Private sector involvement should restrain growth in electricity prices

There was an excellent article in Saturday’s Courier-Mail, quoting me towards the end of it, by State Political Reporter, Steven Wardill, on the likely impacts of the proposed leasing out of Queensland’s electricity network assets:

Energy prices have risen rapidly in Australia regardless of who owns the infrastructure

This extract from the article contains some very interesting data:

Infrastructure Partnerships Australia chief Brendan Lyon believes privatisation in Queensland would herald lower prices.

“Queensland’s electricity grid is the least efficient in the country, with network costs increasing 140 per cent in the past 17 years,’’ he says.

“Over the same period, network costs in the privately operated Victorian market have fallen by 18 per cent.”

Predicting lower power prices seems a crazy brave call. But Lyon’s view is echoed in an Ernst and Young report commissioned by the New South Wales Government.

It found that since 1996, the average annual Queensland electricity bill had risen by $932 while in the privatised Victorian network the increase was $743.

I’m unsure if I’d bet that prices would fall, but I would expect that the growth rate of electricity prices would be lower under private management than under the status quo.

The article also includes some observations I made about leasing out government-owned assets on ABC radio last week (ABC radio interview on asset leases):

Economist Gene Tunny this week highlighted how regulation around investment levels and workplace relations will play a key role in what price the Newman Government gets for leasing power distribution assets.

“A lot will depend on what that lease looks like,’’ he said.

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2 Responses to Private sector involvement should restrain growth in electricity prices

  1. Katrina Drake says:

    There is much more to electricity supply than cost only. There are many more variables to consider, such as reliability, safety, environmental factors to name a few.

    40 people died in the Black Friday fires in Victoria, 204 homes destroyed , billions of dollars of of property destroyed. These losses were due to failure to properly maintain power lines and electricity infrastructure, due to cost cut-backs to inspections and clearing along power lines.

    Remember when homes and business in Brisbane lost power for 4 days in 2013 after cyclone Oswald, due mainly to lack of clearing and poor maintenance of electricity infrastructure, and failure to invest in underground services.

    When it comes to the efficiencies of electricity supply, cost at the meter is possibly the least important consideration to safety, reliability, and the environment.

    Also, cheaper power may just lead to more waste, electricity needs a price driver to limit waste and excess emissions.

    The real question should be – will privatisation make it safer, more reliable, greener, then more affordable ?

    • Gene Tunny says:

      Katrina, thanks for your comment. I agree these factors are important, but achieving safety, reliability and environmental objectives isn’t dependent on government ownership; rather it requires effective regulation. Indeed, your example of problems following Cyclone Oswald relates to a network owned and operated by government-owned Energex.

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