Electricity Privatisation: Unsafe at any speed

by John Kaye Greens NSW MP

NSW has been plunged into a privatisation debate by Treasurer Michael Costa’s obsession with destroying the public sector. He has pushed his Labor government into selling the state-owned retailers and leasing out the generators.

It has not, however, been plain sailing for the privatisation push since it was announced in December 2007. From turmoil in the share markets around the world to growing recognition of the impacts of carbon trading on the sale price of the generator leases, the putative benefits to the state’s coffers are at risk of disappearing in a storm of economic uncertainty.

To make matters worse for the Iemma government, the opposition of about 80% of the citizens of this state is translating into a vocal and well organised grassroots movement, putting enormous internal and external pressure on the Labor party.

Back bench MPs are beginning to speak out in public while a network of resistance is being organised within the party. The public stoush between Treasurer Costa and the party’s state president Bernie Riordan is a measure of the tensions within the labour movement.

Former British PM, Margaret Thatcher started the privatisation ball rolling with the sell-off of the telecommunications and electricity utilities in the mid 1980s. Since then a potent mix of ideology, expediency and corporate influence has driven Australian politiciansand governments to attempt to off load publicly owned assets including water, energy, education, health, transport and banks.

The neo-liberal ideological virus has spread to political leaders throughout the world. Without a shred of evidence, it has become axiomatic that public provision is inferior to private, that cooperation is less effective than competition and that compassion is a sign of weakness while greed is strength. Privatisation becomes a moral imperative for politicians who succumb to the easy charms of economic rationalism, including apparently Treasurer Michael Costa and some of his collea

agues in the Iemma government.

Secondly, privatisation is a great expedient for governments. Selling public assets delivers a massive short term fiscal advantage by simultaneously allowing tax cuts and expenditure on popular infrastructure projects, without increasing borrowing.

Perhaps the most potent force for privatisation is, however, the pressure coming from those corporations who stand to make a massive profit from the purchase of public assets. The NSW electricity industry has been in the sights of banks and foreign utilities for many years and in Michael Costa they found their man to let them in the front door and take what they want.

In mid 2007, the Premier surrendered to the pressure channelled through his Treasurer, and commissioned Curtin University economics Professor Tony Owen to inquire into the future of the electricity supply in NSW. Not surprisingly, the findings strongly supported privatisation, arguing that:

NSW will need new baseload generating capacity by 2014 and other investments over the next ten years, totalling $15 billion, or face blackouts,

* the public sector cannot afford to make the necessary investments without damaging the state=s financial rating, and

* the private sector will not invest in the NSW electricity as long as it is publicly owned.

Professor Owen recommended that the retailers be privatised and that the generators be privatised or, as a second best outcome, leased out. The state should sit back and watch market forces take care of its energy needs.

The problem with this report is that all three of these arguments are demonstrably wrong.

NSW does not need new baseload generation (that is, new power stations that run 24 hours a day). The Owen Inquiry ignored opportunities to strategically reduce demand for electricity which could not only eliminate any need for new baseload capacity but also open the possibility of phasing out some of the state=s coal-fired generators. Not only would this be cheaper but it would substantially reduce greenhouse gas emissions.

Secondly, there is no reputable economic theory that opposes borrowing to build economic infrastructure. If there were, the home loan market would not exist. The Iemma government has allowed itself to be bullied into an obsession with protecting its AAA credit rating despite ample evidence that it has little or no relevance to the health of the state=s economy.

Thirdly, it is impossible to sustain an argument that the private sector will not invest in an electricity industry dominated by public ownership, when the multinational utility corporation TRUenergy is currently constructing a 400 MW combined cycle gas turbine baseload generator at Tallawarra on Lake Illawarra near Wollongong. The Iemma Cabinet and Professor Owen need to get out more and see what is really happening in the private sector.

Further, if new investment is made, it will be the consumers who pay for it under any mode of ownership. The only difference is that Michael Costa wants it to be the boardrooms of the new corporate owners who make the decision as to what will be purchased and how much consumers will pay for it, rather than the people of this state.

On the other hand, there are overwhelming reasons for maintaining public ownership.