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Lights off: Part I

By Kellie Tranter - posted Friday, 7 January 2011


Quite a few people saw what was coming, and some even tried to do something about it. In 1994 independent anti-corruption fighter John Hatton introduced a Private Member’s Bill in the NSW Parliament – the Privatisation of Core Government Services Bill - "to give the people of New South Wales a say as to whether they want the core services as defined by the bill privatised, either in part – to the extent that it is privatisation by stealth – or wholly’. The bill passed its Second Reading on 22 September 1994 with the support of Bob Carr’s Labor Opposition but it was then killed by the Liberals under John Fahey. The Carr Labor Government that followed had an absolute majority and went completely the other way.

John Quiggin said in 2001 of the South Australian electricity privatisation experience "…the South Australian electricity industry has reduced the net worth of the public sector … the interest savings on the sale price will fall consistently short of the earnings foregone through privatisation. This is consistent with most Australian experience of privatisation”. Isn't that exactly what’s likely to happen in NSW? Last year the NSW Auditor General reported that the combined profit after tax of NSW electricity agencies was $1.2 billion compared to $847 million in 2008/09. Pre-tax profits of the distributors also increased substantially, from $661 million in 2008/09 to $965 million. Pre-tax profits from generators increased from $307 million to $465 million. Electricity entities’ distributions to the Government were $1.4 billion, up $200 million from last year.

No wonder Roozendaal’s sale price resulted in the mass resignation of directors!

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With that sort of return providing a source of funding for maintaining and upgrading our energy supply systems, how can the NSW Labor government and Eric Roozendaal explain the midnight fire sale of our energy assets? We are all looking forward to their explanations, but in the meantime, back to our history lesson.

 

The official line: the Owen Report

On the back of the ERIG 2006 report, with its acknowledgment that privatisation might be “politically sensitive”, in April 2007 the Iemma Government commissioned Curtin University Professor Tony Owen to report on the need for new generation capacity in NSW. The Greens, along with various environmental groups, unions, and community groups, questioned the terms set for the inquiry and its independence.

The Iemma government set up the Owen Inquiry on the premise that the State would experience a shortfall of electricity supply capacity and blackouts some time in the next ten years if a new baseload plant were not built. The government based their prediction on a report prepared by the national electricity market operator, NEMMCO, called the 'Statement of Opportunities' (SOO), but the report in fact identified a relatively small shortfall in peak demand which it said could be met by better managing energy use and making businesses and homes more energy efficient.

The Owen report then came out suggesting that a new baseload plant – costed at $8 billion - needed to be up and running by 2014 if NSW was to avert an electricity generation crisis. We’d also need another $4 billion to retrofit existing power stations with carbon reduction technologies, and the retail businesses would need up to $3 billion more to remain viable and compete with their private sector rivals.

(As an aside, the current annual Statement of Opportunities by the Australian Energy Market Operator now forecasts that NSW will face shortages in 2016-17, well after the 2013-14 date put forward by Professor Owen in 2007.)

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Sell-off spruikers in 2008 told us the State needed money to deliver new roads and new public transport to reduce congestion, more hospitals to improve the failing health network, and more schools. Importantly it also needed the $15 billion for energy reform to meet the demands in the next decades. Funnily enough those needs weren’t mentioned by Eric Roozendaal in December 2010: he said the midnight fire-sale removed the need for taxpayers to build new power stations, protected the State’s Triple A credit rating and, despite not resulting in a new energy retailer, ensured a more competitive retail market.

One might be forgiven for asking whether NSW retaining its Moody’s AAA credit rating was contingent upon the sale of the assets itself taking place, rather than on the money NSW derived from the sale!

So where does all of this leave us?

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About the Author

Kellie Tranter is a lawyer and human rights activist. You can follow her on Twitter @KellieTranter

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