Poles and Wires Apart – NSW style

Being it is an election issue – What do you think about privatisation of the electricity assets? A fair question we said, but the wrong one! We feel the ‘real’ question is will the price of supply go down either way? Then it becomes obvious if you use the word ‘redundancy’. In the Queensland election the word was replaced with an emotive ‘gold plated’. In the coming NSW Election there is no mention of either term. The political sides prefer to attack and defend on diverting money streams that would flow onto ‘infrastructure’ projects.

Our point here is that ‘poles and wires’ are infrastructure and there is a level of build required to a) Meet demand. B) Provide reliable pathways. The c) route is actually the political risk to an incumbent that makes the decision to support or reject a build decision and that might not have any basis of a) or b). So c) can be why redundancy is so important when they build.

It is time for a new incumbent politician to be elected. Both sides understand the previous administration built into the system excessive redundancy. This equates to – those assets offered for sale or lease will be attractive as very little needs to be done for another 5 years before meeting demand and system reliability becomes an issue (a and b).

If the current state government is re-elected they can honour their pledge that in 2019 no price rises will occur because of the assets passing into private hands. The potential buyer will find the ‘redundancy factor’ attractive in guaranteeing a profit.

If a new government is voted in they will ‘protect you’ from price rises and continue a revenue stream for the infrastructure needs of the state. They will simply have a different emphasis on what infrastructure to spend. For example less will be spent on Roads and Rail and more on other social needs. The new will be able to do this by avoiding spending as redundancy is built into the system.

How much redundancy is built into the NSW System? The question is not so easy to answer. Because Transgrid the transmission network had something like $15b to spend a couple of years back and the Distribution network companies spend considerable amounts on their needs. The ugly ducky in terms of the need to spend is still looking to be Essential Energy by virtue of the area and geographical spread of its territory. Essential is essentially regional NSW.

What neither party is telling you are what Essential Energy will do to address a new business model to meet the challenges in the next three years.

The question is really, will history repeat itself and will the need to further build after the redundancy period morphs into a massive rebuild program. Building program cost money and in any user pays system you will pay for the need to supply. You will pay either as a taxpayer or a direct cost. The politicization factor will decide what the koala will bear. Koala in this sense is the voter.

To back this up we read with interest the writings of Keith Orchison, 9 March 2015, ‘Who’s telling porkies about NSW’s poles and wires?’ You will find the story in the Business Spectator. He says, “Where the wheels fall off the propaganda cart, is when you look forward and also when you bear in mind what Mike Baird wants to flog. The Premier plans to sell half of Ausgrid and Endeavour Energy, the two largest earners, all of TransGrid, the high voltage business, and none of Essential Energy, which delivers power to 95 per cent of the state and has been declared untouchable by Baird’s National partners.

Broadly speaking, any loss of revenue will be about half the total networks income for the government. Then the question is how much income is that likely going to be?”

“You can then halve these numbers for ‘lost revenue’ because Baird proposes to hang on to half the distribution duo that delivers most of the moolah.

One way of looking at this is that there is about a $3bn to $4bn hole in the ‘anti’ brigade’s bucket on this issue over the remainder of this decade.

These campaigners have not been too fussed about accuracy in other respects, either.

For example, the $1m worth of advertising currently running on NSW television screens is supported by an assertion that power prices in Victoria have risen 60 to 70 per cent since electricity privatisation, but this ignores the fact that network charges in that state have fallen during this period.

Work done for the NSW Treasury by Ernst & Young shows that Victoria’s network charges fell 18 per cent in inflation-adjusted terms between 1996 and 2013. Over the same period, they rose 122 per cent in NSW.

Now the voters of New South Wales can’t be expected to go out and research all this stuff for themselves, so what is the role of the Electoral Commission in vetting the integrity of the campaign?”

We say no more – it has been said! Now you vote – clear as mud is it not!