New Quiggin report lays bare electricity privatisation’s “record of failure”

Prominent Australian economist Professor John Quiggin has launched a scathing attack on energy sector privatisation, concluding that it has failed to deliver promised benefits for consumers.jqnewpic

Professor Quiggin examined 20 years of pro-privatisation reform in his report, “Electricity Privatisation in Australia: A Record of Failure”, which included a detailed economic examination of the outcomes of power sales in Victoria and South Australia.

His research has revealed that many of the claimed benefits of privatisation have not been supported, with key finding including:

  • price rises have been highest in States with privatised electricity networks;
  • customer dissatisfaction jumped, with complaints to the energy ombudsman in privatised States leaping from 500 to over 50,000 per annum;
  • resources have been diverted away from operational functions to management and marketing, resulting in higher costs and poorer service;
  • reliability has declined across a wide range of measures in Victoria;
  • promised increases to investment efficiency have not occurred;
  • real labour productivity has reduced as employment and training of tradespeople was gutted and numbers of managerial and sales staff exploded;
  • private owners are receiving unjustifiably high rates of return based on the low investment risk; and
  • consumers in privatised states bear the cost of approximately 10 per cent per annum interest on private owners’ debt, compared to substantially lower government borrowing costs of three per cent.

“Privatisation, corporatisation and the creation of competitive electricity markets were supposed to give consumers lower prices and more choice, promote efficiency and reliability, and drive better investment decisions,” Professor Quiggin said.

“But after twenty years the evidence is that none of these promised improvements have been delivered. After a marked fall in real electricity prices across Australia from the 1950s until the mid-1990s under public ownership, privatisation and the introduction of the National Electricity Market led to a reversal of that trend.

“Prices have risen dramatically. A secure low-cost supply has been replaced with a bewildering array of offers, all at costs inflated by a huge expansion in marketing.

“My research comprehensively finds that the free market based reform process in energy has been a failure.

“Reforms have failed to deliver a competitive market that benefits consumers. The evidence is there that public ownership of critical energy infrastructure is the only sensible response.”

ETU National Secretary Allen Hicks said that despite this clear and irrefutable record of failure, State and Federal politicians continue to claim that the only option for improvements was yet more privatisation.

“This research has destroyed those arguments,” he said.

“Privatisation has produced no benefits to consumers, but has resulted in large financial losses to the public. Australia’s future economy and the wellbeing of our communities depend on accessible, affordable, reliable and safe electricity supply.

“This independent academic research has confirmed our long-held concerns that the sale of publicly-owned power assets is an absolute disaster.”

ETU Queensland NT State Secretary Peter Simpson said Professor Quiggin’s research had confirmed anecdotal experiences that a free market push for the electricity sector not only fails to improve power affordability, it actually leads to higher prices.

“In Victoria, workers, along with the broader community, have been suffering the detrimental impacts of electricity privatisation for two decades. And our members here in Queensland and in the NT are suffering the pre-privatisation effects of an LNP Government privatising electricity asset by stealth. They have had the worst of both worlds, massive price increases and 1650 job cuts in Queensland’s electricity sector since the LNP took office in 2012 and the NT has lost hundreds more” he said.

“It will come as no surprise to our members that this detailed examination of the economics has concluded privatisation has been a ‘spectacular failure’ and that there is no justification for further sales. It strengthens the not for sale message and comes hot on the heels of the Orion Report”

“That independent report clearly smashed the myth that public ownership is a drain on the public purse, in fact it showed how well-managed public owned  electricity assets are well placed to provide both social and economic benefits to Queenslanders including a headline saving on power bills of $310 per year from 2015”

“For states like NSW and QLD, where the future of publicly owned electricity assets is under threat from governments with a strong privatisation agenda, this research provides a factual basis to drive decision making, rather than a reliance on free market ideology.”


One Comment on “New Quiggin report lays bare electricity privatisation’s “record of failure”

  1. Will Gavin King ever tell the truth???
    New reports put pressure on Cairns MP to abandon failed rhetoric

    The Electrical Trades Union ETU came out swinging today in response to recent ill – informed media comments made by the current LNP Member for Cairns, Gavin King about so called gold plating and the benefits of privatisation.

    The ETU pointed to recent media reporting where the Cairns LNP MP, labelled the Queensland electricity network as “gold plated” and talked up the benefits of what he calls “competition” in the market.

    ETU Far North Organiser Michael Haire said “Mr King has been all over media lately talking about the “gold plated” network and spruiking the benefits of privatisation. He’s either lying to his constituents or he simply just has no idea. The network is far from gold plated. In fact, the Electrical Safety Office is currently investigating the failure of unfused LV conductors which had fallen to the ground alive and remained alive causing a child to suffer an electric shock before Christmas.

    “Mr King’s claim that prices could be reduced if competition was introduced is also a commonly told mistruth. The fact is that this is the same rubbish we heard when Jeff Kennett sold off the SEC in Victoria in the 1990’s. (see Prof Quiggin Report) Everyone heard how it was going to produce better service and lower prices but what actually happened was almost immediate higher prices, a massive reduction in the workforce, a massive drop in Apprenticeships and training and massive profits sent overseas instead of being reinvested into the essential service”

    “If Mr King can provide just one credible example of where privatisation of an Electricity Supply Network has improved service and reduced bills, I’d love to hear it. I’m happy to debate the impacts of privatisation with Gavin anywhere, any time.
    Further a new report due for release today will lay bare the electricity privatisation’s record of failure, a failure that has included massive price rises, safety issues, job cuts and lives lost”

    A report released last week showed how properly managed state owned electricity networks could save taxpayers up to $310 per year without selling any assets (Report included)

    “It’s about time Mr King and the LNP abandoned its privatisation agenda and set about doing what it was elected to do manage our assets so they benefit the whole of our community, not prepare them for sale”

    We’ve already lost more than 1600 jobs from the industry, State-wide, under this Government, almost 200 of which have come out of the Far North. These are the very people who rebuild the network after natural disasters and the like. The experience and knowledge already lost from the industry will take years to replenish and if they sell it off, we know those skills will be gone forever. Vegetation contracts have been slashed and already we’re seeing higher than usual numbers of vegetation caused faults.

    We’re going to see more wires bought down and less people left to put them back up and our local members are telling us it’s all top shelf. It’s an absolute disgrace! We call on Gavin King to do what’s right for the people he represents, instead of looking after Newman and his big-end-of-town mates.

    For further information please contact
    Michael Haire ETU State Organiser 0430 072 049, Andrew Irvine Media Enquiries 0448 633 858

    Andrew Irvine

    Media and Research Officer
    Mob 0448 633 858
    Office 07 3010 0317


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