I’m pleased to see some analysis finally published on the potential benefits of the privatisation of electricity businesses from a Queensland perspective: Network Pricing Trends in Queensland prepared by EY. The Courier-Mail has covered this report with the headline, on its website at least, Electricity prices to fall under privatisation, says audit. While the report is certainly supportive of privatisation, I don’t think it can be read as saying prices will fall under privatisation, only that the growth rate of prices under privatisation would be lower than the growth rate of prices if the businesses weren’t privatised – that is, prices would be lower under privatisation than they otherwise would be.
The reported estimated electricity bill saving of $570 p.a. is from an historical simulation of power prices, covering 1997 to 2013, assuming Queensland experienced Victorian growth rates in network costs (see p.13 of the EY report). Unfortunately, consumers won’t get this $570 p.a. back if the businesses are privatised (technically, if their assets are leased out). The inefficiency is already largely baked in, due to network investments that have already occurred (i.e. gold plating). That said, under privatisation, I expect bills will be lower than they otherwise would be, as private operators would more ruthlessly control costs, running “lean and mean”, as I noted in my 7.30 Report Queensland interview last year:
I’ll talk more about the potential benefits of privatisation at the upcoming EPAP-ESA Qld panel discussion on economic policy issues in the 2015 election.