. These experiences have triggered a cascade of reviews including an Energy White Paper and a Productivity Commission inquiry. Australia's electricity price increases stem from a combination of regulations, carbon taxes, increased demand for peak power and overdue replacements of poles and wires.

Rise in electricity rates offers a chance to grasp nettle of privatisation

The Australian, 8th August 2012

In an attempt to deflect blame for electricity price increases from the carbon tax, Julia Gillard has drawn attention to the high cost of state-owned enterprises' poles and wires businesses and associated profiteering. NSW households have seen their electricity prices rise by 18 per cent both this year and last. Other states have seen comparable increases.

Power rules steal from state

The Courier Mail, 13th May 2011

SENSIBLY, the Australian Industry Group has recommended the Queensland Government privatise its $2 billion electricity transmission business, Powerlink. The proposal should also extend to the state's electricity distribution businesses, Energex and Ergon. Like Powerlink, these are regulated monopolies and may be worth $20 billion to private bidders. Work by Carbon Market Economics director Bruce Mountain and Stephen Littlechild, England's former chief electricity price regulator, indicates electricity distribution costs in Queensland are excessive. Private ownership of the regulated "poles and wires" monopoly assets in Victoria and South Australia has brought greater cost disciplines and the southern states' prices have risen more slowly than in Queensland.

Uncertainty the villain, not the power sales process

The Age, 29th December 2010

The parliamentary impasse between New South Wales Premier Kristina Keneally and the opposition over whether the electricity industry sale should be examined reignites an issue the Premier believed she had buried. Whatever else it may show, the NSW sale once again demonstrates the wisdom of the Kennett government in selling Victoria's electricity assets in the 1990s. In the NSW sales, Origin Energy has bought the 2800-gigawatt coal-powered Eraring Power Station, plus a hydro scheme at Shoalhaven with a capacity of 240GW. TRUenergy, a subsidiary of China Light and Power, has bought 2400GW from the Delta Energy coal-powered portfolio. Origin states the price it paid was equivalent to $313 a kilowatt; TRU may have paid a little less. The NSW ''gentrader'' sales leave the government running the power stations and guaranteeing their output to the buyers. The buyers are responsible for fuel contracts. In effect, it is equivalent to a sale of the power stations but without the privatesector owners having the ability to drive down labour costs.

Privatisation is not enough

The Australian, 14th June 2010

State governments cannot seem to rein in spending so it matches their revenues. The upshot is skyrocketing debt levels. The NSW and Queensland governments see selling assets through privatisation as a solution. Privatisation of government-owned businesses improves efficiency. But it should not be seen as a means of achieving the necessary fundamental reform of state finances.

Privatisation gives power to consumers

Australian Financial Review, 11th December 2007

The NSW government's 10-year march to electricity privatisation is finally under way. The state's retailers and generators are earmarked for sale. But half of the costs of electricity comprise network costs - poles and wires. Regulatory decisions determine charges for these ''natural monopolies''. With network pricing, regulators walk a tightrope between providing the businesses with revenues that prevent system decay while avoiding excessive price allowances. To obtain greater consistency and concentrate expertise, the national Australian Energy Regulator (AER) has been given responsibility.

Energy in the market The unfounded concerns about privatised electricity

IPA Review, December 2006

A dozen years ago, virtually all electricity in Australia was generated in government-owned plants, transmitted along government-owned facilities and marketed by government-owned retailers. The electricity industry comprised seven Statebased utilities, which had total control over generation and sales within their respective States. Competition from other suppliers and retailers was illegal. A rare level of political consensus—the 1993 National Competition Policy report (the Hilmer Report)— led State governments to separate their electricity businesses into the parts that were monopolies, that is, the poles and wires (which account for about half of the costs), from the generation and retailing parts where competition was possible. This was followed by opening up local markets to competition.

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