THE government's decision to unite its three electricity distributors - Ausgrid, Endeavour Energy and Essential Energy - under a single new state-owned corporation promises a modest benefit to consumers. It claims $400 million will be saved during the next four years, most of which will be passed on to households as rebates. It is bewildering, even disturbing, that this straightforward savings measure was not implemented long ago and the benefits passed on to consumers.
THE government's decision to unite its three electricity distributors - Ausgrid, Endeavour Energy and Essential Energy - under a single new state-owned corporation promises a modest benefit to consumers. It claims $400 million will be saved during the next four years, most of which will be passed on to households as rebates. It is bewildering, even disturbing, that this straightforward savings measure was not implemented long ago and the benefits passed on to consumers.
The government put the best possible gloss on the changes amid growing public concern about the rising cost of power. The Energy Minister, Chris Hartcher, said the move would put ''downward pressure'' on network charges, which contribute about half the total cost of electricity bills.
But consumers will be disappointed if they expect the merger to stop electricity costs rising. The effect will probably be insignificant for most consumers compared with electricity price rises in the pipeline. Some experts believe costs will double between 2011 and 2017.
The decision to merge the distributors draws attention to an unfortunate pattern for the O'Farrell government: modest change trumps bold reform. Instead of tinkering with the management structures of the distributors, the distributors should be sold or offered to the private sector on long-term leases. That would free up about $30 billion to invest in transport infrastructure and deliver other statewide economic benefits.
Hartcher has reiterated a promise to keep the distributors in public hands for this term. But the government's audit of the state's finances, conducted by the former Treasury secretary Michael Lambert, says the sale or long-term lease of the distributors would advantage NSW. He found that private sector owners would ''manage the network businesses more effectively, achieving lower costs that would flow through to lower prices''.
Merging the distributors would not reduce their capital expenditure, the main component of their overall costs. If the government did privatise them it would avoid investing billions of dollars in ''poles and wires'' that the private sector is prepared to fund. This would allow scarce capital to be diverted to other infrastructure projects.
The proceeds from a sale would permit a big reduction in the state's net debt or unfunded superannuation liabilities. Privatisation would also resolve the long-term anomaly of the government being both the owner of the distribution businesses and a regulator. Because the network companies are already fully regulated, consumers would be protected from price exploitation, regardless of who owns them.
The electricity network businesses should be privatised, not just merged.
Gambling in a darkened roomTHE ructions at the Star casino which followed the sacking of its managing director continue. Experienced managers have been dismissed for allegedly passing to a whistleblower emails which set out a revised policy towards so-called high rollers. The practice had been to ask all clients, even those prepared to wager large sums, to leave the casino after 24 hours at the gaming tables. That rule still holds for local gamblers but the emails show overseas visitors with limited time and a fixed amount to bet are now allowed to play on. Even if they show obvious fatigue - nodding off to sleep, slow responses, spilling drinks - they will be asked only if they feel up to continuing.
To many who find the lure of gambling inexplicable and baffling, this will seem appalling. Hotels and clubs with poker machines must close for some hours within every 24 to break the gambling cycle. The casino is exempt from those rules and is within its rights to treat clients as it does and its clients of course must be assumed to know what they are in for when they enter its doors. But the casino exists by government fiat. It is an open question whether society accepts this behaviour.
What should particularly concern the public is that these rules had to be leaked. Why the secrecy? Specifically, they should be worried at the lengths the casino goes to - including sacking long-standing staff - to prevent its operations or practices becoming widely known. The public has been allowed - by the casino - to know that the leakers breached its email conventions, and how they did so. But the public is still not allowed to know what the general manager, Sid Vaikunta, is alleged to have done which led to his sacking. Why the double standard?
Some obscurity is essential to casinos. Gamblers want privacy, and casinos must preserve it or lose their clientele. The Star's management will have been horrified that a Papua New Guinea minister's adventures there found their way onto the front page of this newspaper. But secrecy must have clear limits. The Independent Liquor and Gaming Authority is inquiring into the events surrounding the general manager's sacking. It is to report next month but is yet to decide what, if any, of its hearings will be public. That is unjustified.
Activities that need darkness to thrive attract suspicion. The casino is no exception. Those running it and those who police it must remember: the public expects their actions to be open to scrutiny.
Frequently Asked Questions about this Article…
What did the NSW government decide about Ausgrid, Endeavour Energy and Essential Energy?
The government decided to unite the three NSW electricity distributors — Ausgrid, Endeavour Energy and Essential Energy — into a single new state‑owned corporation. The government says the merger will save about $400 million over the next four years, with most of those savings to be passed on to households as rebates.
Will the merger of the electricity distributors significantly reduce my electricity bills?
The article says the merger should put 'downward pressure' on network charges (which make up about half of an electricity bill), but the benefit is described as modest. Experts quoted warn the effect will probably be insignificant for most consumers compared with larger electricity price rises already in the pipeline.
How will the $400 million in savings be returned to households?
According to the government, most of the roughly $400 million saved over four years will be passed on to households as rebates. The Energy Minister, Chris Hartcher, framed the merger as a way to ease network charges that contribute about half of total electricity bill costs.
Why do some commentators argue the distributors should be privatised rather than merged?
The article argues that selling or offering the distributors to the private sector on long‑term leases could free up about $30 billion for infrastructure like transport, avoid the government having to fund billions in 'poles and wires', and reduce net state debt or unfunded super liabilities. An audit by former Treasury secretary Michael Lambert suggested private owners would manage networks more effectively and achieve lower costs that could flow through to consumers.
Would merging the distributors reduce their capital expenditure on poles and wires?
No. The article says merging the distributors would not reduce their capital expenditure — which is the main component of their overall costs. It notes that privatisation could instead avoid the government having to invest billions in network capital expenditure, because the private sector is prepared to fund it.
If the distributors were privatised, would consumers still be protected from price exploitation?
Yes. The article points out that the network companies are already fully regulated, so consumers would remain protected from price exploitation regardless of who owns them. Privatisation would also remove the awkward position of the government being both owner and regulator.
What is the Star casino controversy mentioned in the article and why does it matter to the public?
The article describes fallout at the Star casino after the sacking of its managing director and the dismissal of managers accused of leaking emails about a revised high‑roller policy. The emails suggested overseas visitors were being allowed to play for longer than local gamblers, raising concerns about secrecy, responsible gambling and whether the Independent Liquor and Gaming Authority should hold public hearings into the events.
What should everyday investors and households watch next regarding the electricity distributors and the casino issue?
For electricity, watch for how the government implements the rebates from the $400 million saving, any future moves on privatisation or long‑term leases, and broader electricity price trends (some experts warn prices could rise substantially between 2011 and 2017). For the casino, follow the Independent Liquor and Gaming Authority inquiry (scheduled to report next month) and any decisions about public hearings, which will affect transparency and regulatory oversight.
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