Wednesday, May 07, 2008

Please, some substance amid the power spin

The Sydney Morning Herald saw fit to publish another of my letters today. While an unprecedented storm of spin defends the privatisation of power generation in terms of 'union vs government' and 'securing the future of electricity supply' (as if there is only one way to do that), I tried to bring it back to essential issues:

"I can't believe so many intelligent people are still spruiking the privatisation of an essential utility while the Government is throwing millions of taxpayers dollars at a privatised rail operation to persuade it to carry export wheat to market.

I thought privatisation was supposed to shield the public from financial risk. This is a clear case of private profit holding the public good to ransom and it convinces me that fundamentals such as power generation should remain in public hands."

Michael Gormly Woolloomooloo

I still can't work out how, if the government can't afford new power stations, the private sector can stump up $10-15 billion to buy the system and THEN pay for a power station on top of that AND make a profit out of it. Especially as the government can borrow money more cheaply than the private sector. You can't regulate away that contradiction. Either way, we will be the ones paying!

Meanwhile The Herald leads today with the smiling faces of Morris Iemma and the world's ugliest politician, Michael Costa, under the strapline: "This is a time for healing and calm, not belligerence." This is laughable after Costa was filmed screaming abuse at his own party conference on the weekend.

While the smiling faces spread reassurance, all is not well in the Labor camp. MLC Penny Sharp, for one, is committed to oppose the sale.

And as for Paul Keating spruiking privatisation in a major Herald opinion piece... I am apalled. He coyly writes:

"Critics will say that I am writing in these terms because of my association with Lazard Carnegie Wylie, a company chosen to co-advise the State Government on its privatisation proposals."

Alex Mitchell on Crikey comments:

"This declaration – more like the admission of a howling conflict of interest – should have been made at the start of the article. And Keating is being uncommonly modest when he writes of his “association” with Lazard Carnegie Wylie – he’s the International Chairman for heaven’s sake!"

If I had any respect for Keating it's now gone.

And none of this even gets to carbon emissions and climate change.

Photos by Peter Rae.


Anonymous said...

Liked this letter to the editor today.

Dangers of cannabis

The link between cannabis and the onset of mental illness should be reason enough to keep this drug restricted ("Cut cannabis use by selling it at the post office", May 6). This is one effect that, once triggered, cannot be reversed.

Anonymous said...

Fears over the privatisation of NSW's electricity assets are misguided, and union obsession over public ownership is misplaced, former premier Bob Carr says.

Premier Morris Iemma won an important victory on Tuesday when Labor MPs in a caucus meeting chose not to challenge his decision to move forward with the $15 billion sell-off.

The proposal was overwhelmingly voted down by delegates at last weekend's fiery ALP state conference, by 702 votes to 107.

And Mr Iemma has angered the union movement for pushing on with the proposal regardless of the ballot.

Talks to try and patch up their differences will begin on Wednesday between Mr Iemma, his ministers involved in the plan, and Bernie Riordan - the NSW Labor president and Electrical Trades Union secretary.

Unions NSW secretary John Robertson has signalled the battle over privatisation is far from over, however.

"Anyone who thinks this is over is kidding themselves and is totally misunderstanding the situation," Mr Robertson told Fairfax newspapers.

Mr Carr, a supporter of privatisation, said the unions needed to ditch their "obsession" with the public-ownership of electricity assets because a national electricity system had made them "irrelevant".

"People opposing Morris Iemma making a fetish over who owns power stations are agitating themselves about the wrong issue," Mr Carr told ABC radio.

"When your light's on, your power could be streaming in from a state-owned power station in NSW, a private-owned one in South Australia or Victoria, a private-owned wind farm, or a private owned gas generated utility.

"Ownership is now irrelevant because ... you've now got a national electricity market."

Unions should now be focussed on changes in the industry, brought on by a push for renewable energy sources, and by an impending carbon trading system, he said.

"It's an obsession with ownership," he said.

"The obsession should be in another area of energy policy, that is how quickly we properly price carbon through regulation, through mandating 20 per cent renewables by 2020 and by instituting a well designed robust and rigorous trading scheme."

People should ditch their fears about privatisation, said Mr Carr, who in 1997 was unsuccessful in an earlier attempt to privatise NSW's electricity industry.

The success of former state-owned enterprises Qantas and the Commonwealth Bank, and of his own government's privatisation of the TAB, freight rail and the state-owned coal mines, showed selling off public assets could work.

"We privatised three things in the state Labor government and they were enormous successes, and we did them with the support of the unions involved," he said.

"The state-owned coal mines, the TAB ... and freight rail.

"The unions urged us to privatise freight rail because they saw it as the way of securing jobs against private sector competition."

"No one would argue today that we should have kept TAB or those other entities in state government ownership."

The Editor said...

I was going to comment on that illogical cannabis letter... If it should be 'restricted' because of its tenuous 'links' to mental illness, why not restrict football because of its much more direct links with knee replacements, paraplegia and death? Think about it.

Further, these 'mental illnesses' are occurring under prohibition, supporting Alex Wodak's position that prohibition has failed.

Further, under Dr Wodak's plan, under-18s would be barred from purchasing it, a more effective 'restriction' than the present system under which a 14-year-old was caught dealing pot and ecstasy on the street in south-west Sydney last week. No-one buys pot on the street in Amsterdam because you can go to a café and get top quality gear cheaply. There is no room for the black market.

And quoting Bob Carr, who is being paid by the Macquarie Bank, is laughable. None of his spin addresses any of the basic issues, least of all the one I raised.

Anonymous said...

Disgusting. Depressing.

Why the unions fight so hard

Ross Gittins, SMH, May 12, 2008
I once asked a boss of the state railways why they weren't better run. He said a big part of the problem was that middle-level managers weren't prepared to manage - weren't prepared to insist on great efficiency and better service for passengers.

Why not? Because they'd tried to in the past and every time the union had resisted them. When the managers stood their ground, the unions went over their heads to the minister - almost always a Labor minister - who intervened to protect the status quo.

After being thus humiliated a few times, managers learnt not to stick their necks out.

They realised that the Labor governments' "revealed preference" was for them to keep drawing their pay without actually managing.

This story applies not just to the railways but throughout the massive state government-owned utilities and departments. They're all heavily unionised; the unions vigorously resist change that would affect their members' jobs; and the unions never resist the temptation to pressure Labor ministers to take their side against the interests of voters, taxpayers and customers.

Here you see the very secret of the success of the NSW Labor Right. The NSW Labor Council is dominated by the public sector unions; they do all they can to keep Labor in power at the state level, and Labor governments are obliged to reciprocate with favours to their industrial wing.

You'd expect things to be very different under the occasional Liberal state government, but - with the notable exception of Nick Greiner - Liberal leaders have generally been too weak to stand up to the public sector unions.

The present lot's unwillingness to say where they stand on electricity privatisation doesn't leave you with much hope for better things from the Libs in future.

Remember that various of the state agencies - including the school system - are such huge employers that if their unions decide to take on the state government at an election by campaigning against it in marginal seats, they constitute a noteworthy threat to the government's survival.

That's one reason even the Libs are pretty weak-kneed when it comes to taking on the might of the state public sector unions.

All this - stuff you're not supposed to mention in polite society - explains why the unions have been putting up such a ferocious fight to prevent NSW joining other states in privatising electricity.

The public sector unions are doing what they see as their primary job: protecting their members against all change regardless of the consequences for power users or taxpayers, and ensuring their employer continues to be a manipulable government, not the tough-minded private sector.

If you believe their opposition to privatisation is intended to benefit anyone but themselves, you're too gullible to live in a Labor-fiefdom like NSW.

And this explains why moving electricity into the private sector and away from the back-scratching wings of the labour movement is so desirable.

(All that needs explaining is why the elected wing has sought to defy the instructions of the industrial wing. It's partly because the Government will have a lot of politically unpopular decisions to make about electricity in coming years if it retains ownership, but mainly about the obstinate perversity of the Treasurer, Michael Costa.)

Like special interest groups the world over, the unions have sought to conceal their blatant self-seeking by purporting to be concerned about the interests of the customer.

They've made much of the claim that power prices would rise under privatisation. That's literally true - in the sense that prices will rise a lot regardless of who owns the power stations and retail distributors.

What's open to doubt is that prices would rise more under private owners than under public ownership. Presumably, we're meant to assume prices will rise more because of the private owners' desire to make profits - and that from a monopoly.

But the sector is already required by its state owner to make a profit and the natural monopoly element - the network of power lines and wires - is not being privatised. Wholesale power prices are set in a competitive national market. Initially, retail prices would continue to be regulated by the NSW Independent Pricing and Regulatory Tribunal until a competitive market is working.

It's a convenient fiction that the addition of a profit motive would, of necessity, lead to higher prices.

The notion that, in days of yore, government-owned monopolies would have had lower prices than privately owned monopolies ignores the sad reality that, with government monopolies, the place of profit is taken by cushy conditions for the employees - mainly in the form of restrictive work practices and overstaffing.

In other words, with either independently regulated prices or a competitive market, much of a private owner's increased profit would come from the removal of public-sector rorts. That's what the unions are worried about.

While seeking to give the impression that prices would rise because of the introduction of the profit motive, the unions also argue that selling off the industry would rob the state government of huge sums in annual dividends.

The latter argument is true, as far as it goes. The loss of dividends (and capital gains) shouldn't be left out of the sums on what the sale of a government business involves for the budget.

But, at least in principle, the sale price of the business should fully reflect the present value of the stream of future income to the owner of the business.

And, in any case, the sums also need to take account of the saving in interest payments arising from the Government's use of the sale proceeds to fund new capital works in lieu of additional borrowing.

Of course, to the extent that a new private owner seeking to achieve efficiencies had his hands tied by the Government's undertakings to the unions to prohibit redundancies and so forth, this would diminish the price the prospective owner was prepared to pay.

The Iemma Government has already given extensive undertakings in its initial efforts to break down the unions' opposition. The worry now is that the present efforts to reach a compromise with the unions will lead to even greater restrictions on a new owner.

The unions may yet manage to perpetuate their soft cop at electricity users' expense.

Ross Gittins is the Herald's Economics Editor.

The Editor said...

Hey, why not just paste a link to the story instead of the whole story? That's how blogs work best.

Gittins as always is credible. However he ignores that unions were only the minority vote at the Labor Conference, outnumbered by rank-and-file branch members.

Also the picture he paints is one of 'damned if you do, damned if you don't'. Apparently the only escape from union strong-arming is private ownership which carries the risk of blackmail -- like the current problems with Pacific National as per my Herald letter quoted in the main story.

Another approach (as they are taking with the projected Metro Line) is to build it and then employ a private operator, thus keeping public ownership while breaking free of the entrenched union bastards.

Anonymous said...

If the Herald removes the link as it does on older articles then this opinion would be no longer readable.