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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

speaking truth « Previous | |Next »
November 19, 2003

Summer has returned to SA with its scorching temperatures. That concentrates the mind on airconditioners, electricity, rising prices and blackouts----ie., the mess that is the national electricity market and the spin surrounding it. Nemmco's standard view is that there is some tightness in the system, but that needs to be taken in the context of extreme weather conditions leading to extreme use of energy. It's all just a question of supply and demand.

It takes someone who is an independent consultant to say what we know, but many continue to deny. Speaking at an international power conference in Adelaide Robert Booth, an electricity consultant, said that:


"The crisis in the South Australian electricity market is as bad as the disastrous experience in the Californian market, which almost bankrupted the world's fifth-biggest economy....South Australians had suffered more under the national electricity market than any other Australian state. It was so bad that comparisons with California, which only last week lifted a state of emergency imposed in January 2001 to limit consumption, were appropriate."


Right on. And why is that? Robert Booth speaks plainly and directly. He pointed to the:

"... botched privatisation system initiated by the previous state Liberal [Olsen] government and an imperfect national electricity market for the high prices. He said it could take another two years for the system to be fixed."


What about the role of the regulator. What role has Lew Owens, the watchdog Essential Services Commissioner, played in the botchup? He should be criticised for allowing retailer AGL to charge too much.

Under fire Lee Owens is beginning to sign a different tune to his "alls well with the free market, competition policy and the national electicity market." He now says that:


'... public trust in the energy industry was "particularly low" because of privatisation and the perception that it had led only to higher electricity prices....Energy is a public good, an essential commodity and the public is not convinced it is best provided via a competitive market... .It may be opportune to take control of the reform, to slow it down, to stop shooting everything that moves and to concentrate on the issues that really matter.'


Welcome to the Californian experience.

From the perspective of living the Californian experience, the South Australian Government has been too hands-off and has left things to the market to decide. What has been forgotten is that without proper guidance and without proper rules a self-regulating market will never make the right decisions.
Update
The local newspaper, The Advertiser reports that AGL, the electricity retailer, is pushing for further price increases of 5% to cover the costs of the new Murraylink interconnector charges and a CPI increase on operating costs. Business SA supports the move in the name of competition on the grounds that profits for the power companies must be high enough to encourage more competition. That is the only way the power industry can remain viable in South Australia. The SA Government is currently standing firm against the price increases.

| Posted by Gary Sauer-Thompson at 9:30 AM | | Comments (2)
Comments

Comments

Now that the bills are in I'd estimate that the power increase and Save the Murray Levy will ADD about $24/fortnight to living expenses for our household of four. While some could save a little on this increase through judicious power usage, it's not hard to see the impact for low income households. The Govt will be piddling into a cyclone of discontent if it thinks door snakes and a couple of light globes are the answer.

Gary,
Re your update I heard an exchange with Sandy Canale of AGLSA and Pat Conlon the Energy Minister along with some irate callers on ABC Radio this morning. Sandy is the bearer of more bad news on prices- ie the 5% increase on top of the 25-30%increases for small end users already, which I believe is largely due to the end of cross subsidies from big end users.

Be that as it may, Sandy has some other points to make about higher pricing in SA which can be found at the AGL website under media releases of 28th Oct 2003. Firstly he points out that SA has the greatest load variability requirements of all States. (Large idle network capacity for peak summer load has to be paid for) Secondly he is quoted as saying-"Residential customers bills are higher in SA than Vic due predominantly to the high network charges levied on all customers. These network charges account for the major component of the average electricity bill(43 per cent)." He claims SA network charges are 40-50% higher than Vic which he states is backed up by Prof Dick Blandy's 5AA Oct23 2003 statement(albeit somewhat hedgingly) that "If you treble the value of poles and wires, you're going to have some impact on the cost of electricity." For that diplomatic statement we should all read- The Olsen Govt maximised its immediate return from the sale of ETSA and bugger the long term costs to consumer.

With a gun to its head from the Keating inspired reform plan and a Labor Opposition hyper-critical on idealogical grounds, of its every move on inevitable privatisation, it had to look like it was doing a good deal. Essentially Olsen cut a good short term deal forced on him by Rann and ran from the long term consequences. The problem is that Rann has to run with the long term consequences of his short-sightedness in Opposition. Now he froths the position that AGL will raise prices 'over his dead body' (and probably the corpse of the watchdog Lew Owens)Is it any wonder with all this going on, that an intelligent bloke like Dick Blandy would diplomatically say that flogging off something for 3 times its value would have 'some impact'.

Now that all the impacts of past choices, coupled with the vagary of SA's load variability problem have been etched firmly into the voter's electicity bills, along comes AGL to remind them that of course costs move on. Sandy says- "AGL's costs would be further increased by the regulated Murraylink and a new network outage system." as well as the usual rises in running costs. Hence AGL holds out its hand to the regulator and says 'Please sir can I have some more, the porridge is getting a bit thin' Actually 5% more which it is happy to justify. The answer of course from Rann to his profligate overseer Owens is, "What the Dickens do they think they're playing at. Give them gruel the thankless urchins!"

Of course he can get away with this for only so long before he unsheaths the Sword of Damocles hanging over his head, with his self-interested baying to the masses. That sword is like the one unsheathed in California. He can't afford in the long run to shoot the AGL messenger. Is AGL overfed and cossetted or is it a normal profit enterprise. For that answer we'll have to watch its share price over the next year or so.