Privatising the electricity network comes at a cost

Thursday 12 Feb 2015

The recent Queensland election has made it clear that, when it comes to the privatisation of state assets, there is a growing disconnect between the attitudes of the business and political elite, and the lived experience of the broader community.

The supporters of privatisation see profits to be made in the buying, selling and running of these businesses.  The long-term privatisation experience of the broader community is one of higher prices, poorer quality services and fewer jobs and apprentices.

In his opinion piece in the West Australian on 4th February, the Chairperson of the WA Independent Power Association, Richard Harris, argued that private companies could deliver electricity more efficiently and that competition would drive down the price of power.

These are well-worn arguments, which are not supported by the facts.

An examination of the 2013 Residential Electricity Price Trends final report, which was commissioned by the Australian Energy Market Commission, shows that the price of electricity in WA is the lowest of all Australian states.

The report also reveals that, the greater the level of private ownership within a state system, the higher the price of electricity.

In the partially privatised systems of Queensland and New South Wales, the average charge was 25.8 cents and 25.7 cents per kilowatt-hour, respectively.  In the almost fully privatised systems of Victoria and South Australia, the average charge was 27.1 cents and 29.6 cents per kilowatt-hour, respectively.

The Barnett Government says that the current charge for electricity in WA is 30 per cent lower than the level it would need to be to cover the cost of producing and distributing electricity. 

Do the proponents of privatisation expect us to believe the private sector will invest in a business that is making such a loss?

If our electricity system is to be privatised, then power prices will have to go up by at least the 30 per cent required for the system to break even, and most likely more.  We all know that the number one priority of private companies is to make a profit.

But the problems with privatisation aren’t limited to the price of electricity.

In their drive to make profits for the shareholders, private companies look to cut costs.  This means fewer jobs and apprentices, as well as poorer quality services.

In fire-prone Western Australia, this is of critical importance. 

The Royal Commission into Victoria’s Black Saturday bushfires in 2009 revealed that faulty power lines across the state’s privatised network were responsible for five of the most devastating blazes.

The Commission recommended that single line power lines should be replaced with less fire-prone alternatives, a recommendation that was resisted by the companies that owned the poles and wires, because of the cost of doing it.

Colin Barnett is a much more experienced politician than outgoing Queensland Premier Campbell Newman, which is why we are seeing Mr Barnett proceed with privatisation at a slower pace.  However, whether you sell a state asset through a number of smaller sales over time, or through one big transaction, it is still privatisation, and will come at a heavy political price.

Op Piece

This opinion piece appeared in the West Australian on Monday 9th February, 2015, and was written by Les McLaughlan Secretary of the WA Branch of the Electrical Trades Union.