Report on the failure of electricity privatisation

Economist Professor John Quiggin has released the report ‘Electricity Privatisation in Australia: A Record of Failure’. The report examines 20 years of pro-privatisation reform, including a detailed economic examination of the outcomes of power sales in Victoria and South Australia.

“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 Quiggin said.

“But after 20 years, the evidence is that none of these promised improvements have been delivered.”

His key findings include the following:

• 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.
• Consumers in privatised states bear the cost of approximately 10% per annum interest on private owners’ debt, compared to substantially lower government borrowing costs of 3%.

“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,” Professor Quiggin said.

“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.

“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.”

Electrical Trades Union (ETU) National Secretary Allen Hicks said the research has “confirmed our long-held concerns that the sale of publicly owned power assets is an absolute disaster”, yet state and federal politicians continue to claim that the only option for improvements is yet more privatisation.

Andrew Kerslake is the spokesperson for Stop the Sell Off, a campaign to prevent the NSW Government to privatise the electricity network and Snowy Hydro. He said Professor Quiggin’s 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,” he said.

Professor Quiggin’s report is available here, while a documentary on the subject has been released by ETU’s Victorian Branch on YouTube.