BIG farming groups want the NSW government to put the $13 billion sale of its electricity networks on hold because they are concerned about being exploited by a new private owner, illustrating the deep suspicion in regional NSW to the privatisation.
Nanjing Night Net

The Agricultural Industries Electricity Taskforce, which represents cotton growers, cane farmers and other farmers that rely on electricity, said the sale should wait until rules are in place to stop NSW-owned power networks making consumers pay for “gold-plated” investments that were not subject to proper regulatory scrutiny.

“We are concerned that unless credible regulatory arrangements are established, a government monopoly will be replaced by a private monopoly but with continued inadequate regulation,” the taskforce told a Senate inquiry into electricity networks that will hold its first hearings on Monday in Brisbane.

The lobby group said that once the networks were sold it would more difficult to reform regulation since any changes would raise the prospect of sovereign risk for the private owners. The Labor Party and Greens have instigated the Senate inquiry just weeks before the March 28 NSW election to provide a platform for opposition to the Baird government’s campaign pledge for a 49 per cent sale of the power network. On Sunday Unions NSW formally launched a campaign titled “NSW not for sale” opposing the electricity privatisation and any other sell-offs.

Among the 64 submissions to the inquiry several groups like the agricultural taskforce generally favour privatisation but have expressed concern it will complicate crucial improvements to price setting and regulation now under way. The submissions call for tougher price regulation and several focused on a battle taking place over NSW network prices. In the first test of new price setting rules agreed by state and federal governments in 2012, the Australian Energy Regulator (AER) has issued a draft decision calling for NSW networks to cut their prices by about 30 per cent over the next four years. The NSW network firms have demanded the regulator reverse this in its final decision in April and instead let prices keep slowly rising.

The agricultural taskforce said NSW was pushing for price rises to make the electricity assets more attractive to potential investors. “The shareholding governments are prioritising the sale prior to any reform of the regulatory arrangements and institutions. Evidence of this can be seen in the opposition that the AER is facing from the NSW government to its draft decision for the NSW distributors.”

The Australian Aluminum Council backs privatisation but it also said NSW might try to boost electricity prices before the sell off. Aluminium smelters use a lot of electricity.

“If a government-owned asset is being prepared for sale, the price paid for the asset is strongly influenced by recent and expected future revenue streams,” the lobby group said.

The Energy Networks Association, which represents power transmission and distribution firms, dismissed the union-run campaign that claims privatisation will raise power prices. It said the AER, which sets prices for regulated monopolies, had exactly the same rules regardless of ownership.

“Any proposed operating cost reductions deemed appropriate in the AER’s final decisions due in April would be implemented and passed as savings to consumers irrespective of any decision taken by State governments relating to long-term leasing,” it said.

But it agreed that if the AER decided to slash prices too quickly it could jeopardise NSW plans to lease 49 per cent of its networks to fund infrastructure.

“To the extent any AER decisions are based on unrealistic cost reduction targets, or outcomes inconsistent with prudent risk management, these concerns will persist regardless of any final ownership arrangements and may impact on the value received by State taxpayers in such transactions.”

This story Administrator ready to work first appeared on Nanjing Night Net.