Power sell-offs see price complaints rise to 50,000 a year

AN economist has called for critical energy infrastructure to be returned to public hands, saying the privatisation of electricity networks had been a failure across Australia.

Economist John Quiggin, a laureate fellow at the University of Queensland, reviewed energy sector privatisation and the related process of electricity market reform between the early 1990s and now.

He found no long term benefits for either governments or consumers.

His report, which was commissioned by the Victorian branch of the Electrical Trades Union, found electricity prices were highest in privatised states, and had "risen sharply" since the introduction of the National Electricity Market.

His research has revealed that many of the claimed benefits of privatisation have not been supported, with key finding including:


  •  Price rises have been highest in States with privatised electricity networks;
  •  Customer dissatisfaction jumped, with complaints to the energy ombudsman in privatised States leaping from 500 to over 50,000 per annum;
  •  Resources have been diverted away from operational functions to management and marketing, resulting in higher costs and poorer service;
  •  Reliability has declined across a wide range of measures in Victoria;
  • Promised increases to investment efficiency have not occurred;
  • Real labour productivity has reduced as employment and training of tradespeople was gutted and numbers of managerial and sales staff exploded;
  • Rrivate owners are receiving unjustifiably high rates of return based on the low investment risk; and
  • Consumers in privatised states bear the cost of approximately 10 per cent per annum interest on private owners' debt, compared to substantially lower government borrowing costs of three per cent.

"After 20 years it is evident to everyone that the electricity reform program that began in the early 1990s has not delivered the promised outcomes,'' Professor Quiggin said in his concluding remarks.

"Privatisation corporatisation and the creation of electricity markets were supposed to give consumers lower prices and more choice, to promote efficiency and the reliability in the electricity network and to drive better investment decisions for new generation and improved transmission and distribution networks.

"None of these promises have been delivered.

"Prices have risen dramatically.

"'Consumer choice' has meant the removal of the secure low-cost supply consumers previously enjoyed and its replacement with a bewildering array of offers, all at costs inflated by the huge expansion in marketing and managerial costs."

"Investment policies first ran down capacity inherited from the statutory authority system, then replaced it at massively higher costs.

"In the face of this record of failure, the response of reformers has been to claim that the only option is to push on with yet more privatisation.

"As has been shown in this report, this argument is baseless. Privatisation has produced no benefits to consumers, but has resulted in large fiscal losses to the public.

"It is time to admit that the reform process, as a whole has been a failure, and that a return to a more centralised system, with public ownership of critical infrastructure, is the only sensible response."


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