Friday, April 11, 2008

Compensation Plan Proves The Point

The latest installment in the power privatization saga is the plan announced this week to provide funding to assist consumers to the tune of $272 million, as well as a further $100 million for a clean coal fund. The measures are part of the government’s response to the Unsworth inquiry into the proposed privatization. Those who oppose the sell off have long maintained that it would result in job losses, and increased prices.

In an effort to address those concerns, the government is now offering an increase in the rebate paid to pensioners, along with rebates for carers of sick children and low income families. It has guaranteed a “no disconnection” policy, and it has guaranteed existing jobs will be retained.

At the same time the government has refused to accept the recommendation that prices should be regulated.

It’s not a great feat of logic to understand that any private owners of electricity providers will be seeking to maximize their profits. Of course, if they were permitted to, they would reduce staff if they believe it to be more efficient. Of course they will increase prices if they believe that the market will sustain it. And the refusal to regulate prices leaves that possibility open. On top of that is the obvious truth that climate change measures are also going to push prices up.

Despite claims that increased competition will keep prices down and provide better customer service, many people just don’t believe it. And the fact that the government is prepared to spend so much money to address the concerns is readily seen as a frank admission by the government that those concerns are well founded.

In other words, if privatization is going to deliver so many benefits, why would they need to pay compensation?

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