Paul Syvret in the Courier-Mail today has a nice summary of the Productivity Commission’s latest report on Electricity Network Regulation. The Commission suggests there would be cost savings and lower power bills flowing from privatisation of electricity network businesses such as Energex and Ergon, noting on pages 24-25:
While governments have a legitimate role in owning and operating many services in Australia, the rationale for state-ownership of electricity network businesses no longer holds. This reflects the development of sophisticated incentive regulations that function best when the regulated businesses have strong cost-minimising and profit motives.
State governments often impose multiple constraints on state-owned corporations that are incompatible with maximising returns to their shareholders…
…There are strong arguments for privatisation of these businesses. There is no evidence that the productivity, reliability, quality or cost performance of private sector electricity network businesses is worse than their public sector equivalents. To the contrary, the evidence in Australia and internationally suggests that such private sector enterprises are more efficient. [emphasis added]
The Productivity Commission makes the important point that consumer welfare is best protected by having good regulation in place, rather than State ownership. Indeed, State ownership can be bad for consumers because Energex and Ergon might be too worried about the political consequences of blackouts or brownouts that they over-invest in infrastructure to minimise the risk of power failures at an unacceptable cost to the community.
My previous posts on the electricity sector, particularly the desirability of selling Energex and Ergon (which are now to be merged but remain in State ownership), include: