Initial evaluations of the privatisation were generally positive, reflecting both the dominance of market liberal thinking and some apparently favourable short-term outcomes (Institute of Public Affairs 2000). The prices received for the electricity assets higher than was expected on the basis of past privatisations. Moreover, deregulated prices offered to large customers were well below those that had been charged by the SECV. The expectation was that full contestability, introduced in 2002, would extend similar benefits to small business and household customers. In reality, the low prices offered in the early stages of market contestability proved to reflect the incentives inherent in the NEM to run down reserve capacity (criticised at the time as ‘gold plating’). Private owners cut back on new investment, particularly in system reliability. By the time full contestability arrived in 2002, there was little excess capacity left. Household and small business consumers, who lost access to publicly regulated prices at this time, faced increases in prices, which accelerated over time. In the subsequent decade, outcomes for consumers have become steadily worse, as elsewhere in Australia. Under privatisation and corporatisation, electricity distributors have been unwilling to invest in new network infrastructure unless they are guaranteed high rates of return. This had tragic consequences for victims of the Black Saturday bushfires. The same pattern has been observed in other privatised infrastructure industries, such as ports, airports and telecommunications. Private owners have been able to realise cost savings in operating capital assets purchased from the public sector (often by reducing wages and working conditions). But they have consistently failed to deliver new capital investment at a cost comparable to that of the public enterprises they displaced. useyourpower.au/blog/electricity-privatisation-in-victoria-13
Posted on: Sat, 24 Jan 2015 23:58:24 +0000
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