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Daylight robbery

By John Richardson - posted Thursday, 14 November 2013


I think that most people who gave the matter more than a passing thought, would believe that the primary role of governments is to protect its citizens and their rights; to ensure that proper infrastructure, such as hospitals, roads, schools and others, are set up and well maintained, and to ensure that the economy is stable, in order for the people to be safe, healthy and happy.

I also think that most reasonable people would not believe that it is acceptable for their governments to behave as though it is involved in organised crime, in particular to deliberately conspire to victimise its citizens by running a racket or engaging in extortion?

Once upon a time, governments in Australia were all about providing a range of essential public services, which were funded through the raising of the necessary revenue (taxes) to meet the costs involved. Certainly governments were not in the business of providing essential services on the basis that they would generate substantial profits by extorting from their citizens.

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Which brings us to where we are today.

Last week the NSW Audit Office confirmed that the NSW government owned electricity sector produced after tax profits of $1.7 billion to June 30th, 2013, up $500 million (42%) on the previous year. As a result, the sector contributed $1.8 billion to the NSW government, up $400 million (29%) on the previous year, with $1.4 billion (77%) of that amount being contributed by electricity distributors, $600 million (75%) more than last year.

Whilst the NSW Audit Office also confirmed that the return on equity for NSW government owned electricity companies came in at 21.2% for the same period, it is estimated that, after taking account of other benefits, including financing and income tax credits, that the real return on equity for the NSW government ran closer to 35%, more than three times the average return of 10% generated by ASX industrial companies and more than twice the return generated our favourite corporate oligarchy, the banks, who managed only a lousy 14-15%.

Talk about a license to print money …. what a racket!!

Now, unless you've been asleep or in goal for the past five (5) years, you'd know that your electricity bill has increased by more than 100% over that period. You'd also likely believe that the increases were primarily driven by the need to fund the replacement/expansion of essential infrastructure, not just to provide a wind-fall gain to the state's treasury.

2.

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Or at least that is what our politicians have told us …. again & again & again.

Of course, notwithstanding the continued assurances from Macquarie Street "that this pain was good for us", the evidence of "goldplating" of the electricity network at huge expense to NSW consumers was soon apparent.

That this dreadful waste of resources was a function of a flawed business model, that acted to incentivise more and more capital works on the part of the energy providers, has never been acknowledged by our politicians, although organisations such as the Manning Alliance have been highly successful in exposing the fraudulent waste involved and in some instances, stopping it.

So, not only have NSW electricity consumers been obliged to pay for the creation of an expensive electricity generation system, they paid for the creation of a system that was significantly in excess of the state's real needs and now must pay to maintain it.

The fact is that electricity demand in NSW has dropped by more than 10% since its peak level of demand in 2008. Regardless of the reasons for this significant drop in demand, the industry, supported and encouraged by government, continued to pursue its mission to create a huge and unnecessary power generation capability in this state, even while demand was collapsing, which consumers not only paid for, but now have to pay even more to maintain.

And, of course, the more prices go up, the more demand will collapse as consumers are ultimately forced to cut their power usage, give up other essentials of life, such as food, or look for cheaper alternatives.

A vicious circle, compounded by the fact that today's neo-liberal politicians from both sides of the divide are no longer interested in running boring public services, that cost more and more to run, and are a constant source of voter dissatisfaction and criticism. Surely smarter to flog these assets off to a friendly "suit" & let them worry about the customers, leaving politicians to enjoy the kind of rewarding and stress free existence that they think they deserve.

Of course, the only problem with this strategy is that to persuade the "suit" that he/she should buy the asset, it must first be made attractive, meaning that the "suit" has to believe that he/she will make a motza by doing so.

The best way to do that, of course, is to pump-up the tyres of the enterprise as much as possible, demonstrating the real profit potential of owning a monopolistic money printing machine, that the desperate citizenry just can't do without!!

Of course, with demand falling, you have to pump-up those tyres more and more, with us lucky consumers providing the pump.

And so it is that NSW consumers have bravely endured the hardship of paying billons of dollars for an electricity generation system that they didn't need. Not only that, those same lucky consumers get to pay even more to maintain the monster that has been created, as well contributing to the excessive profits that politicians hope will eventually attract the interest of private sector investors, who will then buy this licence to print money & then charge us even more.

3.

In the circumstances, it would surely be unsurprising if the citizens of NSW formed the view that successive NSW governments have perpetrated a colossal fraud on the citizens of this state; that they have been running what amounts to be an extortion racket by dint of their monopoly control over an essential service.

To further underscore the unconscionable greed that has become the dominant feature of this sector of the Australian economy, the Australian Energy Market Commission (AEMC) recently released (Strategic Priorities for Energy Market Development 2012/3), calling for households who have invested in solar power generation systems to be charged an additional 'penalty tariff', to compensate electricity retailers for their alleged loss of revenue!!

The latest AEMC proposals are akin to asking consumers to pay compensation to oil companies for using less fuel, because the consumer has decided to take public transport or ride a push bike to work, rather than driving their car.

So, government owned electricity companies deliver an increase to government profits over the past year of 50%, equating to $500 million, and its promoters would have us believe that they are suffering from a "loss of revenue". Hello?

This report is, of course, nothing more than a cynical puff, designed as a piece of propaganda to serve the greedy interests of the electricity providers and their political enablers.

However, even were we to ignore that fact, if the outrageous AEMC report recommendations were adopted, it would represent an astonishing act of wanton economic vandalism.

If the AEMC proposals were to be adopted, the value of the investment made by more than 2.5 million Australians in solar energy generation would be wiped-out instantly. In addition, the solar power installation industry, a billion dollar business that employs nearly 7,000 Australians and enjoys an annual growth rate in excess of 100%, would disappear overnight.

That AEMC can publish the nonsense contained in its latest report without being challenged by the mainstream media or politicians genuinely interested in supporting the creation of an economic and environmentally sustainable energy sector to secure the future of our nation, says everything about how our governments have fallen under the sway of corporate Australia or indeed, even actively seek to support and promote its interests ahead of the interests of its citizens.

But it seems that the greed of the electricity sector knows no bounds, as would seem evident by the fact that NSW consumers who have invested in solar generation are being paid a paltry $0.06 per Kwh for excess power that they generate and put back into he grid, whilst the electricity providers on-sell that surplus power to other consumers for upwards of $0.35 per Kwh … only a marker-up of almost 500%!!

Elsewhere, the federal Treasurer & the Chair of the ACCC both repeatedly reassured Australians that the abolition of the carbon tax will mean that energy providers will pass back the tax savings to consumers, industry representatives have been busy suggesting that any such savings will be consumed by "other increases in costs" that have come along in the meantime. How convenient is that?

4.

Meanwhile, the NSW government is said to be seriously considering removing all price controls from electricity and gas markets, allegedly due to the existence of a highly competitive energy market in this state.

That the NSW government would advocate such a policy, when the dullest economics student in the class understands that excessive levels of profitability reflect the existence of very low levels of market competition, is clear evidence of the arrogant contempt it has for the people of NSW.

Given the history of deliberate economic abuse perpetrated on the citizens of NSW by the energy sector in recent years, aided and abetted by the residents of Macquarie Street, I would argue that successive state governments have deliberately acted to betray the trust of the citizens of this state through their unbridled greed.

It is clear that the government controlled energy sector in NSW, along with state politicians of all colours, are guilty of wilfully, cynically & deliberately abusing NSW energy consumers … and that they continue to do so.

In the circumstances, it is surely high time that the people of NSW stood-up and put an end to the organised abuse that masquerades as "government" in NSW?

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About the Author

John Richardson is in semi-retirement from the corporate world but continues to do some consulting work. In retirement he became involved in the grass roots campaign to secure justice for David Hicks and Mamdouh Habib and an inveterate writer to the letters pages and to politicians.

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