Electricity Industry Privatisation

Mr GREG PIPER (Lake Macquarie) [5.44 p.m.]: Residents in my electorate still have concerns about the Government's plans to privatise the New South Wales electricity industry and have asked me to raise this issue in Parliament again. I acknowledge that this is a fluid situation and that the Premier made an announcement today. Residents are unconvinced that justification for such a significant decision has been made. The two inquiries that the Government cites as justifications—the Owen report and the Unsworth review—did not have scope under their terms of reference to conclude whether privatisation would be a benefit. The Unsworth inquiry considered only how privatisation would be implemented. I also acknowledge the announcement the Premier made today regarding proposed benefits the Government will introduce if privatisation proceeds. With community sentiment so opposed to this policy, the benefits will need to be excellent.

A petition launched by email from my office has spread well beyond the Lake Macquarie electorate. At the time I presented the petition to this House it contained 5,000 signatures, but pages continued arriving after the deadline and the signatures now number 6,000. Messages I have received by phone, letter and email reinforce what I already believe: that this plan is bad for New South Wales and the majority of people in the Lake Macquarie electorate do not accept it. Among many others, the Sunshine Progress Association has written to me asking that I raise in Parliament their concerns about the lack of public consultation, the lack of parliamentary debate and the risks of poor maintenance of power stations. I welcome subsequent concessions by Minister Costa and the Government to allow this matter to be debated in Parliament.

On the progress association's third point, I believe that its concerns that State-owned power stations under long-term leases will be at risk of inadequate maintenance are valid. It is not difficult to believe that private energy companies would be less prepared to reinvest in infrastructure and maintenance when primarily seeking to maximise shareholder return. I am not suggesting evil intent by any potential private investor, only that the emphasis on what is most important would be different between public and private ownership models. An example of this is the widespread blackouts in Victoria and South Australia during 1999. A spectacular failure of privatised energy supply was the Longford gas explosion in eastern Victoria in 1998. The inquiry into this incident showed failure resulting from poor maintenance, lack of skilled engineers, poor training of operators and poor communication. Costs had been cut so that profit could be maximised.

The consequences were extreme, with two workers dead, eight injured, a two-week loss of gas supply to 1.3 million households and 150,000 workers stood down. The loss for businesses across Australia was $13 billion. The running down of the power system is a risk that cannot be ignored under the Government's proposed privatisation. These issues have been raised by Lake Macquarie constituents and I understand their concern. It is reported in Professor Sharon Seder's book Power Play that private companies can maximise their financial returns by controlling the availability of the generators. If a company withheld the output of one power station from the market the price of electricity rose almost instantly and the company's other generators could make a greater profit. If, as many believe, manipulation of the energy market has affected prices in Victoria, the beneficiaries have been the private operators and the costs have been borne by the public.

Residents have raised the example of the Victorian power privatisation that has been cited by proponents as a successful model. However, any success is arguable and the circumstances are different in 2008. Tax concessions allowed by the Hawke and Keating governments for private infrastructure investment meant that privatisation in Victoria was subsidised by other States, including New South Wales. This is no longer the case. At the time of the Victorian privatisation there was surplus capacity within its system. Once the reserve capacity was used, prices rose and there were even accusations that price increases resulted from manipulative interference with the market. Eraring Power Station, which in my electorate, is currently being upgraded, but there has been no suggestion that there will be a surplus capacity as a result.

In the changing world of carbon emissions, no-one yet knows what the costs of producing carbon dioxide will be. A basic scenario for change is the Commonwealth Government's commitment to a 60 per cent reduction in carbon dioxide emissions by 2050. Other reputable commentators say that this is not enough of a reduction. Potential lessees of power generators are in no position to evaluate the costs of operating into the future. In light of the Premier's confirmation that no indemnities will be provided to prospective purchasers, it is reasonable to assume that this will affect sale or lease price.