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The Forum > Article Comments > Is privatising power a real turn-off? > Comments

Is privatising power a real turn-off? : Comments

By Carolyn Currie, published 3/9/2008

What are the traditional justifications for privatisation, for example with New South Wales electricity?

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The power stations in the Latrobe valley that were privatised were only privatised because the state was losing money.

Private power concerns bought the old plants refurbished them, rationalised the maintenance and turned them profitable and more productive in a couple of years.

In NSW the gov is faced with a worse dilemma, with the new carbon trading scheme coming in the power stations are set to change from a minor loss to a major financial drain on the state. Financially it is a no brainer, Cash in pocket now vs. cash haemorrhage
Politically, with the public sector forming the back bone of the union base, it is unpalatable to the left.

As far as the liberals are concerned, they have a vested interest in ensuring that Iemma does not get to sell the power generation, as they can see no benefit in giving him a cash injection. So they support it in principle but not in practise.

For sure once the libs get in the power generation will be on the block immediately. In the mean whilst watching Morris dangle is better than having a piñata where the more you beat it, the more candy drops out.
Posted by Shadow Minister, Wednesday, 3 September 2008 10:24:31 AM
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"Private ownership is linked to greater efficiencies ..can produce gains due to a shift from monopoly to competitive markets ... considered more efficient because it subjects the firm to the scrutiny of capital markets...leads to the removal of public sector constraints on efficient behaviour".

I'd like to see some real evidence to support these statements. They sound more like claims made by potential eager buyers rather than by post-privatisation consumers. I can't think of a single privatised utility that provides a superior service or product at a lower cost to the consumer.

Efficiency is not the same as effectiveness. You can always run a business more cheaply and generate more profit at the cost of reducing maintenance and quality.

There was a period some years ago when maintenance was contracted out by Public utilities to save costs and we saw a gas explosion in Victoria, a total electricity blackout in New Zealand and tainted water in Sydney. NSW Railways have had continual problems and now Qantas is facing some interesting issues.

Efficiency is generally related to management - not ownership.

Besides providing access to some fast easy money, another political reason for privatisation is to unload those enterprises that you have run down so badly they may eventually get you thrown out of office. Ultimately the consumer still pays but by then the Government is no longer held to blame.
Posted by rache, Friday, 5 September 2008 12:48:15 AM
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Efficiency is linked to better management, and better management is linked to sound objectives.

Private enterprise objectives is to get value for money, and suprisingly enough maintenance is seen today as a competitive advantage, and a study into the latrobe valley indicates the increased output of the privatised plants is entirely due to improved smarter maintenance, and plant availability, using modern techniques.

Gov managers are more worried about being politically correct, and the employees about maintaining the status quo.
Posted by Shadow Minister, Friday, 5 September 2008 7:51:54 AM
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Privatising Power is like privatising water - it is giving uncontolled unacountable power to a monopoly provider and it does not always provide the best outcomes.
I think that privatisation will provide ever increasing power costs and less customer service.

In Hervey Bay our water is supplied by Wide Bay Water - we cannot chose the supplier based on our market preference.

Wide Bay Water our monopoly water provider control of all the water infrastructure and is not subject to any of the accountabilities we would expect from the state.

The water corporations failure with its one key piece of infrastructureis a case in point.

It is impossible for us as the public to investigate the failiure or call the water corporation to account.

What follows is our story:
Our Family ( upstream) were almost washed away by the failure of the Dam gates to operate.
See the ABCarticle:
Resident fears dam gates risk flooding
Updated Wed May 21, 2008 8:25am AEST

A land-holder upstream of a major dam south-west of Hervey Bay says multi-million dollar barriers on the storage are broken, putting her family at risk of flooding. ....

But Esther Allan says in February the gates jammed, causing water to back up onto her property.
“This is an extremely expensive piece of infrastructure. Ratepayers paid for this and their expectation would be that it would be operable,” ...
“If it wasn’t, we need to know why - not only because our family’s safety was put at risk, but because ratepayers expect to get a result from the infrastructure they pay for.”
The local government corporation that runs Lenthalls Dam says the gates do not work, but it was monitoring the rising water.

It is September 2008 - the gates still do not work as designed.
who knows who is footing the repair bill - the Water Corporation is not a public entity and does not have to account for the contract or the expenditure.
The rub is that this water corporation is propped up by state and federal funds and paid for by local rate payers.

good luck!
Posted by Lenthalls Dam Gate Failure, Sunday, 7 September 2008 4:17:15 PM
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Exactly Lenthalls, I have a water privatizing story of my own which I will return to shortly.

First though, this article did next to nothing to argue a convincing case for the necessity or even desirability of privatization. It simply re-hashes the same old drivel that has been spewed by the right for decades: private ownership automatically increases efficiency, effectiveness, service delivery, value for money, prosperity and generally all things good.

One would think that such a heavily privatized economy such as the US would be a beacon of such virtues - instead, their economy is in the toilet.

My own experience with water privatization just to the north of Hervey Bay, in Gladstone, brought home the perils of privatizing natural monopolies. The private retailer announced water price hikes of between 300% and 1200% following the loss of their biggest customers - the giant industrial plants - who had turned over to desalination, seawater cooling, water recycling etc. The resevoir was full to capacity, making nonsense of the idea of supply and demand properly regulating prices. We could of course, neither refuse to buy water, nor source it from elsewhere. Government intervention was ultimately needed to sort the situation out. Had it never been privatized, the whole debacle would never have occurred in the first place.

Then there was the case of the First Mildura Water Trust, who - knowing so much more about economic management than any government could hope to - invested a huge sum of public infrastructure money in the US sub-prime market and lost the lot.

The assertion that anything will automatically function better if ownership is transferred to the private sector is ideaological twaddle.
Posted by Fozz, Sunday, 7 September 2008 7:12:58 PM
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The traditional reasons given for the privatisation of utilities is that the private sector is more effectient, lower costs and better services follow.

Our experience in Hervey Bay QLD has shown the opposite. Our water is provided by Water Bay Water Corporation who hold a monopoloy on our water supply. Wide Bay Waterare not subject to any law that appplies to listed companies and not subject to the accountablities of government.

The water corporation has failed in its major brief the building to a taxpayer funded Dam increase to increase available supply.

Wide Bay Water spent approx Ten Millon on the gates installed and 21 Million Dollars on the project. The gates were installed in Dec07 and failed from Jan08 - they dont work now. Who can say who is paying for the costly repairs and ongoing maintaince as WBW is not subject to FOI.
It isnt just the financial losses to the taxpayer that are a concern.
The Lenthalls Dam Gates were designed to release environmental flow and now cant be relied on to do so.
The Lenthalls Dam Gates were supposed to minimise upstream flooding but in the Feb 08 event my family could have drowned, water banked up around our house much higher than WBW had told us it would.

Corporations supplying utilities lack transparency.
Widebaywater were supposed to evacuate us once flood levels reached RL26.91, they didnt.
No one notified us in the flood path that the Lenthalls Dam Gates had failed nor have we had any detailed explanation from Widebaywater.
Widebaywater are currently resisting putting affected locals on the emergency action plan for evacuation, this may be an admission of guilt.

Let our experience be a lesson - this is what you get from privatising utilities. Corporations holding monopoly over utilities leads to higher cost, nepotism and failures of governance.

The artifical competition supplied in the electricity industry is not a fix to this ongoing issue. Good Luck to you all - we are hoping we dont get washed away this flood season. And thank a labour government for giving this corporation full support
Posted by Lenthalls Dam Gate Failure, Monday, 8 September 2008 6:52:46 AM
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