Time to recharge the Keating method

Is it time for another Hilmer Report? It’s a question worth asking as the debate about power sector privatisation runs all over the paddock and may well be central to two major elections in 2015.

The original Hilmer Report into national competition policy was commissioned by Paul Keating in 1992 and the three-man committee (chaired by Fred Hilmer) reported a year later.

Its recommendations were a key driver of the development of the east coast 'national' electricity market, which the Productivity Commission has recognised as an important contributor to the economic growth Australia enjoyed in the second half of the 1990s and the early 2000s.

The really big question for power productivity 20 years after Hilmer & Co reported is whether Australia, and in particular Queensland and New South Wales, will benefit from privatising the state-owned monopoly network businesses, which have contributed a significant share of the very large electricity bill increases of recent times?

There is a case for arguing that the question is proving too hard for the O’Farrell and Newman governments in Sydney and Brisbane.

Their main ploy for fending off the issue right now is to say they won’t move on network sales without a mandate at their 2015 elections – polls they are almost certain to win. Even then will they have the cojones to get the job done?

The tendentious outbursts of the union movement on the issue in recent weeks is a fair indication of the barrage of propaganda voters can expect over the next two years – which suggests to me that the public would benefit hugely from another Hilmer-style inquiry.

Getting such a review up cannot occur under a federal Labor government, in thrall as it is to the union movement. But an Abbott government might be able to persuade Newman and O’Farrell of the need for a review in the national interest. 

The case for a new independent inquiry seems to me to be the greater when you consider that, on one side of the ledger, the network sales in the two states would release something like $60 billion for investment in public infrastructure, not a minor matter for the economy.

The prospect of this happening recently got the lobby group Infrastructure Partnerships Australia all excited – its chief executive, Brendan Lyons, said selling government-owned electricity assets would be “an Exocet missle completely transforming infrastructure funding” and he was only talking about Queensland, where the government’s committee of audit led by Peter Costello is urging this step.

Infrastructure Partnerships Australia wants to see a “mature public debate” involving business groups, unions and policymakers to resolve how this second big bout of electricity reform can be pursued “in a way that meets the interests of households, taxpayers and electricity workers” – although I would have thought that business consumers, who account for 70 per cent of power demand, might have merited a mention, too.

Now we all know that “debate” in our political and media environment just means a huge, incoherent shouting match – witness the “debates” over pricing carbon, education, superannuation reform and the NBN – so it seems to me a no-brainer that the circuit-breaker has to be a high-level review at arm’s length from the rowdy mob.

From my perspective, the case for the privatisation of all power assets is worthwhile because it ensures that a commercial discipline is applied to the operation and capital management of the networks.

Far from this leaving us all liable to be raped and pillaged by greedy foreign capitalists – the current trade union case – the benefits for consumers of a move in this direction will rely on an efficient regulation system and effective provision of government help for genuinely vulnerable households.

It says something about how governments manage processes that we are at present in to at least the second major attempt to produce a robust network regulatory system that users and suppliers can trust – some would argue that it is actually the third attempt.

Privatisation and trustworthy regulation of the non-competitive part of the power supply chain go together, as they say, like a horse and carriage.

It is not to policymakers’ credit that we are 20 years on from the Hilmer Report and still struggling to bring the two parts together in a proper fit.

It is more than 15 years since Victoria raised the equivalent of $28 billion in today’s dollars from privatising the state power system and more than 12 years since South Australia raised almost $7 billion in today’s money values from following suit.

The protagonists for and against privatisation shouting at each other will take us nowhere, so why not take an example from Keating and set up another Hilmer-style report to show the way forward?

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.