ABC News

Government pushes states to privatise power

  By Stephen Dziedzic

Updated December 13, 2011 21:14:09 

Energy Minister Martin Ferguson released the Government's draft energy white paper, which warns that the power industry needs massive investment if it is to meet growing demand.
Power prices have jumped by up to 40 per cent over the past three years, prompting angry newspaper headlines and stoking popular anger at state governments.
Mr Ferguson says it is short-sighted to blame the states but says continued government ownership of electricity generation assets makes it more difficult to attract new investment.
"Peak demand is having a huge impact on the cost of electricity in Australia," he said.
"These are the issues that confront all of us. I'm not seeking to apportion blame or to put pressure on state and territory governments or whatever.
"I will stand side by side with them in defending the current increases in prices."
But he says price regulation by state and territory governments can reduce competition and innovation so electricity markets should be opened up.
The draft white paper says power infrastructure is ageing while demand is rising and Australia will need to spend about $240 billion in the generation, transmission and distribution of gas and electricity over the next two decades.
The debate over power privatisation has caused enormous upheaval and controversy, particularly in New South Wales, but Mr Ferguson says the states should bite the bullet and sell off their assets.
"The results in Victoria speak for themselves. They actually see the comparative price increases from year to year, which we now release publicly on a regular basis," he said.
"There is considerable pressure on governments of all state and political persuasions at the moment to be having a hard look at the drivers of increased electricity prices. These increases are not going to go away."
Clare Savage from the Energy Supply Association of Australia says it is a welcome intervention in the debate and she hopes the states take notice.
"From our perspective competition between retailers in a market is the best way to ensure that you get the lowest possible prices for both households and businesses," she said.

States uncertain

But at least three states are not convinced it is a good idea.
Queensland Energy Minister Stephen Robertson says just because privatisation has worked in Victoria does not mean it will work for his state.
"Queensland is still significantly below the electricity prices paid in Victoria so if that is what the Federal Government is hanging their hat on as a compelling argument to privatise energy-generating assets then that's a curious way of going about it," he said.
WA Energy Minister Peter Collier also says his state is unlikely to follow Victoria's lead.
"The WA Government is not considering privatising any of its assets at the moment. What we have at the moment is a situation where we have significant private sector investment in generation particularly over the past few years but that has come at a cost," he said.
In Tasmania, Infrastructure Minister David O'Byrne is waiting for a report from the independent expert panel reviewing the state's energy sector before making a decision.
"We're obviously not going to second guess what that review will come up with. Once that report is finalised by the panel, it will obviously then be put out into the public arena and we'll discuss it," he said.
"But until we've completed our work we'll be focussed very much on ensuring that we provide the best structure of energy provision to the Tasmanian community."

Nuclear option

The draft white paper also notes that the carbon tax may pose additional challenges to the energy sector because it will take time and money to introduce renewable sources of energy.
It says the "lack of bipartisanship" around carbon pricing policy, referring to the rancorous political debate on the carbon tax, is also a significant concern to investors and the industry.
Mr Ferguson also announced the Government will no longer apply some emissions standards for new coal power stations because the carbon tax makes them redundant.
Prime Minister Julia Gillard has consistently said the Government would not embrace nuclear power, but Mr Ferguson continues to argue Australia may one day need to consider it.
"Nuclear for Australia is always there as an option. We don't have to invest in research and development and innovation on that front, other nations are the specialists," he said.
Greens senator Christine Milne says she is not surprised but is disappointed by Mr Ferguson's stance.
She says the white paper focuses too much on coal and gas and not enough on renewables.
"Martin Ferguson is a big supporter of nuclear, he's the one who's pushed the ALP to change its policy on uranium exports to India," she said.
"He keeps saying that if renewable energy was to fail then we'd need nuclear and we need to make that decision in the coming decade, but the fact of the matter is he talks down renewables at every turn."