Whatever you think about the merits of the issue (and it’s certain that Morris Iemma doesn’t have the public of New South Wales on his side with his electricity privatisation drive), the politics of Iemma’s decision to ignore a contrary vote of the Labor Party conference which was carried overwhelmingly - by 702 to 107 - are intriguing.
Iemma’s trying to position the whole thing as a fight with the unions. You’re supposed to win electoral kudos as a Labor leader by standing up to “union bosses”, or so the Tony Blair script goes. But that ignores the fact that Iemma’s at the end of his government’s tether, not a bold new opposition leader, and both he and the policy are wildly unpopular, whereas the unions’ position is in keeping with the public will. He’s also broken not just election promises but specific undertakings to the party. I don’t think the “tough guy standing up for what he thinks is right” act is going to do him any favours, not at all.
It also ignores the fact that the great majority of branch members in the ALP are opposed as well. So it’s not just the unions. But it’s becoming clearer why former Iemma acolyte Mark Aarons was arguing for sundering the link between the Labor party and the labour movement recently in Robert Manne’s Dear Mr Rudd tome. If Iemma and Costa are sounding the same notes as the Tories do when they criticise the ALP for its union links, anyone with an ounce of political nous should be able to see they’re creating all sorts of problems for themselves and for the Labor party outside NSW and federally.
One being why anyone should bother to join the Labor party at all unless they’re in it just for the chance of a job or public office.
In the short term, there’ll be a lot of eyes on the ALP caucus meeting on Tuesday.
Ps: And just quietly, I had to laugh at the briefings from Michael Costa’s office that the NSW union movement was full of outsized egos. Maybe that’s true about another gentleman with a shaven head. But pot, kettle, etc.
The party votes overwhelmingly against privitisation yet Iemma says he’s going to go ahead with it anyway? That seems ridiculous. Can he do it?
Is there any way that rank and file members can call for a leadership spill?
No, but they can charge Iemma with an infringement of the party constitution under the party’s disciplinary process.
Some exciteable souls think Iemma might not survive the caucus meeting. We’ll see!
Of course, he could be doing that oddest thing for a professional politician. The unpopular thing that they believe to be right and necessary. Odd, but it is a possibility.
Well in that case surely he’d be mounting better arguments as well as spin??? I think Iemma is a canny beast and I suspect this has more to do with a successful exit strategy (ie keeping in good with those who can do favours for him when his time is up). After all does anyone seriously see Iemma staying as premier for another term???
It’ll be interesting to see what happens when ALP MPs cross the floor. Will they risk losing their preselections by voting against the Premier’s decision even though State Conference put its views forward?
It doesn’t sound good for the ALP to have their parliamentary leadership ignoring the party rank and file. If Iemma and Costa go ahead with this it could split the party and give the Liberals a free kick at winning the next election (which is already a possibility).
Bob Carr is supporting Iemma in this, claiming that anyone in favour of a state-owned monopoly on electricity generation and distribution is subscribing to a Soviet-era ideology. Flogging off public utilities to make a quick buck isn’t always the best idea, though; just look at the mess both Telstra and the bush are in.
Iemma is not staying and neither is Costa, they are fighting for this skull on the flagpole because they need to establish their big energy (big end of town) credentials when they go looking for a job in the private sector.
No one in NSW wants this privatisation, simply because they suspect they are being sold down the road by a Govt that has well established credentials as incompetent bufoons and corrupt administrators.
That is all.
Phil nails it.
I don’t think so Phil. Costa has no need to prove his Tory economic credentials to anyone, let alone the banks and fund managers. It’s much more about a) the state ALP caucus being caught between the SMH’s requirement to run big fuck-off surpluses and the Telegraph’s requirement to raise pots of money for public spending, and b) Costa’s desire to carve a bit of a name for himself before he retires into obscurity. In this sense Andrew Reynolds is right; the Treasurer is just trying to do the right thing as he sees it. The issue is whether the Parliamentary Party are entitled to do it in the face of the opposition of the Conference to which they’re pledged. (The answer is of course not, what’d be the point of having a Party otherwise?)
Costa’s not moving to the private sector, either, as he’s demonstrated in spades that he couldn’t stitch a deal together with a box full of gaffer tape. Competent capitalists rightly tend to avoid such poisonous buffoons.
I say: draft Robbo for Premier while he’s available. You know it makes sense.
If I were in the NSW ALP I’d be calling for Iemma et al to face party disciplinary action. I’d also be talking to MPs and telling them that they won’t be getting over the line next time around with these duds in their leadership.
Carr’s fetishism for establishing perverse, counterproductive markets is well established (cf. NSW GGAS).
Costa et al missed out on a golden opportunity to establish some green credentials and play wedgies with the Unions by actually arguing for the merits of privatisation viz. windnsolar rather than making shiny distractions like ‘European light rail’ proposals. Of course, since he’s a noted AGW sceptic that would never happen. One of my housemates works for a generation company and reckons they would have invested a lot more in renewables over the past few years if they didn’t have to run everything past the impenetrable bureaucracy of Treasury. But that could be equally used as an argument for reforming the administrators themselves.
And what Phil said.
San, I think this is about a lot of things only peripherally associated with the future of the NSW energy supply.
I support Iemma on this - so do Kevin Rudd, Paul Keating, Bob Carr and my next door neighbour. I agree that he’s done a lousy job of selling it. but equally, Unions NSW don’t offer a case for long-term public ownership that goes much beyond “privatisation is wrong” and “electricity prices would go up,” when the truth is that the cost of power to consumers is going to go up regardless of who is generating it. As Rudd recently observed, rigid ideological adherence to either the public or the private ownership model – simply for the sake of ideology – won’t provide a solution to anything.
All of this is enmeshed in the scramble for the levers of - and paths to - party power, along with posturing, ego clash and general bloody mindedness.
It’s also fair to say that “privatisation” in NSW is automatically read against stuff like the Cross-City tunnel which is why punters tell pollsters that they’re opposed to it.
Pollsters never ask punters how we should secure our power generating future because our interest doesn’t extend much beyond the requirement to have it available as cheaply as possible when we want it. Or else.
Ironically, the compromise deal that should have emerged weeks ago will probably be cobbled together this week. It says a lot about the general state of play in NSW that it had to be done like this.
Meanwhile the state opposition leader keeps ducking behind a bush everytime a journo hoves into view in order to avoid having an opinion on the matter. It’s a pretty gutless performance and in stark contrast to the image conveyed in Iemma sticking to his guns.
I don’t think any anti-privatisation MPs should have any trouble with preselections (at least over this issue) next time around, both because the people running the organisation seem firmly anti-privatisation and also because I don’t see Iemma and Costa being around in 2011 to take their revenge. But I expect some of the more stridently pro-privatisation MPs who relied on N40 to get into Parliament may find that safety net disappear come next preselection.
Well, If Iemma privatises, then there will be at least some transitional arrangements for workers - even if that means layoffs.
If the Libs get in, it will be a staged conflict like Kennet and the Tramways Union (or Joh B-P and Seqeb), and they will be out without a penny.
Then, armed with the $15Bn from the sale, and no redundancy for the workers, the Libs will have a war chest enough to keep them in power for a generation. (No pun intended).
What a choice, eh?
And with the Libs in power (no further pun intended) in NSW, there goes Labor’s opportunity federally to get things through with the cooperation of all the States.
Kevvie had better pull out all the stops - cut the symbolic crap and get real legislation and State/Feral issues sorted before Iemma goes, or it won’t happen.
I do not believe the unions are so stupid as not to recognise this…so I figure they must be organising their own exit packages while the going is good.
Good choice folks.
Probably the best piece I’ve read today on the privatisation, if only because it details how the big end of town see this. But the kicker for me was this.
Sell Forestry NSW? WTF! Not to mention the STA. All for what, a credit rating from the same criminal assholes who gave us the subprime meltdown?
so i’m confused about why all of sudden (?) opinion people seem to be supporting iemma? e.g. on insiders yesterday; the smh editorial today; kevin rudd…
i agree with you kim and was surprised to hear all these people congratulating iemma exactly for standing up against those crazy unions who heaven help us think they should have a say.
Ah yes Phil: more standardised misuse of the word “reform” so that the money launderers can buy a few more Speed Queens. Does anybody actually believe that any funds raised would be put to the (infrastructure)purposes touted?
Your argument looks good on paper, Geoff, but you’re ignoring the convenient case study presented by Victoria’s electricity privatisation.
Prices went up very quickly down there (can’t remember the exact figure), and Victorians are currently paying more for their power than NSW. They have to have an ombudsman checking out cases to make sure people aren’t getting their power unethically cut off.
There’s always this werid idea that privatising basic goods and services and monopoly industries is a good thing, because the private sector can do it better and cheaper. I agree that private can sometimes do it better, but cheaper? Don’t be crazy! They exist to make money; any savings will be profit, further more, when you privatise a monopoly, they end up gouging consumers (and well they should, any self-respecting company would). and holding the government to account over a barrel.
Look at Telstra, look at power in Vic. The idea this is a good idea is nuts. Governments love it because they get to say “look! Free money!” and then when it (inevitably) fucks up, they can blame it on the company not themselves (See again, Telstra).
I would be itnerested to see where the Oz heard the idea of privatising the STA; it would be electoral suicide. Look at the privatised bus system in Sydney; it’s beyond a joke.
Power distribution is a natural monopoly.
Power generation isn’t necessarily, particularly as a) interstate grid connections are improving, and b) renewable micro-generation is growing (everybody loves rooftop solar, don’t they???).
And Geoff is right. The cost of power generation is going to go up in the medium term regardless. Why? Because the cost of new-build coal (even ignoring greenhouse issues) has doubled over the past couple of years. Gas infrastructure has as well, and buying the gas to fuel it now has to compete with selling the gas on the world market, rather than just domestically.
When you take the cost of greenhouse (either buying permits, or installing more expensive non-emitting tech) the inevitable conclusion is that electricity costs are going to go up substantially.
Geoff (11) and Robert (18) are right. Power generation is going to become hugely expensive and risky. The private Victorian coal generators are worried, with some justification, that Rudd’s emission’s reduction and trading policy could wipe billions of $ off their value. The NSW government should get out while it still can find a buyer foolhardy enough to take these dogs off its hands.
Of course, having Iemma and Costa sell the policy is a recipe for political and financial failure. Those two couldn’t sell the idea of chemotherapy in a cancer ward.
“Look at the privatised bus system in Sydney; it’s beyond a joke”
As is the publicly owned rail system.
The problem with NSW is the entrenched Rum Corps mentality which makes the NSW public sector a byword for corruption, incompetence, venality, stupidity and laziness. The only way out is to break the nexus between Unions NSW, the government and certain elements of the business sector, not least the state owned power businesses.
John Robertson understands this very well. What is at stake is future of the Sussex Street machine.
The merits of privatisation almost don’t matter. No-one trusts these clowns to do this right. I’d actually be more inclined to support privatisation if it was being run by Jeff Kennett. In that case there would at least be someone on the government side looking to get a good deal. How on earth can anyone feel the Macquarie Street circus will get this rigth when they have screwed up multiple previous and far simpler privatisations? Not to mention the unbelievably arrogant attitude to corruption and conflicts of interest that has them claim there is nothing wrong with the Bob Carr walking out of the premiers office straight into a $300,000 a year job working for the very people who would be buying up these assets.
And South Australia, where prices for consumers jumped and prices for corporate users dropped. And then the Liberals lost the election to a lacklustre opposition almost entirely because they’d broken the “don’t privatise electricity” promise they’d made.
And it’s looking like a potential deal collapsed in the face of Michael Costa’s ego:
http://www.smh.com.au/news/national/costas-obscene-outburst-at-unions/2008/05/04/1209839457247.html
Electricity prices are going up anyway. And the more they go up, the less electricity will be produced, the fewer greenhouse gases are released.
It is jolly indeed to see arguments, on this blog of all places, against electricity privatisation on the grounds that it will lead to higher electricity prices.
Of course, privatisation as such won’t have any effect on prices. The NSW generators will continue to do what they do now, which is bid to dispatch electricity in the national electricity market. They will try to get the highest price they can, which is exactly they are doing now.
Diversion:
The Rum Corps mentality was that of the early nineteenth century British officer class, who were frankly far less concerned with their market than with their place in the colonial hierarchy. The reason they (and Macarthur) moved against Bligh wasn’t because he threatened their profits but because they thought he threatened their roles as gentlemen. They weren’t incompetent, they weren’t lazy, and by the standards of the time, they weren’t even very corrupt.
There’s an analogy here somewhere, but that’s not it.
/warnerd
Even if you are philosophically inclined to power privatizations in NSW, you have to be against Iemma Costa Tripodi Meagher et al doing it. This mob couldn’t run a chook raffle without questions arising. Allowing them to get their hands on so much money which would they would then liberally piss up against a wall is something to be avoided at all costs. With Costa Iemma and Sartor running the show any privatization would be a feeding frenzy for the big end of town and consumers would end up with the bill.
And another thing;. having Bob Carr trying to get Iemma to do something he was too scared to do is a bit rich. Don’t let’s forget that he now gets his riding instructions from Macquarie Bank which will, no doubt, benefit greatly from any privatization.
Spiros, I said in the post I’m commenting on the politics not the merits of the decision.
And your argument seems to me to make false assumptions:
(1) that price signals to household consumers are the most important. The evidence in other states is that distributors discount prices to big corporate users to secure their business;
(2) that distributors will just charge consumers the wholesale price. They’re in the business of making profits, which is why prices have jumped in Queensland since the distributors were privatised.
As I understand it some weeks ago the Alexandria branch of the NSW ALP voted to haul Iemma and Costa before the party’s disciplinary committee. They are in danger of having their party membeeship suspended and might even get expelled. Or has the situation changed since then? Does anybody know?
In any case parliamentary members can cross the floor on the vote on electricity privatisation with no fear of party retribution now. After all, in theory, its the branches who preselect candidates, as noted in a comment above. Whether this means their parliamnentary careers would be stalled forever is another question. And Rudd would be very wise to keep right out of it, from now on.
And Bob Carr seems to be forgetting the ALP was started by the unions and until c.1977 was in fact a socialist party. Extraordinary bullsh*t for a man of his knowledge of history to equate western style socialism with the Soviet Union, and I’m sure he knows it.Or were all t5hose governments who believed in a mixed economy closet Commies. I mean, if Carr has access to a whole bunch of historical documents no other historian has ever seen,from all around the Western world, I wish he’d let us see them.
Kim, I don’t know what you are talking about, and I’m not sure you do either.
(1) While households and businesses pay different prices, both will respond to price signals. The whole edifice of emissions trading is based on this principle. If it’s not true, then NSW electricity privatisation will be the least of anyone’s worries.
(2) Electricity distributors, including the private companies, have their prices strictly regulated. Perhaps you mean electricity retailers. Do they add a margin to wholesale prices? Of course, just as retail fruit and vegie sellers add a margin to the wholesale prices they pay. But really, so what?
(1) Spiros, if the price signals are in the wrong direction for businesses, then isn’t that a problem?
(2) Sorry, I meant retailers. You’re very complacent about profit margins. I don’t think public goods should be produced and sold for profit. So yep, I’m opposed to privatisation.
“As I understand it some weeks ago the Alexandria branch of the NSW ALP voted to haul Iemma and Costa before the party’s disciplinary committee. They are in danger of having their party membeeship suspended and might even get expelled. Or has the situation changed since then? Does anybody know?”
Paul, they’re not in danger of anything much from that quarter other than an inadvertent poke in the eye from the theatrically waving finger of gesture politics.
It’d be interesting to see how a disciplinary hearing would get around the plain fact that they’ve broken the rules of the party, though, Geoff.
Kim, in what sense are you using the term “public good” for electricity? It’s not a public good in the economic sense.
If you mean “essential”, I don’t think it’s any more essential than a) petrol, b) food, or c) medical drugs, all of which are provided by the private sector, though in the case of medicine the market is extremely heavily regulated.
If you mean “currently provided by the public sector”, the further question is why you think it’s better provided by the public sector than the private sector. I’m not convinced by your argument on cross-subsidies for household customers. That ultimately gets passed on to the customers of those businesses - in large part, NSW householders - anyway. TANSTAAFL.
Don’t get me wrong; I’m not not necessarily for the privatization, particularly of the distribution networks as it’s a natural monopoly. But it seems to me that the arguments made against it have been pretty weak, however politically successful they’ve been.
Spiros, I’m not defending the public sector - for my argument to work, you don’t need to (and you could make an argument the bus system and pricing is worse than the train, but you don’t need to).
All I’m saying is that I don’t see any evidence to suggest the private sector would be better than the public sector - especially in, as someone as put it, “a dog of a sector”, where making profit will be that much harder.
In fact, we have a tonne of evidence that the private sector will - if not be worse or the same - at least be more expensive, and those prices rises in VIC (I can’t speak for SA or QLD, but would assume it to be the same) were not a result of inflation or the increased cost of coal - if that was the case they would have been commensurate with the public rises in NSW. But they’re not, they’re way more.
I a) don’t want to pay more for the same type of power,
b) don’t want another government to shift responsibility for something else onto a private company, it will then have to keep bailing out in one form or another for decades, without being able to actually enforce any kind of policy.
c) the consequences of which we will be paying twice for - firstly as consumers, and secondly as tax payers. No thanks. That sounds shit.
Robert, the absence of effective competition seems to me to be the difference between power and food.
I also don’t see petrol as an essential good for consumers.
“You’re very complacent about profit margins. I don’t think public goods should be produced and sold for profit. So yep, I’m opposed to privatisation.”
What do you mean by “public good”? Electricity is not actually a public good in the way that economists use the term.
Perhaps you just mean that electricity is a basic necessity.
In which case, I have some shocking (sorry) news for you: all sorts of necessities are provided by the private sector, and you probably don’t think twice about obtaining them from companies. Food, medicine, health services (remember, your nice family GP is actually, gasp, making profit from her services) …
There’s no need to be sarcastic and patronising, Paulus.
Electricity prices are going to go up for businesses because wholesale prices are going to go up for retailers.
You’ve never heard of discounting to secure business, Spiros? I repeat that’s what occurred in South Australia and Victoria.
My comment crossed with Robert’s … I’m not just parroting him!
The way it’s worked in Queensland is that retailers have effective monopolies in the household sector delineated geographically but they compete for commercial business. Securing market share via discounting margins is surely something you’re familiar with?
To get back to the politics of it, an interesting meme that was floating around this morning on local radio (and Geraldine Doogue might have mentioned it on RN) was essentially “the ALP members aren’t representative, Iemma et al are democratically elected and so should be able to do what they want”. Which at first pass seems fine, except that they were elected as part of the ALP. Do they then have the right to go against the ALP’s wishes? And there’s the fact that the majority of the public are probably against privatisation too. Just where does the distinction between executive discretion and party and public accountability lie here?
Those are some of the interesting questions I think Iemma has inadvertently raised.
As I said in the post, he specifically gave undertakings before and after the last election not to privatise. So that’s a relevant factor too.
There are forces working in opposite directions.
When electricity retailers try to win secure some business, they may well offer discounts. Climate change issues aside, this is a good thing.
But carbon restrictions will mean that their wholesale prices will go up. They will pass on those price rises. Businesses and households will economise on their use of electricity, but installing more efficient light bulbs, 5 star appliances, not getting air conditioners with motors that could power a jumbo jet etc.
This will happen regardless of whether electricity is supplied by private companies or the state.
Apologies, Kim. I normally keep a better grip on my inner snark, but sometimes he just escapes his cage …
As regards the merits of electricity privatisation (which is a far more interesting topic than the NSW politics of it IMHO), I note that many big-government Euro nations have no problems with letting companies produce and sell electricity.
In Sweden, for example, “There are more than 100 electricity production companies in Sweden but generation is dominated by a small number of companies. … The Swedish electricity market was deregulated in 1996, when both production and trading of electricity was opened to competition. All customers are eligible to choose their electricity supplier.” (The national grid is still owned by the state.)
http://www.iern.net/country_factsheets/market-sweden.htm
They’ve evidently realised, as Iemma has, that it’s more important for government to spend money on social goals like education and health than on goods and services that can be provided by the private sector.
No probs, Paulus.
Actually, one of the interesting things about socialist Sweden is that they never got into public ownership. The equation of that with socialism is part of the English speaking Labor/Labour tradition rather than northern continental Social Democracy.
I note that they’ve got competition for households in there, though, which is what we don’t have in Qld.
I’m not persuaded by Spiros’ argument which seems to me to conflate changes to pricing resulting from emmissions trading with privatisation effects.
The precedent for expulsion is that of Premier Holman and Prime Minister Hughes who were expelled in 1916 for advocating conscription against the policy and Conference of the ALP. Both had the support of their Cabinet and the majority support of their caucus, and thought conscription was the right thing to do.
Today, a disciplinary motion would have to go through Disputes Committee and/or Administrative Committee. I can guarantee that neither will raise a finger.
A better question is what interest unions and branch members have in working to re-elect a Government that isn’t in any way their Party.
I think Iemma and Costa would’ve had a politically easier time selling this as part of a package which beefs up MRETs in an attempt to make NSW’s electricity sector more efficient and environmentally friendly at the same time. Companies looking to make a quick buck would buy the coal-fired generators and run them until the end of their lifetime while the long-term companies would invest in renewables and may even sell shares to the quick-buck companies down the road.
Of course, MRETs would damage the price the government can get for coal fired power stations.
If prices have to go up to curb consumption and thus lower greenhouse gases, so be it. Electricity is, more and more, sold through markets and that’s how markets work. What I do have a problem with is large companies using pricing mechanisms to drive the smaller competitors out of business so they can take advantage of a relatively inelastic demand for electricity so they make massive profits and not invest that money into clean energy sources. My great fear with privatisation is that the public loses when it was justified on the grounds of the public winning.
“They’ve evidently realised, as Iemma has, that it’s more important for government to spend money on social goals like education and health than on goods and services that can be provided by the private sector.”
Government control of essential services has a most positive community benefit. It is also the goldmine that can help fund education and health. This is just ideologically driven deform and NSW folks should realise how lucky they are not to need to fork out for a shareholders cut when they pay for their power.
Teh lesser evil, I imagine. But I also imagine that’s wearing pretty thin.
What evidence has the NSW government shown in any case of being able to do anything competent when it spends money on education and health?
But Costa doesn’t believe in AGW, so that was never going to happen.
Kim, I accept that your post is looking at the politics rather than the merits. But I suspect the reason why Iemma is investing so much in this is that he believes the politics and the merits are aligned, or will be by March 2011. There really does seem to be a realisation that a big slice of the scepticism with which the NSW Government is viewed can be traced to dissatisfaction with infrastructure, especially roads and rail. Fixing decades of underinvestment in such things is no doubt not cheap but, economically and politically, it’s easy to see why they want to try. In an environment where their capacity to raise additional tax revenue or additional debt is limited, I suspect they think that shifting capital from things like power generation to things like roads and rail makes good sense both economically and politically.
I have no doubt that’s what they’re thinking, Buccrabendinni, but I’d question:
(a) their capacity to deliver and given their apparent incapacity, the public scepticism that would (probably rightly) surround promises to put more bucks into infrastructure;
(b) the massive self-inflicted damage on their own party.
“Government control of essential services has a most positive community benefit. It is also the goldmine that can help fund education and health.”
Say what, joe2? “Goldmine?” NSW will apparently have to toss $15 billion down this particular “goldmine” in the next few years, if it stays in public hands.
A better description might be “bottomless pit” to throw public money into.
I don’t think that criticism of the Victorian privatised experience holds much water. Victorians may well pay more than NSWalers for power, or you could say they don’t cross-subsidise as heavily and they pay the true cost of power. Also, Victoria doesn’t have $32 billion of debt for which an interest bill must be paid.
The job losses in the La Trobe valley occurred before privatisation.
The only real problem I have with privatisation is that it is not as easy to reward energy efficiency, the old SEC could have as part of its business the generation of ‘nega-watts’.
Sam, I’m pretty skeptical of your argument on the politics - and not in this case because I think MRETs are a crock…
Unless I am very much mistaken, the main reason that the unions are opposed to the privatization is concerns about job losses in the coal industry, which is very heavily unionized.
A wholesale switch to renewables will still shrink the coal industry, regardless of who owns it.
“The only real problem I have with privatisation is that it is not as easy to reward energy efficiency,…”
And it is a big problem.
You try telling a company that they need to sell less of the product. Essential services are best in the communities hands because the profit motive, should not be the only consideration. The time spent trying to regulate by government would be far better expended on owning and managing the bloody thing in the first place.
I tend to again with Joe2 at 58. Conservation of energy, for environmental reasons, runs counter to the profit motive. As I understand the power providers want you to use more of their product and offer pricing packages accordingly (ie the more you use the less you pay per unit)
I agree, and that’s where I can’t get my head around Spiros’ argument.
Kim, I’m not really sure that Iemma has any other option but to try this if he is serious about a big increase in infrastructure spending. I accept your point about the public being sceptical of everything they do (although I think some of this comes from being unfairly targeted by the media at times) but it’s hard to see an easy way out for them. I don’t think they’ll have a hope in 2011 if they don’t take decisive action on infrastructure, so I suppose that’s why I question whether this is really such a political error. It’s a risk, you’re absolutely right about that, but I’m inclined to think that this course does give them their best chance. Given that the alternative is a government dominated by David Clarke, I really hope they’re right.
“As I understand the power providers want you to use more of their product and offer pricing packages accordingly (ie the more you use the less you pay per unit)”
The NSW government owned electricity businesses do exactly this. If they were privately owned, they would do exactly this.
The NSW government owned electricity businesses however have the added complexity of being an integral (pun intended) component of NSW Inc, whose controlling shareholders are the NSW Right and Unions NSW, with special places reserved for some (but only some) business interests.
It makes perfect sense, Phil, when you consider that Forest NSW has been a major player in the commodification of land based carbon sinks for the past decade at least: http://www.forest.nsw.gov.au/env_services/carbon/accounting/aust_std/Default.asp
See also the WA Forest Products Commission http://www.fpc.wa.gov.au/ who allows BP put up those posters saying the sell carbon neutral fuel. We’re all ‘Carbon Managers’ now.
Kim @52, I know, but it’d be nice to believe that a politician acting against their beliefs could have a positive impact.
Robert @57, they could’ve at least swung the ETU members’ votes, had a shot at getting the Greens’ support in the Legislative Chamber and perhaps even got the public on side. Who wouldn’t like the idea of further renewable energy as well as light rail. It would’ve made the government sound like they were planning for the 21st century rather than the 20th.
Will anyone make the claim that this could be what brings down Iemma? Will it lead to a no-confidence motion in the Legislative Assembly from the Liberals and those in the ALP who think the party leadership should stick to the rules?
patrickg said:
Thats exactly what a carbon tax would result in. And one of the better ways to encourage better efficiency in the home and businesses.
The politics of this are far more important in the end than the issue of electricity privatisation, not because there isn’t an interesting argument to be had on the issue of the economics and politics of privately owned electricity generation, but because the economic issues were barely addressed at the Conference, except by Riordan in what was the final speech on the issue on Saturday.
The fact is that this government is so hated by both the electorate and its own party, that it wouldn’t matter what arguments were ponied up-people don’t trust them to do anything for the right reasons, and nor do they believe any reasons that are given at the time, whether they seem right or not.
The Machine now has only one choice-insist that they are resposible for administering a political party that at least plays lip service to the idea of the primacy of the members when it comes to the policy and platform that is put to the electorate at each election, or, concede that the very idea is preposterous, and establish a private consultancy, that will, for a fee, assist any would be candidates to run for elections. That would complete the whole logic of the last twenty years. It is apparently, outrageoulsy undemocratic for a voluntary assoication (that is, a political party) to establish Rules for its association, binding on its memebrs, when the poeple who belong to it, are dirty unwashed, self interested ignorant and tragic people like elected union officals who also represetn voluntary assoications, and party bvranch memerbs, who are also elected by volunteers who turn up on their own volition to meetings and the like, for the purpose.
The truth is simple. No-one is forced to join the ALP (or any Party in this country that I am aware of), and nor is anyone forced to join a union, propaganda from daleks with an axe to grind, to the contrary. People who believe that the ALP’s way of doing business is anachronistic, old fashioned, undemocratic or otherwise out of tune with the zeitgeist, are free to run on their own ticket as independents, or on another party’s ticket.
Meanwhile, you dance with the one that bring ya
Sam: as Kim’s responses show, everybody likes renewable energy until they have to pay extra for it.
Well said amused. Were you at Conference too?
Kim/Joe2/Rayedish — conservation isn’t an end in itself, it’s just one way of reducing GHG emissions (and other externalities). A carbon tax is the cheapest way to reduce these emissions — that will result in a mix of conservation, renewable energy and (if it is feasible and cheap enough) sequestration. Taking these measures will cost money, and it’s arguably easier for the government to impose a carbon tax rather than directly increasing electricity prices (directly upsetting voters) and reducing the use of coal (thereby upsetting unionised coal miners).
Robert, my concern is that not everyone will have to pay more for it! I also think equity needs to be figured into the household equation.
And I think this is the stupidest possible way of responding to climate change issues, though I also think what Iemma and Costa are up to has nothing to do with that.
And I agree with amused that the implications for the Labor party and government are more important than the merits of the stoush.
That is - the complacency from those like Spiros who seem to be arguing - private power will be more expensive, but that’s good. As I pointed out several times, this completely ignores the fact that private power to corporate customers is often cheaper.
If you want more expensive nonrenewable energy - with the cost distributed equitably - and more attention given to renewable energy that isn’t yet commercially competitive - I think privatising nonrenewable energy is just nuts.
But like I say, climate change issues are very far from the NSW regime’s mind, except insofar as Costa seems to resent the fact that they might reduce the profit potential of what’s being sold, and thus the sale price.
And also, am I right in thinking that the private investment Costa and Iemma say is necessary for NSW power generation is going to channelled entirely into coal?
Chris said:
Yeah, but it would be a carbon tax, as opposed to a “we sold a bum steer and now they need to jack to the prices to make money, which is what private companies do” tax.
Kim, sorry for using your comment like that. Must..remember..to..breathe..before…posting.
I share your concerns about equity, Kim, but I’m really unconvinced that cross-subsidising the electricity of NSW households is a good way of achieving it. The reason why big customers of electricity get discounts is that the cost of providing it to them is less. It’s not that private power companies are setting out to gouge household consumers - or, more to the point, they are setting out to gouge household consumers, but they’re equally setting out to gouge business consumers.
The effect of the cross-subsidy is to, in effect, encourage the over-use of domestic electricity and the under-use of electricity in business (and other big, centralized consumers), than what would happen given people’s expressed preferences. Think of it like this: the current pricing structure makes running the filter in a home pool cheaper, and the filter at the local swim center dearer.
Now, the big but about this rather twee for-instance is that the cross-subsidy probably represents a net transfer from the wealthy to the less-wealthy, something that is very important. But the question is whether the current arrangements are a particularly sensible or efficient way of achieving such an outcome.
Wouldn’t it make more sense just to give the lower-paid more money (through upping the pensioners’ utility allowance, for instance), which they could then choose to spend on electricity, gas, going to the local pool, or whatever else?
Kim,
To me at least privatisation allows all of what you want as well as transparency. I have worked on a few power deals both here and in the UK over the last 10 years. The economics and politics of power generation invariably get mixed up in government ownership. The deals that get done to try to meet the 100s of competing objectives of the publically owned firms just result in bad decisions.
A good example is WA, where the recent government power station builds have all been in coal to meet the political requirements relating a certain electorates - and both parties did it. The result was a coal fired plant that emitted lots more sulphates and CO2 than a gas one at a higher price, with the government subsidising the infrastructure cost. To try to make some sense out of it they broke it up into four trading entities - and the result was even higher costs, resulting underinvestment and fewer renewables.
Selling the whole lot off and, if thought needed, then regulating all suppliers equally is much, much better than having a system that is so open to political influence, short-term budgetary pressure etc.
Oops. Sorry about the typos above. Spellcheck out of commission. Yes, Liam I was at Conference, and the speeches by Roozendal and Kenneally were a revelation, even to someone like myself, who takes pride in being either amused or completely unsurprised by the nonesense served up at these types of fests.
BTW, isn’t is lovely how ‘democracy’ now becomes the right no, the duty actually, to ignore elected delegates, in favour of a claque of unelected infrastructure investors, media commentators, (aka shills for those that ‘bring them’ as it were), and a tiny bunch of unelected, appointed careerists nesting in Ministers’ offices? I mean, could someone who is a supporter of the ‘let’s remake policy and f*ck youse’ argument, care to engage with this fundamental aspect of policy making in a political party that makes ritual obeisance to the importance of democracy?
The whole debate run by the Sydney and national media today is laughable. When it comes to making money, North korea or the PRC appear to be the preferential procedural option. Funny that. But why am I not suprised? If unions were run in the way that these louts propose that the polity be run, there wouldn’t be an elected union leader left to boast about their exploits. But of course, they know that. And that’s the problem with unions as well. Too many uneducated and ignorant louts, thinking they have a right to have an opinion on matters that must be, that as a matter of law and right, have to be, matters about which they should just shut the f*ck up. As we all know, this is a terrible governance model, and one to be deplored when one is trying to run a democracy business
The key reason that the big end of town wants a power sell off now is that we are a pivotal point where the future for power generation is not laid out. It is believed that all future energy options are both expensive and different. Two things that establishment dislike. By capturing existing energy infrastructure now the players intend to secure supply contract futures. In this way they will have the ability to delay the introduction of alternatives and maintain the use of cheap coal. It is not just the assets, it is the commitments that go with them (think road and tunnel contracts).
By flogging the assets Iemma intends to pick up cash, dispose of worn out facilities, reduce his obligation to become involved in global warming compliance in an asset holding framework, and distance the government from the criticism of coal energy reliance.
All up it is a guttless strategy considering what is at stake.
I don’t agree with all his commentary, but Niall Cook accurately describes the balls up that is quasi-privatisation of electricity in Queensland.
http://www.waddayano.org/blog/2008/05/how_power_corrupts.php
You have to wonder what kind of company is going to want to buy coal-powered generators when everyone knows that coal usage is going to become insanely expensive once the Kyoto carbon cap and trading schemes come into force. Just as Rudd promised.
Oh wait a minute, coal prices are sky high alright. But the profits are going to producers and well placed distributors.
And NSW and VIC are planning more coal-powered generators to cope with expected increases in base-load power demand.
So I guess the fix is in. We sell off our public utilities for a song to private companies on the story that coal’s future is bleak.
But King Coal continues to rule, Greenland melts and the NSW Right all get sinecures once they hang up their head-kicking boots.
And Rudd is on-side.
Beautiful. Welcome to the 21C parliamentary ALP, where everything is a done deal.
“So I guess the fix is in. We sell off our public utilities for a song to private companies on the story that coal’s future is bleak.”
Well said Jack. The only thing you forgot to mention is, “commerc