The dangers of privatisation – Some facts:

 

  • The government puts a lot of faith in the regulator to maintain pressure on power companies to keep prices down. However, as the linked Sydney Morning Herald article shows, companies will game the system.  It is estimated gaming by network owners such as AusNet and Spark Infrastructure in Victoria has cost consumers up to $3 billion. SMH, Risks lurk for buyers in NSW electricity assets sale, March 20, 2015

  • There is no guarantee tax revenues from these private companies will flow to the Federal Treasury. The ATO is presently battling with a number of privately owned power companies regarding their ‘tax minimisation strategies’ which mean they pay nothing like the 30% corporate tax rate.  SMH, Tax strategies may distort power sales, March 23, 2015

  • The publicly-owned NSW electricity network generates public profits that last year exceeded $1.7 billion dollars. The NSW Liberal Government says Treasury estimates show these returns will decline over the next four years. However, as pointed out in the linked article, by emeritus Professor Bob Walker, governments can choose how much of the networks' profits are paid as dividends to government. The Conversation, Power privatisation is bad for the NSW budget bottom line, 19 March 2015

  • The Baird Government has not explained how it will deal with this shortfall in revenue once the electricity network is sold off. The initial UBS report said electricity privatisation would likely be bad for the budget over the long run, because of the loss of the revenues from the distribution businesses. SMH, NSW election 2015: Premier Mike Baird’s office sought to influence report critical of electricity privatisation, March 18, 2015

  • Household prices will rise by around $100 per year owing to the higher overheads of private companies according to the McKell Report: Nothing to Gain, Plenty to Lose, pg 13.

  • A 99 year lease is considered to be privatising the asset. Even former QLD (LNP) Treasurer Tim Nicholls said in 2010 long term lease was as good as selling off the farm.

  • According to a Reachtel poll the vast majority of consumers in Victoria (67 per cent) and South Australia (74 per cent) say they are worse off under a privatised electricity network.

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