‘If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would.’ — Alice in Wonderland
And so the electricity debate unfolds in Tasmania — a world of its own, where everything is nonsense.
Tasmania is jumping on the bandwagon of selling the old neoliberal mantra that privatisation leads to cheaper services, the market regulates through competition and private enterprise is much better placed to deliver services efficiently.
This all sounds so familiar and it is no surprise that this issue is being raised at a time when the federal government’s energy minister Martin Ferguson is calling on the states to privatise energy, claiming that the draft energy white paper has shown that the power industry needs massive investment and continued government ownership of electricity generation assets makes it more difficult to attract new investment.
This has also been backed by federal Coalition’s energy spokesperson Ian MacFarlane who stated that his party would forcefully encourage the states to privatise their electricity networks.
Even more curious is that the Tasmanian Greens are leading the charge to remove government participation in the energy sector while claiming the moral high ground that their aim — essentially stripping the governments’ role in retail sale and wholesale distribution — is a progressive position which will ensure Hydro Tasmania will be protected from privatisation under a Liberal government in the future.
For all those somewhat gobsmacked at the absurdity of this notion, please forgive my cynicism as I and many other Tasmanians have become increasingly desensitised to the neoliberal politics of the Tasmanian Greens; specifically Ministers Nick McKim and Cassy O’Conner who have promoted a vast array of austerity measures on the state, including proposals to close smaller schools, public housing privatisation and back-flipping on their election promise to not sell the states betting agency (Tote).
Now we are seeing a new side to the Greens, one that wants to remove the government’s regulatory role within the state’s energy sector.
There is an argument for allowing competition into the market but the Greens energy proposal removes government ability to regulate or intervene in the market. Under this system the costs to consumers become completely dependant on market forces.
Tasmanian Greens energy spokesperson Kim Booth backed this assertion when he said: “The Greens position represents a fundamental shift in the way power prices are set in Tasmania, moving from a regulated model to a market-based model delivering greater competition at both the retail and wholesale levels.’
The Greens’ plan to remove Hydro’s trading capacity also further removes any government input over costs to the public, leaving customers entirely susceptible to market dictated costs.
Tony Reidy from the Council of Social Service (TascCOSS) has rightly questioned whether more choice in the market will automatically lead to lower power prices.
A paper on privatisation of energy in Victoria was written in 2005 by Professor Sharon Beder and Damien Cahill of the University of Wollongong, titled “Neo-liberal think tanks and neo-liberal restructuring: Learning the lessons from Project Victoria and the privatisation of Victoria’s electricity industry.”
The paper found that Victoria’s energy privatisation initially lead to low cost power, but it was also accompanied by reductions in the workforce, maintenance was cut back and the state faced a number of blackouts due to equipment breakdowns.
2000-2001 saw the introduction of retail deregulation, which lead to a 60% increase in the price of electricity. The government set safety net price caps to avoid the political implications of these increases — this lead a number of retailers to seek ways of getting around price caps by increasing off-peak electricity rates by 175% and decreasing peak rates to ensure average increases met with price caps.
Beder also completed a submission for the Owen Inquiry into Electricity Supply in NSW in 2007. In a March The Conversation article she said: “The supposed inefficiency of publicly-owned electricity providers has been shown to be unfounded rhetoric. It is belied by the cumulative evidence of one hundred years of electricity provision all over the world.
“Publicly-owned electricity enterprises have consistently provided electricity at no greater cost than privately-owned enterprises and often for prices that were far less than those charged by private companies. When Victoria and South Australia privatised their electricity prices increased and service reliability declined.
“It is no accident that South Australia and Victoria subsequently had the highest residential prices of all the Eastern states. Between 1994 and 2002, residential rates in SA increased by 40% and householders now pay more for their electricity than anywhere else in Australia.”
Beder went on to discuss how the costs of privatised power increased in Victoria and South Australia during these periods but this did not correlate to the state-owned energy sector in New South Wales, which saw a fall in power costs.
Although the Greens propose the continued state ownership of Hydro, there is ample evidence showing that the removal of government from the retail sector does not work.
A clear example is the banking sector in Australia, which has raised interest rates above levels recommended by the Reserve Bank on numerous occasions over the past years. Such moves have been attacked by government, but the fact is that the government is powerless to help consumers.
Had the government kept the Commonwealth Bank in public ownership, the state owned bank as one of the four major banks would set rates at recommended levels and competition would force the private providers to keep their rates at or below increase recommendations.
This issue also raises the question of the Greens commitment to reform — is it genuine or just smoke and mirrors? If the Greens were serious about reforming the energy sector and seeing a massive increase in renewable energy, wouldn’t it be easier to achieve their aims by working with the state-owned industry under the stewardship of a government they themselves hold cabinet positions in?
It would be easier to promote the infrastructure needed with a state-owned industry under the budget of a state department than working with a private company whose primary motivation is the bottom dollar and short-term gain from not moving away from a carbon based economy.
Another issue highlighting this point is the Greens support for the privatisation of Tote. Besides being a betrayal to the Tasmanian people, this move makes one question the Greens credibility on gambling reform.
Surely it is easier to work on reform with a state-owned gambling industry than to work against a private company, which is likely to run a savage campaign against any government attempting reform. This has already been seen in Australia when Julia Gillard pulled the plug on her deal with MP Andrew Wilkie after the gaming industry targeted NSW Labor MP’s in marginal seats.
The simple fact of the matter is that government owned industry has one primary goal, the provision of service to the people. When privatisation occurs the primary focus changes from provision of service to increasing earnings, the customer satisfaction takes a backseat to increasing profit margins and keeping shareholders happy.
The Greens have stated that their plan gives Tasmanians a choice of provider but this is not the case for those who want to stay with a state-owned electricity provider and not end up in the situation of other privatised states across Australia, which have seen increases in costs and decreases in provision of service.
Equally the Greens and the Tasmanian government need to realise that government assets are owned by the Tasmanian people, not whichever political party happens to be in for that parliamentary term. It is wrong that governments such as Tasmania’s can take it upon themselves to sell our assets without public consultation or public support. Any attempt to sell a state industry should be an informed debate with the public holding the final say through a plebiscite at the ballot box.