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NSW electricity privatisation can be stopped!

The recently released NSW Auditor-General's report supposedly gives the green light to the NSW Government's electricity privatisation legislation. NSW Premier, Morris Iemma, has seized on this and has announced that he may recall the NSW Parliament as early as next week in order to rush through the privatisation legislation.

The actual words from the report (pdf, 354K), which NSW Premier Morris Iemma claimed as a "stunning endorsement" of his government's plans were "... nothing has come to my attention that causes me to believe that the Government's strategy for the transfer of assets to the private sector ... is not appropriate for maximising financial value for taxpayers."

These read like weasel words, intended to satisfy the political needs of the Iemma Government whilst maintaining a facade that the Auditor General has fulfilled his responsibilities to hold the Government accountable to the NSW public.

A condition imposed by the Auditor-General, which superficially appears to pose a hurdle to privatisation, is that a confidential reserve price for each electricity generation asset to be sold be arrived at. If, for any one asset, the bids fail to exceed that asset's secret reserve price, that asset's sale is to be scrapped. One "of the factors used to determine the reserve price for each transaction" is to be the asset's 'Retention Value'. The report doesn't specify what other factors are to be used in determining the reserve price.

The A-G's report describes the 'retention value'.

The Strategy Document outlines the intended approach to be adopted to estimate the value of the businesses under continued Government ownership. This approach values the projected future dividends from the businesses and projected corporate taxes paid by the businesses which are ultimately received by the State under the Tax Equivalent Regime. The projections should reflect the expected performance of the businesses under continued Government ownership taking into account any impact of Government ownership on the businesses’ growth strategy, capital structure and performance. The projected future dividends and tax payments should be discounted at an appropriate cost of equity reflecting the risks associated with the projected cash flows.

From the point of view of accountability and the public interest, there are a number of problems:

  • The 'retention values' were unspecified.
  • What is to stop the NSW Treasurer from applying 'factors' other than an asset's 'retention value' in order to reduce the reserve price?
  • The process requires, on the one hand, concealing from the NSW public the calculated retention values, whilst, on the other hand, relying on those managing the sell-off to keep that knowledge from the intending purchasers.
  • The 'retention value' is defined only in the narrowest financial terms. For example, it appears to accept shifting of costs, previously borne by publicly owned corporations, onto the public as a legitimate means to favorably assess comparative performance of the privately owned utility. One example of cost-shifting typically employed by privatised corporation is the reduction in on-the-job training of its staff.

In other ways, the report helps expedite privatisation. It states:

... it is in the interests of investor confidence and bearing in mind the long lead times for developers to physically obtain generation equipment, that any uncertainty relating to the proposed restructure should be removed as soon as possible.

The report also takes issue with the five year employment guarantee to current NSW electricity employees:

Based on information provided by Treasury, the planned measures for the proposed employee protections are generally consistent with other privatisations and Government restructures, except for the employment guarantees. A five year employment guarantee for certain Generator employees exceeds such guarantees in previous privatisations and restructures, which were for three years or less.

From the A-G's objection to the five year employment guarantee which he implies is excessive, we can see that he unquestioningly accepts the prevailing economic orthodoxy which is that the greater propensity of private owners to shed jobs is a factor in favour of private ownership.

Whatever can be said of the report, it fails to clearly demonstrate, as the NSW public who paid for the report are entitled to know, whether or not privatisation is in their best interests. It admits that its parameters are confined to dollar projections in the narrowest sense, and does not consider factors beyond this - notably democracy.

The fate of NSW's electricity assets, paid for over recent decades by the NSW public with taxes and through electricity bills, should not rest on such an obviously limited and deficient report.

Democracy disregarded

The NSW public, the rightful owners of the electricity assets, have consistently and emphatically shown their opposition to the sale. In the 1999 elections where they resoundingly voted against the NSW Liberal/National opposition which stood on a platform of full privatisation. The latest poll showed 79% opposition to the sale. An earlier poll showed 85% opposition. The NSW state Labor Party Conference, wholly consistent with the feelings of the broader community, voted 702 to 107 against privatisation, but was subsequently ignored by the NSW state Labor Parliamentary Caucus.

The plans to privatise were never put to the NSW public during the 2007 elections. As it is impossible to believe that privatisation had only occurred to Iemma and Costa since the election, it would appear that they deliberately concealed their intentions, knowing that they would have been rejected.

If democracy in this country is to have any practical substance whatsoever, then the NSW government has no mandate to proceed with the sale.

Given that the Iemma Government may well have the numbers on the floor, how is it possible for the NSW public to prevent this brazen theft from proceeding?

The public have already made it clear they don't support privatisation of electricity

As the Vietnam Moratorium and many other popular protest movements have demonstrated, Parliament does not always get its way when it is so far removed from the will of the public.

The most effective way to block privatisation would be for the Electrical Trades Union (ETU), members of which stand to lose the most should it proceed, to carry out their threat of industrial action. In all likelihood the ETU would not even need to carry out its threat. If it were simply made clear to the Iemma that, unless privatisation is abandoned outright, or the legislation put to the NSW public either through a referendum or at the next election, it will proceed with industrial action, it is hard to conceive of how this could not enjoy the overwhelming support of the NSW public and and it is hard to concieve of how Iemma, faced with such an ultimatum could see any alternative but to agree.

Whether or not the ETU decides to pursue this course, all parliamentary representatives must be held to account for their actions. As hardly any who have voted in Parliament for privatisation, least of all the Labor representatives, are acting in accord with the will of their constituencies then their constituencies have every right to have them replaced by others who will. In the case of the NSW Labor Party, whose will has also been ignored, simply supporting those few Labor members who have voted against privatisation is hardly sufficient. They should not hesitate to disendorse each and every member who have voted for privatisation, starting from Morris Iemma and Michael Costa. Given the generally appalling record of the Iemma Government and its abysmally low popularity, this would seem, in any case, to be the only realistic chance that Labor would have of retaining government in NSW in 2011.

If the public don't endorse the sale it can be revoked later on

However, the most important measure that should be adopted by those now fighting privatisation is to clearly warn those intending to buy NSW's electricity assets that they have no right to do so and be resolved to both remove from office all those who are pushing privatisation and to renationalise those assets.

All those who intend to buy NSW's electricity assets in open defiance of the will of the NSW public must be told in no uncertain terms that once a government, which is representative of the NSW public, comes to power, that they, and not the NSW public, will be made to bear the cost. Whatever costs, which were were illegitimately imposed on the NSW public in the course of privatisation and whatever further costs are necessary to renationalise those assets should be discounted in full from the money paid for the repurchase of these assets.

If this were stated clearly now, then they won't be able to say that they weren't warned.

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Very good, article, James, but, as is often the case, there is a bucketload of spelling mistakes and grammatical errors. Hopefully this will be rectified before too much longer.

On the Electrical Trades Union, I have to wonder why they won't simply issue the ultimatum as you suggest: either the government agrees to postpone all plans for privatisation until they have been put to and accepted by the NSW public, or the ETU will commence industrial action. With at least 79% opposed to the sale, if they can't win public support for their action now, then when can they ever hope to win it?

One can see by looking at how Telstra is attempting to destroy the union, what future lies in store for the ETU should it not act now to prevent privatisation.

Furthermore, an awful lot of time and energy has been put by grass roots activists into opposing the sale. The ETU acts as if it takes that activism for granted and behaves as if the activism will always be there. Instead of standing on the sidelines as these activists burn themselves out for what may, in the end, be a waste of effort should the ETU not act, the ETU should now move to the centre stage and take on Iemma, Costa and the thieving investment bankers who stand behind them.

Thanks, Sir John Lydon. Apologies for my errors. They would have been fixed very soon after you posted.

You raise a good point. See the article in the Sydney Morning Herald of 16 August:

Unions NSW step up electricity campaign

Unions NSW has stepped up its campaign against electricity privatisation.

More than 55 union stalls have been set up at shopping centres and fairs across the state, urging communities to contact local MPs and sign a petition against the proposed sale.


Unions NSW spokesman Matt Thistlewaite said on Saturday that electricity privatisation would be the primary consideration when the state parliament resumes.

"We've got six weeks to convince local MPs that this proposal is not in the interests of the people of NSW and remind them of the promise that they gave in the lead up to the last election to maintain public ownership of electricity assets in NSW," Mr Thistlewaite told reporters.

If local MP's are not yet "convinced" that privatisation is "not in the interests of the people of NSW", with 79% of the NSW public opposed, then when will they be?

The Unions need to decide whether or not they are serious in their stated opposition to privatisation. If they are they should be prepared to do all tath is necessary within their power, up to and including carrying out industrial action in order to change the Government's. If not, then they should stop wasting the time and energy of their membership and supporters in the broader public.

If they had been prepared to act decisively months ago, privatisation have have been buried long ago and those who have been spending their Saturday mornings trying to put their case to the NSW public, who have, in any case, said over and over again that they agree with them, could have got on with their lives.

Iemma's claiming that because the Auditor General didn't slam dunk the whole idea, it's received a 'stunning endorsement'.

But as Unions NSW secretary John Robertson has pointed out, the report made no reference as to whether it was "a good or bad thing" for the state's residents. Not quite a stunning endorsement after all, then,

I'm hoping that history will repeat and that public opinion will halt the process, as it did with the proposal to privatise Snowy Hydro. Many of the arguments made against that proposal are as relevant with this one.

Very good thanks...