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New report lays bare electricity privatisation’s “record of failure”

Paul Lister - Thursday, February 20, 2014

Prominent Australian economist Professor John Quiggin has launched a scathing attack on energy sector privatisation, concluding that it has failed to deliver promised benefits for consumers.

Professor Quiggin examined 20 years of pro-privatisation reform in his report, “Electricity Privatisation in Australia: A Record of Failure”, which included a detailed economic examination of the outcomes of power sales in Victoria and South Australia.

His research has revealed that many of the claimed benefits of privatisation have not been supported, with key findings 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;
  • private 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.

“Privatisation, corporatisation and the creation of competitive electricity markets were supposed to give consumers lower prices and more choice, promote efficiency and reliability, and drive better investment decisions,” Professor Quiggan said.

“But after twenty years the evidence is that none of these promised improvements have been delivered.

“After a marked fall in real electricity prices across Australia from the 1950s until the mid-1990s under public ownership, privatisation and the introduction of the National Electricity Market led to a reversal of that trend.

“Prices have risen dramatically. A secure low-cost supply has been replaced with a bewildering array of offers, all at costs inflated by a huge expansion in marketing.

“My research comprehensively finds that the free market based reform process in energy has been a failure.

“Reforms have failed to deliver a competitive market that benefits consumers. The evidence is there that public ownership of critical energy infrastructure is the only sensible response.”

ETU national secretary Allen Hicks said that despite this clear and irrefutable record of failure,State and Federal politicians continue to claim that the only option for improvements was yet more privatisation.

“This research has destroyed those arguments,” he said.

“Privatisation has produced no benefits to consumers, but has resulted in large financial losses to the public.

“This independent academic research has confirmed our long-held concerns that the sale of publicly-owned power assets is an absolute disaster.”

Stop the Sell Off campaign spokesman Adam Kerslake said Professor Quiggin’s research had confirmed anecdotal experiences that a free market push for the electricity sector had not only failed to improve power affordability, it had actually lead to higher prices.

“In NSW, the future of our publicly owned electricity assets is under threat from a governments with a strong privatisation agenda,” Mr Kerslake said.

“This rigorous independent academic research finally provides a factual basis to drive decision making, rather than the blind reliance on free market ideology which is spouted by many proponents of privatisation.

“In Victoria we have seen workers and the broader community enduring the detrimental impacts of electricity privatisation for two decades, which is why we are campaigning so hard to save our own power network.

“It is no surprise to us that a detailed examination of the economics of privatisation has concluded that these electricity reforms have been a ‘spectacular failure’ and that there is no justification for further sales.”

Click for a full copy of Professor Quiggin’s report.

Watch the documentary trailer or the full version documentary (18 min.)


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