Thursday, October 7, 2010

At Least New South Wales, The Premier State, Is Number One In Something

It’s no secret that the price of electricity is going up. We have all seen our bills increasing over recent years, and we’ve all been told repeatedly by the government, the regulator, the industry, and the media to expect more of the same. We know that prices are expected to increase by as much as 40% over the next few years even without a price on carbon dioxide emissions, and as much as 60% if and when there is a carbon price. We even have a pretty clear idea of why the price has risen so far, and will continue to rise even further. A number of factors are involved, but by far the most significant is the long term lack of investment in the infrastructure as successive governments have repeatedly sucked all the cash they can out of the sector to beef up the budget bottom line.

What’s worse, is that there isn’t really all that much to show for it in terms of government services or community infrastructure with so much of the budget bottom line evaporating into sheer waste. $400 million and counting for a Sydney Metro system which will most likely never be built. $100 million wasted on a T-Card system which was never delivered, and the money might never be recovered. That’s a total of half a billion dollars right there for those two items alone. And who pays? You and I do, with the cost of our electricity being driven upwards to pay for the belated investment in the infrastructure which should already have been covered by the past dividends of the publicly owned power providers.

It’s not a problem which is peculiar to New South Wales, with prices all around Australia being driven higher for much the same reasons. But sadly it is the state of New South Wales which leads the way. A report by the Institute of Public Affairs has shown that around the nation the price of electricity has outstripped inflation by almost four times over the past five years. Yet some cities have fared better than others, with the best performing city Adelaide registering an increase over five years of 16%. Sydney, by contrast, has experienced an increase in the price of electricity of 61.3% over the same period. As Duncan Gay, the Shadow Minister for Energy said to me today, “at least New South Wales, the premier state, is number one in something.” He was of course being sarcastic, as he levied the blame at the feet of the current government which has had more than 15 years to address this problem.

While it is relatively straightforward to identify the problem, it is much harder to devise a solution. With the government having proven to be such a poor manager of what is supposed to be a public asset, perhaps privatisation really will deliver better administration. But sadly that is no guarantee of lower prices or better service. In fact the reason for the problem is that the government has behaved just like a greedy corporation in the first place, rather than as a responsible government. Privatisation, in any form, is only going to see the perpetuation of the principle of profit before people, as any private operator will quite reasonably expect to be allowed to manage their investment in a manner which maximises their profit. That is what private companies do, so we cannot and should not expect any form of privatisation to deliver consumers a better deal. Unless a cheaper source of energy is discovered, the only solution will inevitably involve greater subsidies for low income families, or the reduction of living standards.

Neither of those options should have ever been necessary in the first place.


Stan of North Coast said...

Always enjoy your pieces Leon but need to comment today on several things. The IPA has a political agenda and it's easy to blame a Government that has an aura of incompetence about it for everything bad or annoying that happens in our lives. The radio shock jocks make a living out of it.

You may be right but the greater reason for skyrocketing electricity prices and network meltdown might lie here in this newspaper article:

Country Energy has recently replaced all my street wiring, the feeding transformer, and all the cabling into every house. Must have cost a bomb and yes everybody has been putting in those reverse cylce power guzzlers. Some houses have two of them and sometimes would dim our lights (we don't have one) when they turn on.

Stan of North Coast said...

Sorry. Messed up previous post. Correct link is here: