Auditor-General (Supplementary Powers) Bill 2008

Bill introduced on motion by Mr Michael Daley, on behalf of Mr Morris Iemma.


Mr MICHAEL DALEY (Maroubra—Parliamentary Secretary) [10.41 a.m.]: I move:

That this bill be now agreed to in principle.

The Auditor-General (Supplementary Powers) Bill 2008 is the third bill in a package of legislation concerning the proposed electricity restructuring. The Electricity Industry Restructuring Bill 2008 and the Community Infrastructure (Intergenerational) Fund Bill 2008 are already before the House. Over the past 12 months the New South Wales Government has demonstrated an overwhelming willingness to undertake meaningful and genuine negotiations. We have entered into these discussions in good faith to secure the future electricity supplies of this State. We have listened to all sides of this complex and, at times, emotional debate. The Government has undertaken extensive discussions with the trade union movement, which has led to the adoption of the overwhelming majority of the recommendations of the Unsworth committee. The Government has consulted widely in the community and in this Parliament. This bill represents the culmination of those discussions.

With this legislation, the Government will provide additional authority for the Auditor-General to report to the Parliament on the Government's proposed strategy. It will be an accountable and appropriately scrutinised transaction process. The Auditor-General (Supplementary Powers) Bill 2008 provides for the Auditor-General to undertake a review of the Government's overall strategy for the electricity industry restructuring. This review must be completed and a report presented to Parliament before any assets can be sold or leased to the private sector. The Auditor-General's review will be required to assess the appropriateness of the Government's strategy in terms of maximising financial value for taxpayers. It will review the proposed transaction methods, the sequencing of transactions, the proposed timing—including the impact of external factors such as prevailing debt and equity market conditions—and the proposed emissions trading scheme. It will also review any contingent liabilities that accrue to the State and any other factors that may impact on the sale price of the assets.

After recent discussions between the Government and the Opposition, the following has been agreed. In developing his report, the Government expects the Auditor-General will take into consideration the proposed emissions trading scheme together with the current electricity hedging and coal contracts. Having regard to foreign ownership issues, the Government expects the Auditor-General will also consider the strategy's approach to foreign ownership. The Commonwealth's Foreign Investment Review Board has jurisdiction in this area.

The Australian Competition and Consumer Commission will initially assess the competition effects of the Government's proposals with the benefit of an information memorandum prepared by the Government. This submission will be made available to the Auditor-General. Having regard to the transaction process contained in the strategy, the Auditor-General will be able to engage independent experts to provide him with advice. In the normal course, we expect the Auditor-General would consider issues such as the effect on the net transaction proceeds of the debt levels in the businesses, electricity hedging contracts, coal contracts and incentive payments for the workforce. The review will also assess the financial impact of the Government's proposed community safety net, including the protections that will be put in place for workers, pensioners and low-income earners allowing the Parliament and the community to assess the effectiveness of the Government's policies.

I also take this opportunity to foreshadow that the Government will introduce related amendments to the other electricity bills before the House. Those amendments will further clarify and enhance the Auditor-General's oversight role and will require that the network of Country Energy's customer service centres continues to operate in support of its distribution assets. That is something that Country Labor members—particularly the member for Monaro—have pressed strongly for, especially in the Unsworth committee process. It will also ensure that a charter for the community infrastructure fund is established to guide its operation and purpose and to set out administrative and governance arrangements. I also inform the House that a rural communities impact statement being prepared by independent experts will be available in the next few weeks.

With this, the Government is delivering lock, stock and barrel on the matters brought to its attention by the leaders of the Liberal Party and The Nationals. Each request has been accepted and acted upon on its merits. The legislation and the amendments to be introduced fulfil each and every request, point by point. The implementation of the Government's plans to secure New South Wales' future energy supplies is the most important economic initiative undertaken in this State in a generation. It will put New South Wales on a path to future prosperity. Every member of this Chamber will bear responsibility for the profound economic consequences if we fail to act. We will all be harshly judged if we bring those consequences down on the people of this State because we, as lawmakers, cannot see past the political melee to act in the greater public interest. I commend the bill to the House.

Mr MIKE BAIRD (Manly) [10.48 a.m.]: I lead for the Opposition on the Auditor-General (Supplementary Powers) Bill 2008. I say at the outset that the New South Wales Coalition supports private sector involvement. Indeed, it is a core principle of these parties that if the private sector can do it both efficiently and in competition then there is not necessarily a compulsion for the Government to intervene. The private sector's involvement in the electricity industry has been effective. Real prices have reduced by between 6 per cent and 8 per cent in Victoria and South Australia under a privatisation model. The Energy Reform Implementation Group's report to the Council of Australian Governments last year shows that New South Wales's electricity assets have underperformed in relation to both labour and capital productivity. Labour productivity in the generation sector from 1999 to 2003-04 across Australia was the lowest in New South Wales, which experienced a 3 per cent decline. Capital productivity in the generation sector across the same period was also lower in New South Wales than in Victoria and South Australia. The Energy Reform Implementation Group report states:

Economic analysis has shown that the potential resource savings within the bulk electricity sector flowing from moving to a fully efficient market would reduce the total economic costs of supplying electricity, within the NEM, by between $200-$300 million per year. At the economy wide level, the long term benefits include an increase in real GDP of around $400 million per annum.

No doubt the current structure in the New South Wales electricity sector has precluded an element of private sector involvement, although there has been some involvement. The emergence of the national electricity market will ensure that only the most efficient survive. Private operators in the market are concerned about the current structure in which the key participant generates, transmits, sells and regulates. However, these principles and imperatives do not negate the need for social responsibility, and transactions should not occur at any cost. A team that is united and that has demonstrated competence, control and objective reasoning should execute transactions such as this. If we lost that approach we would lose value or, worse still, it would lead to a transaction that was not in the best interests of the stakeholders who, importantly in this instance, are the people of New South Wales.

We have seen the exact opposite from the team that is in charge of this transaction. Members should reflect on the conference and on the issues that were dealt with at that conference. We should ask ourselves whether this management team is in control of this significant transaction. Should the Iemma Government be placing 2011 re-election strategies into this basket against the commonsense strategic objectives represented by this transaction? Should it be playing poker with these assets? Intuitively, I believe that the Government is pursuing this transaction at any cost. It is gambling away potential value for reasons other than the merits of the transaction.

Those are the reasons why the Opposition requested that the Auditor-General conduct an independent assessment to establish whether this transaction was in the broad public interest. I will deal with some of those issues later. Members would be aware that this bill would not have been introduced if it were not for the persistence of the New South Wales Coalition. The bill addresses most of the key issues that were outlined on 8 May 2008. The Auditor-General must assess the Government's power privatisation plans to ensure that the public interest is paramount, and the Auditor-General must report to the Parliament before any sale takes place. This matter must be debated and every member in this House must be informed: the issue is too important for us to rely solely on press releases.

This is a once-only transaction. I believe we would be doing the people of New South Wales a disservice if this transaction were not properly implemented, if we did not have full information about it, and if we did not have an independent view relating to it. The Coalition's remaining community safeguards have been addressed in correspondence between the Coalition leadership and Treasury, and in the Government's Industry Restructuring Bill 2008 and the Community Infrastructure (Intergenerational) Fund Bill 2008, which have been introduced in this place. The Government withheld its support for this final condition until Monday 16 June 2008.

I wish to comment on the many strategic elements of this transaction and on the points raised in the Owen report. I will refer also to the provisions in clause 4 of the Electricity Industry Restructuring Bill 2008, which highlight the reasons why the Coalition pursued this course of action. That clause refers to the model to be used to restructure the State's electricity industry—the model on which the Auditor-General has been asked to comment. Clause 4 refers specifically to an initial public offering, or IPO—or, for the benefit of the Premier and the Deputy Premier, a clear sale. The Deputy Premier told the public that the Government's plan involved the long-term lease of electricity assets, which was not the same as a sell-off. It is important for members to understand that this legislation provides for a clear sale. Whatever spin the Deputy Premier wants to put on it, members must understand that this is a clear sale. On 1 May 2008 the Deputy Premier said:

The current plan is about maintaining ownership, even though there are long-term leases.

The Deputy Premier must understand that leasing for three generations represents the same thing. I believe that the Deputy Premier is being disingenuous. The legislation will enable a complete sale of electricity assets. I am sure that when the Deputy Premier lies in bed at night he would have difficulty finding comfort from the fact that he has told the truth relating to this matter because, frankly, he has not. Every member in this place must understand that this legislation will enable a sale of the assets. The Premier's record in this regard is worse than the record of the Deputy Premier. His office gave unions written assurances via emails three weeks before the 2007 election that he had no intention of privatising the power industry, and that it would remain in public hands. In May 2007 the Premier said in Parliament:

There will be no sale of electricity generation, transmission or distribution.

Why did the Premier and Deputy Premier not tell the people of New South Wales? Unions have articulated that one-third of Labor voters would have switched their vote at the last election if they had known about this Government's agenda. If that is the Government's approach to this matter, it means that it will stand up for nothing. Why has it avoided public scrutiny? What is it hiding? The people of New South Wales would respect it more if it stated its case and stuck to it. The community wants a government that is honest and transparent; it does not want a government that makes disingenuous statements that it is not selling this State's electricity industry.

I believe that this Government thinks the people of New South Wales are fools. The Coalition wants the Auditor-General to reveal the truth about this matter. Last year the Government commissioned Professor Owen to assess the State's future baseload electricity generation requirements. Professor Owen determined that the State's demand for energy would outstrip supply by 2013 and that additional capacity would be required. Professor Owen recommended that the Government divest itself of its ownership of retail electricity and electricity generation. I wish to comment on a number of aspects in the Owen report.

The conclusions in that report have been well publicised but what has been lost in the detail is the cost of the impact of this Government's mismanagement of the sector over the past 14 years. The Government has neglected generation infrastructure for years. There have been no new assets or no increase in generation infrastructure over the past 15 years, even though there has been a dramatic increase in the population of New South Wales. As surely as night follows day there will be an imbalance in supply and demand. The Government's years of neglect of its generation infrastructure, its inaction on energy efficiency, its failure to seize the opportunity of coal seam methane and its failure to prepare for a carbon-constrained economy have created the energy crisis in this State. In March this year Annabel Hepworth from the Australian Financial Review summed it up perfectly when she said:

NSW, after years of reform inertia, has chosen the worst possible time to privatise. The credit crunch and crisis among bond insurers known as monoline makes debt funding more expensive for possible bidders. That's not great news for trade sales. The turmoil on financial markets makes any initial public offering hard to price. And uncertainty about carbon policy isn't going away.

Bob Carr admitted that this State would have received double the capital if it did not fail in its privatisation attempts 10 years ago. He told the Daily Telegraph:

We didn't pull this one off [in 1997] when we were offered real advantages ... $30 billion in new capital.

The position we are in today is because the Government has not faced up to this emerging crisis. It appears as though it will do that now, at any cost. Infrastructure has been neglected and no new infrastructure has been built for 15 years. The Owen report states:

As no baseload generation plant has been built in NSW in 15 years, the energy consumed in NSW is catching up with supply.

What action has the Government taken? It has failed to invest in carbon technologies. Last year, for the first time, carbon emissions in the United States reduced in generation because, for a number of years, it has been investing in carbon scrubbing technology. We will face many problems, as we are not doing that in Australia. Despite reaping billions of dollars from dividends and taxes there has been no strategic investment in our generators—something that any prudent manager would do. Any company that had assets would prepare for possible market shocks, but that is not what this Government has done. In the United States greenhouse gas emissions from its generators fell by 54 million metric tonnes after it installed carbon reduction technology and increased its use of sub-bituminous coal, which emits less sulfur dioxide.

If this Government takes seriously the reduction of greenhouse gases, why would it not invest in such technology? Government Ministers often make ministerial statements and refer to the Government as a green Government. Investing in technology is a practical solution to reduce greenhouse gases. It should be borne in mind that approximately 40 per cent of emissions in this State come from our generators, but this Government has done nothing to address that issue. A report by Standards and Poor's, which was released in February, stated that this State's relatively aged generation assets and the significant level of investment required were likely to lower the sale price. For the past 15 years this Government has ignored these assets and has not improved their quality. In its submission to the Owen inquiry, the Australian Gas Light Company said that the State's generators were not operating to capacity. It also said:

If existing coal-fired generators in NSW operated at capacity factors comparable to coal-fired generators in Victoria and Queensland (around 80%) an additional 15,000 GWh of energy per annum would be available.

That is important because the total increased energy requirement in 2013-14 is below that level. Yesterday, for the first time, this Government made an announcement about energy efficiency, but it is too little too late. According to an EnergyAustralia survey released this month, households collectively are adding around 2.5 million tonnes of carbon dioxide to the atmosphere every year in New South Wales alone. That is equivalent to putting an additional 500,000 cars on the road every 12 months. If every household in New South Wales reduced its energy consumption by 10 per cent there would be no need for new generation.

We have not been doing enough to improve our energy efficiency, which has obviously led to increased demand. We have not invested in our generation assets or looked after them with up-to-date technology. At the same time, we have an emerging crisis that will hit us in 2013-14, as articulated in the Owen report. A general question for all members is: does that time line hold when they look at the need for energy efficiency and also the investment that could have been made in existing generators?

Coal seam methane is the most significant opportunity this Government has missed. Unlike the other mainland States, New South Wales is forced to import nearly all of its natural gas from its neighbours. Gas-fired power stations emit only 40 per cent as much carbon dioxide as those fired by steaming or black coal and require much less water to operate. However, New South Wales has no pipelines—there has been an announcement, but that is all it is—capable of bringing gas from the coal seam gas fields of Queensland, Gunnedah and the Hunter Valley to major population centres in Sydney, Newcastle and Wollongong. Lucas Energy's Paul Bilston said:

I think the Government needs to focus on the development and legislative environment under which coal seam gas works in New South Wales.

The Owen report states that, "the potential exists for significant coal seam gas supply from New South Wales." Coal seam gas methane has been extracted in the United States for more than 25 years, with production levels now at 1.9 trillion cubic feet a year, and it is on the rise. This is another point the Iemma Government has failed to address.

The desalination plant will cancel out the only announcement about renewable energy generation—the Bungendore wind farm. All renewable energy will be consumed before it leaves the planning table. The 2008-09 budget does not allocate funds for renewable energy infrastructure, and that is another black hole that the Government must address. It is important to note that while the Government is intent on selling old assets, it is forgetting to invest in new ones. It is the Government's role to strategically anticipate renewable sources of energy to meet new requirements when markets are not, and to intervene to stimulate those sources to provide for the future of the State. Only 6 per cent of the State's energy is from a renewable source—lower than Queensland and Tasmania—but the Government has promised that renewable energy will supply 15 per cent of energy needs by 2020, or an extra 7,250 gigawatt hours.

According to the Owen report, only 1,600 gigawatt hours are expected to come from renewable energy by 2016-17, which is obviously far less than the Government's target. Owen said, "There is uncertainty around the likely siting of renewable generation." Are these targets real? Is the Iemma Government taking them seriously or is it developing an energy policy, at the core of which is electricity privatisation, on the run and on the basis of lack of action and management incompetence? Owen says renewable energy will achieve 6,600 gigawatts, including hydro, by 2017. If that is so, how can it reach 13,000 gigawatts by 2020? That is something the Government must address. These are the reasons why the Coalition fought for an independent review and a public interest test on this transaction. We do not want to rely on press releases. We want to see the facts and we want to understand them. We want to determine once and for all whether the Iemma Government has done everything possible to avoid this crisis and that the proposed transaction is in the best interests of the State.

The Leader of the Opposition and the Leader of The Nationals have led the charge. They have put public interest at the core of this transaction. There is no budget imperative to drive re-election strategies. It is nothing more than making sure this transaction makes sense for the people of New South Wales according to the parameters. I repeat the first five of those parameters. The first is that all sale and lease arrangements be subject to the Auditor-General reporting to Parliament before finalisation. That includes timing and price, conditions for workers, pensioners and low-income earners and price guarantees for consumers. Within this context we asked the Auditor-General to consider the impact of the sub-prime crisis; the impact of the lack of definition of carbon tax; asset management and how the Government has managed its assets; the financial investment of one billion dollars per annum into dividends and taxes; the contract impacts; the coal contract maturity profile from 2009 to 2011, how that impacts on the sale price and why it is such a short-term profile; electricity hedging, why the Government has undertaken the derivatives, what impact that will have on the price and how it affects the assets; and valuation of the assets over the past five years and projections to 2013.

We have also asked for a rural community impact statement. The Nationals are interested in looking after its community. Its members are interested in the transaction if it is in the interest of their communities. That is a big distinction between the way the New South Wales Coalition has attacked this issue and how the Iemma Government has presented it to us. The Nationals have asked for real consultation. We heard from the Parliamentary Secretary that there has been consultation. There were no rural community impact statements before The Nationals became involved. The Nationals will look, among other things, at jobs, prices and service levels to communities outside the Sydney central business district that day in day out feel ignored by the Government.

We have also asked for an independent oversight body comprising the Auditor-General, community representative and a financial expert to monitor the use of funds realised from the sale. We do not want this sale to be a slush bucket for marginal seat funding, which has been a characteristic of the Iemma Government. It should be on the priorities of this State, and that is what we have asked for. We have asked for a parliamentary oversight committee to guarantee the delivery of improvements in clean, green and renewable energy investment resulting from the sale. The Government is selling the power of old and not doing enough to invest in future power or energy sources. That is one of the fundamental, strategic absences in this transaction. More should be done on renewables and coal sequestration, but not enough is being done. We also asked for the retention of poles and wires in public ownership and appropriate safety nets for pensioners, low-income families and employees as determined by the Auditor-General. The Government has substantially agreed to our conditions, and we are pleased that only this week it has agreed to our request to have the Auditor-General oversee this transaction.

I will touch on why some of those concerns are important. We hear about the impact of the sub-prime crisis. Why does that matter and why is it important to this transaction? It is difficult to raise $10 billion to $15 billion in current market conditions. I say $10 billion to $15 billion because the Treasurer has alluded to figures of up to $15 billion. We are not sure what we will receive—somewhere between the Owen report and the optimistic projections of the Treasurer. The cost of raising that sort of money today, compared with 12 months ago, will be $400 million to $600 million more, which is a substantial amount. It is a new school hall for every public school in the State or it is two new hospitals, and it is something that we should be concerned about. The head of Deutsche Bank's financial sponsors group was asked by the Sydney Morning Herald in March if he had ever seen the markets like this in his 20 years in the industry? He replied no. That is the comment I get from around the world, from colleagues still in the marketplace. This is the worst they have seen it in 25 years. Is this a time one should undertake such a transaction? Will privatising the assets, selling the assets, give New South Wales the best value? Delaying the sale might well see some of this cost burden removed. That is what we want, independent advice that addresses that concern.

The uncertainty around carbon tax cannot be underestimated. Gavin Madson from the Finch ratings agency has commented on the uncertainty among potential bidders because of the emissions trading scheme. He told the Sydney Morning Herald in February, "The generators in NSW, being coal-fired, assets which will be at a particular risk of a shock to you to carbon pricing." He believes it is unlikely New South Wales will get the high prices for privatisation that Victoria and Queensland did. Professor Owen stated in his report, "Carbon uncertainty and Government ownership [are] impediments to [private] investment." Recently released projections from both Citibank and Deutsche Bank estimate the cost of a carbon tax to be between $20 and $100 a tonne. Considering that generators emit 57.8 million tonnes of carbon dioxide a year, that means a potential annual cost to prospective buyers of between $1 billion and $5 billion.

When asked in the other place whether the huge uncertainty around carbon trading—also a key concern of the Owen report, which repeatedly says this is an impediment to private investment—could significantly erode the price of the generators, the Treasurer admitted that he did not know. He said, "We cannot assess the final impact until we see the details of the carbon-trading regime." He made that statement on 5 June 2008. That is just one of a number of reasons why I have asked the Auditor-General to look at this issue as part of his report, because there is too much uncertainty to give New South Wales any confidence that it will get a fair price for these assets. With such uncertainty apparent, any private investor is likely to focus on the top end of that liability when negotiating a price. In other words, selling with no clarity on the carbon tax may ultimately cost New South Wales billions.

In a climate of uncertainty and with those types of projections in the market while we are negotiating a price and a point of time opportunity—we are only doing it once in a 100-year cycle—we have asked for independent advice on whether we should do it now. Should we wait until we get clarity on the national emissions trading scheme, which the Federal Government is due to announce in the next 12 months?

We need to know also whether market conditions preclude participants from bidding in the process, thereby removing competitive tension and diminishing the value of the sale. Participants with a triple-B credit rating—the rating of many generators and in robust market conditions they would be expected to participate heavily in the process—would be unlikely to raise the debt required in the current market. The Owen report suggests that the private sector needs carbon tax certainty to invest. However, the uncertainty, coupled with the market conditions, may well mean that we are not seeing the competitive tension required to achieve the best results for these assets. That is another reason why we have asked for an independent report.

The Premier, Morris Iemma, said in Parliament on 4 June that "if no private investment occurs the Government will be able to pursue a baseload power station development". That evokes a huge number of questions. It undermines all his arguments over the past few months. What advice is he receiving? Is it that the private sector will take the assets but not invest in the new generators? And how does this impact on the budget Michael Costa delivered recently, which was devoid of any investment in generation whatsoever? If this is a possibility, should the Government not have a contingency plan for forward estimates, and can we meet those forward estimates if this eventuates? Or is our triple-A rating under threat? Those questions need answers.

The Premier stated, "If private investment does not occur, then we will." My understanding of the transaction is that he will undertake the sale of these assets because that is the only way to achieve private investment in the generation. How does that match with his comments, "If they don't do it, we will" once the assets are gone? It is incongruous. The Iemma Government does not have the best track record in negotiating with the private sector. Its record is appalling. Can the people of New South Wales be satisfied that the Iemma Government's management team will receive the best results on the basis of its track record?

Mr Barry O'Farrell: No.

Mr MIKE BAIRD: No, it will not. We have heard about Star City and the $400 million increase in value the day after the licence extension was announced. The Cross City Tunnel opened in 2005 and was boycotted in protest against street closures. The original owners were placed in receivership in 2006 after the State Government reversed road changes that funnelled cars into the tunnel.

The DEPUTY-SPEAKER: Order! Members will cease interjecting and allow the member for Manly to be heard.

Mr MIKE BAIRD: I quote the words of Don Urquhart, a constituent from North Ryde, the seat of the Deputy Premier. He summarised the feelings of many New South Wales taxpayers when he wrote in the Sydney Morning Herald as follows:

The sale of the state's power industry planned by Morris Iemma and Michael Costa may and may not be good public policy—that is open to debate. What is beyond debate is that the State Government should not be permitted to undertaken this exercise given NSW Labor's appalling record in managing the sale of state-owned assets and its equally abysmal record in the delivery of services and strategically important infrastructure projects.

The history of mismanagement has eroded trust and thus demands a high level of scrutiny. A transaction of this magnitude and importance demands the involvement of the Auditor-General. The Opposition has concerns that will be addressed in the amendment to be moved in Committee, which seeks to broaden the role of the Auditor-General's report.

Whilst talking about energy and sources, another emerging crisis relates to peak oil and how the Government is managing the industries when preparing for the future. This crisis is looming, yet the Iemma Government is again doing nothing. Australian oil production has already peaked and what is left is significantly harder to extract. The Queensland Oil Vulnerability Taskforce estimates that retail prices of petrol, diesel and gas will be roughly 18 per cent to 22 per cent higher in 2015 than they were in 2005. We must reduce the State's reliance on oil urgently. The inaction of the State Labor Government is adding to the crisis. The State's public transport system is crumbling—commuters have no choice but to drive. There is overcrowding, unreliability of service and fanciful new announcements. If we do not do something about this crisis, we will face a crisis similar to that faced today with electricity generation. This crisis requires action, determination and strategic understanding of the issues this State faces.

We must be sure that the transaction being presented is the best result possible for the people of New South Wales. People's concerns have been deepened by the increasingly inconsistent comments of the Iemma Government. The Auditor-General's review of the proposed plan before any sale takes place will reveal whether it is in the best interests of New South Wales. We are concerned about the Iemma Government's contribution to this crisis—the "all or nothing" approach, the lack of management discipline and the loss of objective reasoning or long-term thinking. We acknowledge the need to open up the electricity market to the private sector and the budget imposts that will be faced if that line is not pursued, but we reiterate that it should not be at any cost at any time or on the back of any deal.

Mr GERARD MARTIN (Bathurst) [11.15 a.m.]: I speak to the Auditor-General (Supplementary Powers) Bill 2008. I put on the record that of all the members who have spoken on electricity privatisation, to quote the Bard, I have been as constant as the northern star. From day one I have opposed the policy: I have said as much in Caucus, at the State conference and in my electorate, and I will continue to do so. The member for Manly lectured the Iemma Government on not being competent to handle a transaction of this magnitude. Perhaps he should read the history of his own party. I remind him of the airport rail link. Someone close to him was the Minister involved, and the Leader of the Opposition might have been his chief of staff. The incompetence of the Coalition cost the taxpayers of this State $800 million. It gave away the State Bank because it could not handle the contractual negotiations in tandem with the legislation, which cost the taxpayers of this State hundreds of millions of dollars. The Coalition Government sold the State Bank for a song, and three years later it was sold for about 10 times that amount. The Coalition Government was penalised because of the way it handled the transaction. It is sheer hypocrisy for the Opposition to lecture the Government about due diligence.

The DEPUTY-SPEAKER: Order! Members will cease interjecting.

Mr GERARD MARTIN: If those opposite wish to go through that process, I have no problem with using this bill as a model. However, we should not proceed down this track. I shall reserve my comments when that legislation comes before the House later in the year. My stand and that of my colleague is in stark contrast to that of the Opposition. I presume the Coalition is committed to electricity privatisation; the member for Manly said that in his opening remarks. We should not take any notice of the member for Coffs Harbour, who is still running around trying to find a couple of hundred thousand dollars for defaming the secretary of the Nurses Association.

Mr Barry O'Farrell: Point of order: That point was raised yesterday. I advise the House again that the matter is still before the courts.

The DEPUTY-SPEAKER: Order! The sensitivity of the matter is well known to the House. I ask the member for Bathurst to reflect that sensitivity.

Mr GERARD MARTIN: I am on the public record as opposing privatisation.

The DEPUTY-SPEAKER: Order! The member for Clarence will resume his seat.

Mr GERARD MARTIN: If the member had not taken one too many punches he would have heard. I want to know what he is going to do. He has plasticine in his backbone; he has been flip-flopping. The member for Manly accused the Government of not providing electricity infrastructure. The criticism of the Wran Government was that we had overcapitalised and overprovided electricity-generating capacity. One need only look at my electorate to see there is a very simple solution to Mr Owen's comments.

The DEPUTY-SPEAKER: Order! The member for Clarence will cease interjecting.

Mr GERARD MARTIN: We already have $3.5 billion that can be put into the baseload at Mount Piper, as recommended in the Owen report, because it was developed to take four units but only two proceeded. The infrastructure and the transmission are there. The way through is good planning by Labor governments. Over the past 60 years, the former State Electricity Commission, with all its name changes, has been a world leader in the electricity industry. The record of Labor governments in this field is excellent, in contrast with what was said by the member for Manly. We can meet the deadlines set by the Owen inquiry to meet that baseload by 2013. Tomorrow The Nationals will tell more lies about this issue. Today I have sorted out the dishonourable Rick Colless in the media.

The DEPUTY-SPEAKER: Order! The member for Hawkesbury will return to his seat or leave the Chamber. It is inappropriate and contrary to standing orders for members to walk around the Chamber calling out while another member is speaking.

Mr GERARD MARTIN: That is the standard of behaviour that we see from those opposite. I put quite clearly on the record where I stand on this matter: I have been constant since day one. I want to know what The Nationals are doing. We have already had a commitment that the Coalition will support electricity privatisation. The Leader of The Nationals and the member for Coffs Harbour change their position every day, but they will do as they are told. They are claiming credit for this, but 99 per cent of it was in the Premier's original submission. I remember arguing about it with Michael Costa and asking him questions. It really is nitpicking. Coalition members have tried to be relevant in this debate, they have tried to sit on the fence and take cheap politic shots. Members on this side who oppose electricity privatisation do so for the right reasons and will be constant until the end. I am quite happy to debate this with the member for Coffs Harbour, or the Leader of The Nationals, or any of their floosies anywhere in my electorate.

Mr ANDREW STONER (Oxley—Leader of The Nationals) [11.22 a.m.]: We are debating a miracle bill. I call it a miracle bill because just days ago the Premier said that it was impossible for the Auditor-General to have any role in reviewing the proposed terms of the sale of the power industry. But now, miracle of miracles, it seems to be possible: the Auditor-General (Supplementary Powers) Bill 2008 appeared the day after the Premier backed down and pulled the legislation enabling the sale of the electricity industry. The miraculous appearance of this bill reflects two important points: first, Labor cannot be trusted to get private sector deals right when it comes to safeguarding the public interest and, second, the review of the proposed process by the Auditor-General prior to Parliament debating the enabling legislation is a legitimate role for his office. That is what happened in 1994 when the State Bank was privatised, with the support of the current Premier who was a member of this Chamber at that time.

The Nationals protest the very short notice given for this debate. Two days after the introduction of the bill the Opposition is expected to digest its contents and consult widely with stakeholders. That is, again, a sign of the disarray of the Government. Six weeks ago the Leader of the Opposition and I delivered a set of conditions—community safeguards—to the Government, which included the Auditor-General oversighting the process from the beginning and before the legislation enabling the sale was debated. Yet only two days ago the Premier finally admitted that it was possible, and only two days ago did we see any legislation. I protest the very short time given for the Opposition to contribute to debate on the bill.

I point out that The Nationals support for the bill is given without prejudice: The Nationals reserve the right to oppose the sale legislation when it returns to the House in September. At no stage, despite the Government's desperate and dishonest spin, have we supported Labor's power sell-off. However, we remain unconvinced that it is in the best interests of country people or the State as a whole. Along with our Coalition partners, the Liberal Party, The Nationals have put forward a number of community safeguards on the understanding that the Government could go ahead and privatise the electricity sector in New South Wales without legislation and, in fact, can still do so. The bill and the other safeguards are an insurance policy, because we know this dishonest Government can proceed without legislation, which is what it originally intended to do. We hope that insurance policy will be in place. However, when it comes to debate on whether the sale goes ahead, our position is not prejudiced in any way by our support for this bill.

Contrary to the Premier's spin, the great majority of these safeguards, including the Auditor-General's role as detailed in the bill, as well as a proper rural communities impact statement, were not part of the Government's processes in relation to the sale. The Government had to be dragged kicking and screaming to protect the public interest and only ultimately acceded to these points following the backbench revolt in the Labor caucus. This truly is a Government in disarray. Having said that, the bill represents a set of sensible checks and balances for a government that has bungled every other deal it has attempted, including the Cross City Tunnel and the introduction of a Tcard. The member for Bathurst went off like a roman candle, as he usually does, in his typical contribution to debate.

Mr Andrew Fraser: With no substance.

Mr ANDREW STONER: With no substance whatsoever—it was a rant and a rave. The member for Bathurst should be the last person to raise the Government's dealings with the private sector. I refer to Bathurst Hospital, which was a public-private partnership project. The hospital was not built to the requirements of the medical fraternity—bodies could be taken out in front of patients, operating theatres were too small to swing a cat in, and potentially people could hit their heads on ceilings that were too low. The member for Bathurst should be the last person to talk about the Government's handling of public-private partnership projects.

Mr Andrew Fraser: What about the aluminium smelter?

The DEPUTY-SPEAKER: Order! The member for Coffs Harbour will cease interjecting.

Mr ANDREW STONER: Yes, that was another private sector deal that went down the gurgler. The member for Bathurst really should not spray. The amendments moved by the member for Manly will ensure that the Auditor-General's review of the Government's intentions is comprehensive and that it properly addresses the concerns of the community. They are very sensible amendments. I acknowledge the contributions of my Nationals colleagues in the development of those amendments. In conclusion, the Opposition supports the bill but we put the Government on notice: We will read very carefully the Auditor-General's report and the rural communities impact statement. If the public interest, particularly in country and coastal New South Wales, is not fully served The Nationals will oppose Labor's proposed power sell-off come September.

Mr PAUL GIBSON (Blacktown) [11.28 a.m.]: I support the Auditor-General (Supplementary Powers) Bill 2008. This is a procedural matter, and that is why I support it. It would be very easy for a group of Government members to cross the floor to vote against the bill—as the Opposition did earlier today. Such a move would have finalised totally the sell-off of the electricity industry. But to do that would be against Labor Party policy and platform. That is something I will not do at any time.

This morning Opposition members have been very keen to talk about the economic performance of the Government. I have been a member of this House for over 20 years, including seven years in opposition. In the seven years Coalition members were on the Treasury side there were seven budget deficits—seven out of seven. The Government has now delivered 13 budget surpluses. From an economic point of view there is no match.

When the Opposition speaks about economic management I remember things such as the $800 million airport rail link that went down the drain, the State Bank and the Port Macquarie Hospital. The doozy of them all was when my mate Nick Greiner was Premier. Coalition members ran at 100 miles per hour to achieve the impossible in those days: they paid off the debt on the Sydney Harbour Bridge! We were paying about 1 per cent interest on that debt. Subsequently the State borrowed money at 5 per cent, 6 per cent and 7 per cent interest. The Labor Government has done a great job on economic management.

Like the member for Bathurst, I have been against the privatisation of the electricity industry from day one, and when the major bill comes before this House in three months time I will cross the floor and vote against it. If I am the only one to cross the floor so be it. Labor members want essential services to be in the domain of government. I am yet to meet anyone from my electorate who supports the privatisation of the electricity industry. People may want to sell a little bit of the farm to get out of trouble or to do a few things that need doing. But what happens in five or 10 years when we need to do something else? Do we sell a bit more of the farm? One day they will turn around and look and the farm will be gone. There is no doubt that people do worry, whether it is a Chinese family or others buying the electricity business in this State.

Last December the electorate of Blacktown suffered a major storm that resulted in damage amounting to $350 million. On the edge of my electorate at Huntingwood 500 people are employed to look after our electricity supply. Huntingwood is the go-between for contacting the linesmen to get the power back on. When people lost their power supply as a result of the storm they rang Huntingwood. If we privatise electricity and there is another storm I will ring and then be asked, "What is the trouble?" I will say, "I live in Blacktown. My electricity has gone out. When am I going to get it back on?" Then some little bloke at the back of Bangladesh will say, "Where in the bloody hell is Blacktown?" I have no doubt service will go out the door.

The people of New South Wales do not support the privatisation of the electricity industry. It does not matter whether this bill originated from the Government side or the Opposition side: there is great similarity between the five points the Coalition wanted and the five points in the bill today. It is not unusual for government to entice the Opposition to seek support to pass a bill, but I want to put on record that what is happening here is unprecedented. The Labor Government is trying to get the support of the Opposition to pass legislation through the House. That is fine, but I oppose the Government seeking the support of the Opposition not only to get legislation through this Chamber but also to go against Labor's policy and platform. That is something I cannot support and will never support.

Mr JOHN WILLIAMS (Murray-Darling) [11.34 a.m.]: What we see here today are potentially the first steps on the road to Damascus. I do not agree to take those steps. I have stated from the start that I am opposed to the privatisation of electricity and I continue to be. Come September I will clearly let members of the House know of my opposition to electricity industry privatisation. I come from a town where the values of the Labor Party were derived. I represent people from that town that are concerned about the action that the Government is taking. It is not about securing future electricity supply. If it were I am sure that the Premier and the Treasurer would have spoken out about it a long time before today, and a long time before they suddenly emerged saying they had to do something about securing the future electricity supply. It is only about seeking revenue and cashing in the chips. I do not think that either the Premier or the Treasurer gives a damn about the future electricity supply in New South Wales.

This is a government that cleans up afterwards; it is not a government that plans for the future. It has never done that. It has to have a crisis so it can fix it. All of a sudden the Government is saying that the future electricity supply needs to be secured. It saw an opportunity to cash in the chips, to get some money in the tin and probably bankroll the next election. That is all it is. Everyone in this House is breathing a sigh of relief, particularly on the other side, because the inevitable has been delayed. The two puppets in the lower House are pushing around the guys who are prepared to stand up and fight for the rights of the people who have elected them by opposing the sale. The Government is trying to shove and push them by saying, "Come on fellas, support the Government. This is a Government initiative. This is good policy." It is talking up this crazy notion that it is about securing the future electricity supply.

It is absolutely not! Shortie Reville, a citizen of Broken Hill, went to the Labor conference and voted this proposal down. Shortie said to me, "John, what are they going to sell next? What bit of silverware out of the cabinet are they going to sell next?" The rank and file of the Labor Party know what the Government is up to. It has nothing to do with securing the future of this State; it is merely about cashing in the chips. The Premier and the Treasurer may believe this proposal is the solution to passing the privatisation of electricity legislation but they still have a fight on their hands. It is not over yet. While many of The Nationals might be waiting to see the whites of the eyes, I will state where I stand. Come that day in September that we have to vote to privatise electricity in this State, the blood will be on the floor.

Mr KERRY HICKEY (Cessnock) [11.38 a.m.]: I support the Auditor-General (Supplementary Powers) Bill 2008. I do not support the sale of the power generators or retailers in any way, shape or form. I have taken that stand since day one. It is good to see the Coalition finally make a decision. At first it did not support the sale; now it has had a win and will support the sale. Nothing has changed! I am not playing politics. Because of the expansion of aluminium smelters, et cetera, and the effect that will have on the generation of jobs within my electorate, privatisation of the electricity industry has raised major concerns. I am very concerned about the benefits of keeping the power industry in public ownership. Essential services should remain in public ownership.

Mr STEVE CANSDELL (Clarence) [11.39 a.m.]: I congratulate The Nationals in the first instance on forcing the Government to introduce legislation that will ensure the Auditor-General oversees and investigates the sale.

[Interruption]

ACTING-SPEAKER (Ms Diane Beamer): Order! I call the House to order.

Mr STEVE CANSDELL: I appreciate advice from the Government benches! The Government also has been forced to agree to a rural communities impact statement and other studies to ensure that electricity privatisation goes ahead. That does not mean that I in any way support privatisation. The Government has seven apostles who were totally against privatisation but they have become the seven dwarfs of the lower House. They are miniature when it comes to ticker. When it comes to the crunch and they have the chance to oppose the privatisation of electricity 100 per cent in full view of their party colleagues and their electorates what do they do? At the first test of their resolve they fold like a pack of cards. The seven giants of the Labor Party have become the seven dwarfs of the Labor Party.

Mr Kerry Hickey: Oh, go away!

Mr STEVE CANSDELL: The member for Cessnock is dwarf No. 1—Dopey.

Mr Kerry Hickey: Point of order: I ask the member for Clarence to withdraw the remark. I find it very offensive.

Mr STEVE CANSDELL: I unreservedly withdraw my reference to the member being Dopey, but I do not resile from my view that the seven apostles or the seven giants of the Labor Party who stood tall in the party room, in the media and before their constituents—85 per cent of people are against privatisation—suddenly folded. They have gone from being giants to being dwarfs. I am reflecting what people in the broader community feel. I expected some display of strength and ticker from members of the Labor Party who stood tall with the unions, especially the 700 delegates who voted overwhelmingly against privatisation at the Labor Party conference. However, at the first test the dissenters failed miserably.

They cannot claim to be against privatisation and also claim to support this bill, because the bill is just one small first step along the path to privatisation. At the first test Labor dissenters folded. The member for Cessnock and his six mates and some Labor members of the upper House have folded big time. We will know everything when the time comes to vote. Of course, there will not be a vote because no Labor members would be game enough to put this matter to a vote. I predict that all Labor members will sit tight and smugly tell their electorates, "I spoke against it. I am against privatisation."

ACTING-SPEAKER (Ms Diane Beamer): Order! Government members will remain silent.

Mr STEVE CANSDELL: I appreciate decorum in the House. As the member for Murray-Darling observed, the Government's privatisation of electricity has nothing to do with achieving better outcomes for unions, workers and the community—nothing at all. The Government's privatisation strategy is only about flogging off the family silver to fund fixing up the mess Labor has caused in its 13 years of administration. And what a mess it is! Any portfolio we would like to mention—health, law and order, education, transport—is a total mess. The Government has spent billions of dollars looking after itself and propping up its backroom mates with jobs. The Government's focus is not on the delivery of front-line services.

Ms Angela D'Amore: How much did your electorate receive in the budget?

Mr STEVE CANSDELL: My electorate did okay, thank you very much, with all credit due to the Federal Government.

Mr Kerry Hickey: We will pass on your best wishes to Kevin.

Mr STEVE CANSDELL: It might be Kevin who has propped up the New South Wales Government and bailed it out, but he will not bail out the Iemma Government regarding privatisation of electricity. The seven dwarfs will not bail out the Iemma Government either because they have folded big time.

Mr PAUL PEARCE (Coogee) [11.43 a.m.]: I support the legislation because it will expose the flaws in the Government's strategy for the privatisation of electricity. I oppose the privatisation of the electricity industry—I have stated that publicly—and I will continue to oppose privatisation of the electricity industry. I do so because I believe it is a fundamentally flawed strategy. By virtue of this legislation the Auditor-General will be given a brief to examine the privatisation deal, and I believe that examination will expose some of its flaws.

One cannot debate this bill without referring to the Electricity Industry Restructuring Bill 2008. That bill confers extraordinary powers upon the Treasurer, who will not be answerable to the Parliament on the exercise of his powers. The Legislation Review Committee in its consideration of the Electricity Industry Restructuring Bill 2008 identified that. Effectively, the bill will authorise stripping of assets owned by the generator that are not transferred to the proposed new public body.

In my view, the Electricity Industry Restructuring Bill 2008 is a very flawed bill. As I have indicated, the proposal confers substantive powers upon the Treasurer for which he will not be accountable to Parliament. It also authorises disposal of the assets of the generator that may be leased in the future. That is virtually inviting asset stripping to take place, which is totally unacceptable. However, allowing the Auditor-General to review the deal is to the benefit of the people of New South Wales.

It is my sincere belief that the outcome of this deal will be a redrafting of the proposition. That will enable people to have the opportunity to think about the real issues underlying privatisation. If today's newspaper reports are accurate, the Auditor-General has indicated some reticence concerning his role. Quite correctly, he does not envisage his role as commenting on whether Government policy is good or bad, and he will not comment upon policy. But according to the terms of the bill, especially item [2] of schedule 1 which inserts new schedule 1A (1) and (2) into the Public Finance and Audit Act 1983, he will provide an analysis of the process of privatisation. I am pleased the bill before the House has been introduced, but I reiterate that I am utterly and completely opposed to the privatisation of the electricity industry in this State.

Pursuant to sessional orders debate interrupted and set down as an order of the day for a later hour.