Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 1 Contents 38 futurebuilding Volume 3 Number 1
Back on the reform horse
In the lead-up to April's Council of Australian
Governments (COAG) meeting, the COAG Reform
Council underlined a persistent lack of progress,
while the Productivity Commission's latest working
paper on Australia's utilities brought more bad news.
'This report con rms our worst fears,' says
Matthew Warren, Chief Executive of the Energy
Supply Association of Australia (esaa). 'Energy
market reform in Australia has stalled, and national
productivity is paying the price.'
But there are positive signs ahead. Several states
have committed to privatising state-owned electricity
businesses, or are undertaking independent reviews
into future market structures.
The federal government's draft Energy White
Paper (EWP), due for release in October this year,
also promises to be a game changer. It is no secret
that the report will come out in strong support for a
fully private market, and will push for a move away
from retail price regulation towards price monitoring
Ensuring this momentum is translated into action
will require consensus across the major parties,
and a shared recognition that privatised retail,
wholesale and networks, coupled with retail price
deregulation, will deliver meaningful and enduring
This article takes stock of current market
structures in the unreformed states of New South
Wales, Queensland, Tasmania and Western Australia
-- and the likely pathway towards reform.
New South Wales
Like all states outside Victoria and South Australia,
New South Wales's transmission and distribution
networks are publicly owned and operated.
'The Premier has said that he won't sell off the
poles and wires without a mandate,' says Jim Miller,
Head of Infrastructure, Utilities and Renewables,
Australia and New Zealand, Macquarie Capital. 'But
they are very open to the process of engaging on the
subject such that if a mandate is granted they will be
able to move very quickly.'
Glenn Byres, NSW Executive Director of the
Property Council of Australia, said New South Wales
needs to move past the 'false starts and politics' that
have held back any real reform progress.
'This should be about economics, not ideology
-- and economics should lead New South Wales to
unlock the capital tied up in energy assets for use on
infrastructure renewal,' says Byres.
Meanwhile, electricity prices are continuing to
increase faster in New South Wales than in Victoria.
A 2011 Ernst & Young study found that the price paid
per megawatt-hour of electricity in Victoria increased
by just seven per cent in real terms from 1996 to
2010, compared with real increases of 45 per cent in
New South Wales.
Dr Peter Boxall, who is Chairman of the
Independent Pricing and Regulatory Tribunal (IPART),
is concerned about the impact lack of reform is
having on cost increases.
'Around half of the increase in New South
Wales's electricity prices from 1 July is a result of the
continuing rise in costs faced by the retailers from the
electricity network -- or the poles and wires,' he says.
This concern is well-grounded. In the unreformed
states of New South Wales and Queensland, network
costs account for a signi cant proportion of overall
price rises. Ernst & Young found that network costs in
Victoria decreased by nine per cent in real terms on
a per-customer basis between 1996 and 2010. Over
the same period, per-customer network costs in New
South Wales increased 65 per cent.
Worse still, over the next ve years, New South
Wales network businesses are expected to spend up
to three times the level of capital expenditure per
customer compared with their Victorian counterparts.
In 2007, the former Beattie Government sold
Queensland's retail electricity business for a total of
$3 billion. However, in December last year, the then
Energy Minister Stephen Robertson told the ABC that,
while he acknowledged that total privatisation had
worked in Victoria, that did not mean it would work
reform in Australia
has stalled, and
is paying the price
Links Archive December 2011 Volume 3 Number 2 Navigation Previous Page Next Page