BOOKS: by Peter WestmoreNews Weekly
Power Politics, edited by John Spoehr
, May 3, 2003
Edited by John Spoehr
Wakefield Press, Rec. price: $19.95Power Politics consists of a series of separate contributions which analyse the process of privatisation of South Australia's electricity industry in the late 1990s, and the consequences for the state today.
Its contributors believe that the privatisation of the SA electricity industry has been a disaster, imposing significantly higher costs on consumers and small business, while leaving electricity users vulnerable to blackouts due to inadequacy of supply.
These consequences are the opposite of what was anticipated when the Electricity Trust of South Australia was privatised in 1999.Fire sale
The sale was mainly motivated by the State Liberals' need to retire state debt, arising from the State Bank debacle. This was also evident in the fire sale of the SA TAB, for around $43 million in 2001 - far less than the business (with a turnover was $630 million a year) was actually worth.
At the time, the Government claimed that the sale of the Electricity Trust and SA Generation Corporation were part of South Australia's response to the establishment of a national electricity market (in which electricity would be freely traded between the states) and National Competition Policy, which rewarded states for privatisation.
When the then Premier, John Olsen, announced the privatisation of the electricity industry a year earlier, he cited both these factors as justification for the government's decision. He specifically mentioned that unless South Australia went down the road to privatisation of government businesses, it could lose up to $2 billion in payments due under National Competition Policy payments.
A major push, strongly backed by Adelaide's only daily newspaper, The Adelaide Advertiser,
led to a narrow decision by the SA Parliament to support the privatisation of the electricity industry.
Once privatised, the price of electricity is controlled by the law of supply and demand, instead of being determined by the electricity utility, but with the complication that power can now be supplied from interstate, at least to some extent.
The problem with this, as is emphasised in Power Politics
, is that electricity generating companies make the highest profit where supply is limited, and therefore have a vested interest in limiting power supply and forcing up the price.
Inevitably, this will happen over time, as a result of the natural growth of demand for power, due to rising population and increased electricity usage.
This harsh reality was obscured by the fact that at the time when privatisation took place, there was an oversupply of generating capacity in the state.
When full deregulation of the SA electricity industry took effect at the beginning of 2003, the results were felt immediately.
The large Australian energy company, AGL, announced that "From January 1, 2003, standard electricity prices for residential customers [in South Australia] will increase by 58 cents per day or 25 per cent. This will add around $4.00 per week to the average residential customer's electricity bill for a medium sized house. Small business customers' prices will rise on average by 16 per cent."Power Politics
discusses the reasons for this, and puts forward possible remedies to the problem, including increased energy conservation, resumption of public ownership of existing generating plants (which seems most unlikely, given the financial position of the state and existing contracts with the private operators), and adoption of renewable energy alternatives, such as solar water heaters, photovoltaic cells for electricity generation, and wind power.
One option, which should have been discussed more extensively in this book, would be for the SA Government to build new power generators, in the public interest.
Such a step would clearly address the major problem of the present system, which is the lack of public accountability in energy generation.
The contributors wrongly reject the increased use of coal and natural gas for power generation, on environmental grounds. This is clearly a result of the influence of the Conservation Council of South Australia, which employs a number of them.
There are a number of prospective coal fields in South Australia, in addition the Leigh Creek open-cut mine, which is the only operating coal field in the state.
According to Energy SA, the major coal deposits are in the Arckaringa, Cooper, and Northern St Vincent Basins; while smaller deposits are in the Murray and Polda Basins. None are currently being developed.
Despite its limitations, Power Politics
is a useful guide to understanding the problems of privatisation of an essential service in Australia. Unfortunately, the book lacks an index.