Eight electricity privatisation myths exposed


Myth 1: “Prices will be lower because of increased competition”.

Fact: Over the last decade, the average yearly price of electricity per megawatt hour has been $38.22 in NSW. This should be compared to other states in Australia where privatisation has occurred. An example is in South Australia, the average price is $76.36.

This is an economic assumption that hasn’t proven to be true in either Victoria or South Australia, two Australian states where privatisation has occurred. Indeed recent independent statistics on home fuel and power use show that a NSW family with a weekly income (before tax) of $923.00 would spend $21.23 per week on domestic fuel and power.

In comparison, a Victorian family earning the same income would pay $29.19 and the same family in South Australia would pay $27.78. The domination of Australia’s private electricity generation market by a few large companies means that in reality there is not much competition at all.

Myth 2: “Workers’ jobs will be protected”.

Fact: This hasn’t been true when privatisation has occurred in other Australian states. In Victoria, between 1990- 2001 71 per cent of jobs in the industry were lost.

In Victoria, despite government assurances, more than 200 Australian jobs were sent to India by just TruEnergy. In South Australia employment fell by 52 per cent between 1990-2000 (Monash Business Review Vol 12 (3) Nov 2006)

The NSW Government has said that it will provide one-off payments to public service employees forced to move to the private sector. A power station employee who has been in their job for six years will receive the equivalent of 30 weeks pay. However as these companies have shown in other states there is little job security when electricity is privatised. If you are facing months or weeks without work shortly after transferring to the private sector, that money will not go very far. Also, when that one-off payment is compared to what employees could have earned through decades of loyal service in the public service then suddenly, a one–off cash payment does not seem so appealing.

Myth 3: “Foreign companies won’t control our electricity supply”.

Fact: Many of Australia’s electricity companies are either owned by foreign multi-nationals or operate through a web of subsidiaries that are based as far away as the Cayman Islands. This means that the people accountable for a reliable and efficient electricity supply are not based in Australia but rather in boardrooms in Hong Kong.

Myth 4: “The privatisation of electricity will secure the supply of electricity”

Fact: It is acknowledged by experts that in the next 10 years there will need to be new facilities built for electricity generation. However, the government’s proposals do not place any obligation on businesses to build more generators.

Myth 5: “The NSW Government can’t afford to build the new generator needed”.

Fact: Contrary to popular belief, debt is not used in determining a government’s credit rating. What is considered is the government’s ability to meet its financial obligations. It is recognised by ratings agencies that governments have a responsibility to fund public infrastructure and it may require debts that are offset by long term gains.

Myth 6: “The money from the sale of the electricity generator is better spent on other infrastructure”.

Fact: There appears to be a short term gain in selling off our electricity assets. However, the experience of other countries has been that in the long term privatising electricity leads to higher prices which means that governments are forced to subsidise an increased number of individuals who are unable to afford their electricity bills. Similarly, in the USA, some states now have to subsidise private businesses that are unable to sustain their position in a fully privatised market so that the government can minimise disruptions to electricity supply.

Myth 7: “Privatisation of electricity assets leads to greater efficiency”.

Fact: In a comparative study of productivity rates in different countries, independent researchers found that UK productivity growth rates before privatisation were similar to those achieved in the US A. However, after privatisation productivity growth fell: “By 1997 productivity levels in the UK were some 20 per cent below those in the US and France.” (O’Mahony and Vecchi).

Myth 8: “This is just an economic issue”.

Fact: Electricity privatisation has consequences for the communities in which the power stations operate as well as for the provision of apprenticeships. An example of this occurred in the Victorian LaTrobe Valley where privatisation and the significant loss of power station employment led to house prices plunging. This meant that despite seemingly good redundancy payouts, people were left unable to move and look for new work.

Also in Victoria, the Victorian Council of Social Services warned in March 2004 that 1 in 4 households risked disconnection of power when the state became fully deregulated. In terms of apprenticeships, the number offered dropped from 300 per year to under 100 after privatisation.

Information sheet for job delegates, produced by the AMWU, Technical, Supervisory and Administrative Division

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3 Responses to “Eight electricity privatisation myths exposed”

  1. tania Says:

    hi, nice topic. I have planned to compose about privatisation in electricity sector for My final paper, n im in contra side with this policy. The reason for contra is bcz my ideology said its not allowed.
    Honestly, its quite difficult for me to find the journal that againts privatisation. Most the journal that i have already collected is pro with privatisation.
    If u dont mind, can u share the journal or written that contra with privatisation in electricity? For argument to make my paper have good evidence, not only my mind.
    My country, Indonesia have planning to private this sector this year. Im interesting with ur article that talking about what happen to ur country (that ‘ve already privated),
    My mail is putri_taniahanif@yahoo.com
    I will very thankfull if u help me,

  2. Ed Lewis Says:

    Tania, I suggest that you read the trade union representatives’ minority report to the Unsworth inquiry appointed by the NSW government. There is a link to it in Unsworth report is a dead duck, on this site.

    People on this site have written extensively on this battle. See in particular, The charge of the corporate heavy brigade, Outsiders in their own party, Labor ranks revolt on privatisation and Crunch time for Labor as a force for progress.

  3. tania Says:

    thanks alot, 🙂

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