Labor electricity perks unplugged

Rather awkwardly for Julia Gillard, one submission to her power price inquiry indicates state Labor governments may have milked power network loans for over $6 billion in the last 10 years.

The senators investigating power prices in the wake of Julia Gillard’s "I have a big stick” rant last month are getting out on the road.

Having garnered six dozen submissions to date, the committee will hold hearings in Sydney and Melbourne next week, in Perth and Brisbane on back-to-back days the following week and also in Canberra.

The three key players on the eight-senator committee are its chairman Matt Thistlethwaite (a lawyer who is a product of the NSW union movement and was general secretary of NSW Labor for three years), Christine Milne and the Coalition frontbencher Matthias Cormann.

Among those seeking to get in the committee’s ear is the Melbourne-based Consumer Action Law Centre, which has managed to sum up the challenge for senators in two paragraphs:

"Undoubtedly, there is no silver bullet and there are a range of drivers for price rises, including (1) the need for new investment to replace ageing infrastructure, (2) the need to provide sufficient generation capacity to meet demand, notably peak demand, (3) the installation of smarter technologies, (4) the limited ability of the regulatory system to limit prices and (5) policies responding to climate change.

"There is a need for the system to deliver reliable and sustainable energy services at least cost. In the main, Australia relies on the rubric of the market to deliver energy services. While we acknowledge that a market-based approach can facilitate efficient and low-cost outcomes for consumers, we (are) concerned that the limitations of markets and regulatory frameworks have not been well understood.”

The senators could probably cut and paste this in to the report that Julia-in-a-hurry wants delivered by November 1.

The centre and others representing consumers want increased resources for their advocacy work. In particular they want help to launch a national consumer voice in this area.

Poor old Wayne Swan may find that all this leads to another 'send money' message, which is definitely not his shtick right now.

Given the influence of the unions on this government, it is also interesting to see the submission sent in by Unions NSW (of whom Thistlethwaite was deputy secretary from 2004 to 2008).

The prime minister devoted a great chunk of her August power price talk to having a go at the New South Wales government, but Unions NSW is at pains to point out that the state’s prices are cheaper than, or equal to, those in South Australia and Victoria where there are privatised networks.

Unions NSW adds: "The nature of electricity use, that is large peaks and troughs, is by far one of the major drivers behind the need for infrastructure investment, placing upwards pressure on retail prices.”

Nothing here about "gouging” and "gold-plating,” you notice.

The unions also highlight something that intrigued me in the review the Australian Energy Market Commission recently carried out for the O’Farrell government.

AEMC surveyed more than 1,200 NSW customers about their attitudes towards reliability versus prices – and found some 60 per cent were willing to pay more for improved reliability.

"This is challenging,” the unions say, "because the solution to increased prices that is often put forward is about reducing reliability standards.”

The unions argue that one of the current causes of problems is that the very large network capex has been "jammed in to an unrealistic and artificial time frame” – referring to the 2009-14 Australian Energy Regulator determination that sent NSW (and other) household prices soaring – and that necessary outlays should be implemented over longer periods.

This, of course, is precisely the argument of the power distribution businesses – that they were starved over funds for years until the supply security problems became serious and then the money has had to be spent in a rush.

Unions NSW is calling for a rolling 10 or 20 year improvement program to better balance the capex requirements with what customers need to pay.

Of course, the unions’ big concern is the privatisation issue.

The likelihood that the O’Farrell government will sell the distribution and transmission businesses grows every time state cabinet looks at the butcher’s bill for the NSW overall infrastructure requirements.

Some $28 billion for the "poles and wires” will make a big difference to what gets built in terms of roads, railways and so forth.

However, "privatisation,” says Union NSW, "is not in the public interest.”

It lashes out at Martin Ferguson’s draft energy white paper – the final version of which is now expected to appear in late October – for failing to take account of broader community views or "sensible federal government policy” in arguing for the private sector to run power supply.

Rather awkwardly for Julia Gillard, who made a great song and dance over the dividends the O’Farrell government is taking from the networks businesses, Unions NSW devotes special attention to pointing out that "successive NSW governments have used networks as a source of revenue to support other services.”

What’s more, the unions say "in principle, we support this approach” while arguing that the present state government could take a bit less.

They point out that electricity dividends, income tax equivalents and interests on state Treasury loans generated $2.19 billion in funds for the Keneally government in 2010-11. (O’Farrell won office in late March last year.)

Perhaps most amusing of all, Unions NSW provides a helpful table that shows that state Labor governments from 2001-02 to 2010-11 milked this revenue stream to accrue per household about $2,700 over 10 years from rural NSW, almost $2,500 for Sydney and about $1,200 from western Sydney and the Illawarra.

By my rough calculation, the accumulated revenue for 10 years exceeds $6 billion.

Surprisingly – yes, that is my tongue in my cheek – neither the Fairfax media nor the News Ltd tabloids nor the ABC, all of whom gave Gillard lots of coverage as she lambasted O’Farrell, have felt any need to report this calculation.

Here’s a quote from Gillard on ABC Lateline on the evening of her power price rant: "State governments are increasing their revenue at the expense of the family electricity bill. This has to stop.”

This is the problem with government inquiries, you see.

As the political hardheads know, never establish one unless you can be sure about what it is going to turn up.

Mind you, the galahs in the Canberra Press Gallery do have to get off their perches and do some digging in the seed scattered around to bring this stuff to the public’s attention.

Can we look forward to, say, the 7.30 Report or Sydney’s Daily Telegraph interrogating the PM about whether these numbers throw up just a teensy piece of hypocrisy or misleading of the public?

Her speech happened, after all, just some 30 days ago – not 30 years.

Don’t hold your breath.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of 'Powering Australia' yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.

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