Electricity privatisation - record of failure

[boris1gary]

http://www.cpa.org.au/guardian/2014/1628/07-electricity-privatisation.html

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” (http://johnquiggin.com), 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:

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 network
• 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 percent per annum interest on private owners’ debt, compared to substantially lower government borrowing costs of three percent.

[the_hawk*]

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@boris1gary wrote:

http://www.cpa.org.au/guardian/2014/1628/07-electricity-privatisation.html

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” (http://johnquiggin.com), 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:

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 network
• 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 percent per annum interest on private owners’ debt, compared to substantially lower government borrowing costs of three percent.

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GEE they needed a economist Professor to work that out, gee lets look at the spin at a very basic level,

from the governments side they wanted the quick cash and to sell it with out too much opposition from the sheeple that will always say the government told us, so it must be true.

They spin the BS that there will be all these advantages of competition and lower prices because of it.

Well der if it was such a cash cow and making lots of money so that private sector could discount the rates, I highly doubt that to be the case but even if it was then that profit was going intro general revenue and saving the people from paying it in tax.

More seriously if it wasn't such a cash cow then when you have several fragmented private companies with multiple duplicated systems and management the logical outcome would be a increase in costs and the onflowing effect of increased charges being passed onto the consumer.

essential services should always be owned and controlled by the people for the people, remembering the government of the day doesn't actually own anything and are only care takers for our assets.

[boris1gary]

hawk, no not needed but not a bad thing when an economist comes out with something that is in the interests of the majority rather than the rich minority for a change.

[monman12]

"hawk, no not needed but not a bad thing when an economist comes out with something that is in the interests of the majority"

Or in the ideological interests of the left leaning, who are certainly not the majority. How about the topic being addressed by someone in "policy, strategy and economics in the energy sector, with specialisation in the economic regulation of networks, electricity market design and clean energy policy design"? B.R. Mountain.

Higgins also wrote : Privatisation debunked , in 2009 which I found in "Left Focus",  this latest look-alike report sponsored (surprise) by the  ETU (who currently are demanding 18% increase in pay rates over the next 3 years), I note B1G, is in the CPA newsletter.

Higgins 2009 paper included this

"With the spectacular failure of the efficient financial markets hypothesis over the last two years, it is no longer possible to put any faith in general claims about the superiority of the private sector."
That forecast back then has proved desultory, considering that the ASX 200 is now over 5400 .

Another Higgins comment apropos electricity generators: "private owners are receiving unjustifiably high rates of return based on the low investment risk" what nonsense, I own AGL shares (AGK) and received around 4% with a 1.3% franking credit FY 12-13..

Taken from the Hioggins paper:
"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.
A glance at the report indicates that retail electricity prices finally rose to pre 1995 levels by 2009, and large user prices the same  by 201,1 having fallen from the "mid-1990s"  until 2008, hardly a reversal (rise)  after the "mid-1990s" as claimed.

This is also worth reading B1G,  a quite  comprehensive paper:
Mountain, B.R., May 2011. Australia’s rising electricity prices and declining
productivity: the contribution of its electricity distributors. Energy Users Association of Australia.

Excerpt.
Government owned distributors in Australia would need to halve their expenditure levels to achieve a comparable level of efficiency as their privately owned peers;

A precis of the above in the Business Spectator.  titled (state government power price gouge) :   http://www.businessspectator.com.au/article/2012/9/27/policy-politics/state-government-power-price-g...         

You might find it interesting TH and B1G to research NSW government pricing of electricity supplies, with particular emphasis on transmission costs (government monopoly)  which are, and have been, the greatest single factor in the recent  large price increase in electricity charges in that State.

nɥºɾ

[fourandsixpants]

replying to OP:

pre-meditated criminal activity

[fourandsixpants]

replying to an excerpt from monman who brags in a most pompous vein: ....."Another Higgins comment apropos electricity generators: "private owners are receiving unjustifiably high rates of return based on the low investment risk" what nonsense, I own AGL shares (AGK) and received around 4% with a 1.3% franking credit FY 12-13.."

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Gee you think you are so clever in attempting to address this.....but you 'twist' and 'tweak' the meaning of Higgins' and OP's intended meaning to suit your smug comment.

Do you keep your utility share folios in the boot of your imported new mini so you can refer to them whilst travelling from pontification lecture to pontification lecture? Lol

[fourandsixpants]

replying to monmans comment:

You might find it interesting TH and B1G to research NSW government pricing of electricity supplies, with particular emphasis on transmission costs (government monopoly)  which are, and have been, the greatest single factor in the recent  large price increase in electricity charges in that State.

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Rubbish & waffle monman......contorted sentences, woven into pompous paras....but full of holes and catatonic BS as usual!

Show us/make reference to this your research to back what you retort with such laissez-faire!

chemtrails are real

[the_hawk*]

John I can only go buy what I pay in SA and while the Gov owned distribution network charges have added to the costs over all because there was no such thing as a supply charge before privatisation so we have been hit in two ways.

the last quarter the main block of power was charged at from my actual bills and the same quarter in previous years

2014 .3502c kw

2013 .3201

2012 .3041

 I am sure you will work that out to an 18% from 2012 to 2014 well above official inflation figures

on the other hand the service charges for the same periods have remained roughly the same 

2014  $57.14

2013  $52.85

2012  $60.45

so clearly it not the infrastructure cost that concern consumers in SA it is the price gouging by private companies, then add the supply charge that was never there before privatisation, then add the extra taxes we now pay to make up for the lost income to the state. consumers are really much worse off with all this competition.  

[monman12]

TH I would suggest that you have a look at this pdf report  AEMC Report

"The Australian Energy Market Commission (AEMC) today released its Electricity Price Trends Report, which looks at trends in household electricity prices and examines the drivers of those trends.

TH, your figures are fairly close to those presented for SA,  it is of interest to note that for the last years comparison the figures (fig 1) show that  for  : 2012/13 -  2014/15  there is a slight decrease of 1% in retail electricity costs.

However the report states:
"Transmission and distribution networks The main driver of upward pressure on retail prices in the short-term continues to be network prices, but this is estimated to stabilise From base year to 2015 (2011-2012 to 2014-2015):

• Transmission network prices are estimated to increase nominally by 43%, or 0.8 c/kWh. This accounts for 15% of the total retail price increase over this entire period. Of this increase 27%, or 0.5 c/kWh, occurred in 2011-2012 to 2012-2013.
• Distribution network prices are estimated to increase nominally by 25%, or 2.5 c/kWh. This accounts for 46% of the total retail price increase over this entire period. Of this increase 11%, or 1.1 c/kWh, occurred in 2011-2012 to 2012-2013.

TH:  "so clearly it not the infrastructure cost that concern consumers in SA it is the price gouging by private companies"

Prices are not set by the electricity companies in SA   TH,   and as I have stated earlier the return on my AGL shares (major SA electricity supplier)   before franking credits is  4%, hardly gouging!

If one looks outside of the privatisation debate and considers the recent steep price increases in electricity charges,  one might realise that  factors such as a carbon tax have not helped, also feed in tariffs, but mainly the neglect of electricity infrastructure, and lack of forward planning apropos increase in demand/population by all governments when they owned the industry is the underlying cause of the steep price increases.

nɥºɾ