The OECD gives Nathan Rees a nudge

With respect to the incredibly destructive electricity privatisation debate in New South Wales, I remain a fence-sitter, at least to some degree. I was not convinced by the arguments that were put forward by the former Premier and former Treasurer Michael Costa in support of the sell-off, nor the arguments of those opposing it. In an ideological sense I do not believe there to be a simple answer to the questions raised by the associated issues in this case. The old left/right dictums of “state ownership” and “private ownership” can not simply be applied glibly to complex situations such as this one, no matter what the nation’s rigid ideological warriors might continue to believe.

It’s probably worth considering the politics of this for just a moment. The Rees Labor Government is in a spot of bother, given that its former leadership team was determined to push the privatisation through, with or without the support of the NSW Labor Party. With Nathan Rees enjoying only a tenuous command of the party organisation, he lacks the political capital to defy the rump of the party on this issue, as Iemma and Costa bravely (and stupidly) tried to do. This leaves NSW Labor looking like a bit of a shambles, with the whole issue shelved once again for now. Of course, unless the government can turn things around rapidly over the next year or two, the smart money in 2011 will definitely be on the Liberal Party returning to power in New South Wales, as unsavoury as that is for Labor supporters like myself. If and when that happens, it is likely that electricity privatisation will be back on the agenda anyway, and this is something that the Rees Government needs to consider carefully.

On balance, from what I have read, I do believe that a partial sell-off of the state’s electricity assets probably makes sense for the people of New South Wales. On the other hand, I don’t think any person within the Labor Party has yet cogently argued their case to the people of this state or indeed the party’s rank and file. It’s interesting therefore to note this excerpt from the OECD’s policy brief [PDF] associated with its Economic Survey of Australia 2008 report (pp. 8-9):

The implementation of a competitive domestic energy market needs to be accelerated, with companies still under government control privatised and the ceiling on electricity retail prices removed. Public control over electricity companies is neither necessary for securing power supply nor a guarantee of efficiency. Electricity prices have risen faster in New South Wales, where there is still a public monopoly, than in other states in eastern and south-eastern Australia since the creation of the National Electricity Market, whereas productivity gains have been smaller.

So where to now on the electricity industry Premier Rees? If anywhere at all?

5 thoughts on “The OECD gives Nathan Rees a nudge

  1. That snippet of the OECD report just doesn’t make sense to me. What about reports of alarming price increases in Victoria? What about the very serious blackouts they’ve had in Victoria?

    It just seems like common sense that a private company would be even less inclined to reinvest in plant and equipment – particularly new green technology. In fact, they’d almost have a duty to their share holders to flog every last cent out of aging power plants. And what will happen when a government electricity is no longer there to keep the market in the other states honest? I’m happy to be corrected on this, but it’s my understanding that NSW exports vastly more electricity to the other states than it receives.

    I still have to be convinced that you can have efficient markets in electricity. Yes electricity on the national grid is traded every few minutes, but is that really evidence of healthy competition, or is it just more convenient to buy electricty that way?

    I’ve had a bit of a spray about this over at LP.

  2. I agree – at least in that snippet of the policy brief document that there is little argument or explanation to work with. Perhaps there is a bit more in the full report.

    I suppose what’s worth considering here is that if an emissions trading scheme is introduced in Australia (as the Rudd Government looks set to do), all electricity sellers will have to pay for permits for their emissions. Assuming that there is only going to be set amount of these permits available, this effectively means that these companies may actually be forced to invest in green technology in order to meet consumer demand. This would probably be a good thing.

    Matthew, to my knowledge it’s been shelved by Nathan Rees in the wake of the Iemma/Costa leadership debacle. Happy to be corrected if this is not the case – perhaps we’ll have to wait and see what happens with the mini-budget that the Rees Government is due to deliver shortly.

  3. “Matthew, to my knowledge itโ€™s been shelved by Nathan Rees in the wake of the Iemma/Costa leadership debacle.”

    The Rees gov’t has made no commitment either way on electricity privitisation. Still waiting…

    One point to keep in mind is the Iemma/Costa Plan B, to sell only the retailers and not the generators. This would not raise near as much money for the gov’t, but has different policy implications than any sale including generators. For example, retailers buy from the national energy pool, which does not identify the carbon intensity of the energy purchased, so coal concerns are taken out of the equation.

    On the politics of this, most job losses for privitised retailers will happen in call centres. The majority of these call centres are Western Sydney or regional areas, meaning the community impact is higher (because employment levels are already lower in these areas). However, this also lowers the number of unions who are passionately opposed (i.e. their member base is not affected). And Ben Kruse of the USU will get louder.

    The Liberals will privitise after the next election, they have stated as much. This might weigh on any consideration by Rees.

  4. Thanks for the advice Joel – I guess we’ll just wait and see what is decided.

    After all the kerfuffle caused by the privatisation push, it’s hard from where I’m sitting at the moment to see Rees moving forward with it unless he can reach some agreement with the unions. I think the Premier’s position is too vulnerable for him to be going out on a limb without taking both the party and the union movement with him.

    Judging by the results of the vote on privatisation at conference and the volume generated by the union campaign, it’s hard to see him managing to do that, But, this is NSW politics after all, and stranger things have happened! ๐Ÿ˜‰

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