Letter to Gerard Martin MP

People Power Blue Mountains recently sent the state member for Bathurst (which includes Lithgow), Gerard Martin, a letter asking for him to state his position on the privatisation of the eletricity industry. This letter, and his reply, are printed below:

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Dear Mr Martin,

PeoplePower Blue Mountains notes with warm approval your opposition last year to the proposal to sell electricity retailers and lease electricity generators.

When he ascended to the leadership of the NSW Parliamentary ALP caucus Nathan Rees indicated that he would support a ‘revised’ plan to sell off electricity assets

We note with dismay that not only will the so-called revised plan include the sale of electricity retailers; it will also include the sale of the generator trading rights.

As NSW Treasury, who have been pushing this anti-democratic policy all along, stated at Budget Estimates prior to the mini-budget last year, the purchaser of the generator trading rights will also purchase the rights to make significant decisions on the day to day operation of electricity generation plants (such as Wallerawang and Mt Piper).

Decisions such as maintenance, staffing, industrial relations, production levels and investment will all be taken from the state owned Delta Electricity and given to a private (and highly likely overseas owned) operator.

This is not alarmist rhetoric; this is a matter of public record from the former head of treasury, John Pierce, along with other senior treasury officials, under oath before budget estimates last year.

As you can well imagine, this new plan, put together by Infrastructure Minister Joe Tripodi, will be anathema to the substantial number of power workers and their families that live and vote in your electorate.

What the workers in the industry, and consumers of Country Energy and Integral Energy want is a clear statement that you oppose the sell off of their assets.

At no stage prior to the 2007 election was this proposal canvassed from the electors of Bathurst. Your stated opposition to the Tripodi Plan will provoke a ringing endorsement of yourself from the people of the Bathurst electorate come the next election.

If, however, you support this endeavour by Mr Tripodi to sell off the electricity retailers and the generator trading rights, PeoplePower Blue Mountains would like to invite you to publicly enunciate the reasons for your support for the Tripodi plan at a forum in the Lithgow district at your earliest convenience.

Our many members in the Bathurst Electorate are very curious to understand your position and we will be promoting your position with a great deal of visibility over the next few years.

We look forward to a response that indicates that you have chosen your electorate over Joe Tripodi and the NSW Treasury who, after all, do not have a vote in the seat of Bathurst.

Yours sincerely,

Liam Mitchell,

Convenor, PeoplePower Blue Mountains

29 March 2009

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People Power Blue Mountains

Dear Sir

Thank you for your recent correspondence in relation to my stand on ownership of electricity in New South Wales. People of the Bathurst Electorate have had a very clear position on this issue from day one.

I have opposed privatisation at every forum in the Australian Labor Party and will continue to do so, as I am currently doing regarding plans to privatise correctional facilities in New South Wales

Yours Faithfully

Gerard Martin MP

MEMBER FOR BATHURST

Campaign against power sell off gaining pace

The following article was published in the Lithgow Mercury, 31 March, 2009:

A leading anti-electricity privatisation group has written to Member for Bathurst Gerard Martin calling on him to oppose the latest push by the Rees Government to sell off the State’s power system.

The call comes after power workers at Delta facilities on the Central Coast walked off the job last Friday in a protest against power privatisation plans.

The letter from PeoplePower Blue Mountains highlights statements made under oath late last year by the head of NSW Treasury John Pierce that many of the day-to-day decisions on the running of plants at Mt Piper and Wallerawang would be taken from Delta Electricity and given to the successful bidder for the generator trading rights.

Many industry commentators have already said that the successful bidder for the trading rights at Delta would likely be an overseas-based company.

“Whoever wins the bid for the generator trading rights will be driven by profit,” PeoplePower Blue Mountains convenor Liam Mitchell said.

“You don’t have to be a rocket scientist to see what is going to happen to job security, pay and conditions if an overseas multinational is calling the shots at Delta.”

PeoplePower Blue Mountains say press reports indicate that NSW Infrastructure Minister Joe Tripodi is behind the revived plan.

“The people behind this, Joe Tripodi and the NSW Treasury, must be very slow,” Mitchell said.

“The people of NSW, especially workers in the industry, have spelled it out for them time and time again — privatisation in any form of public utilities is simply not an option.

“We are calling on Gerard Martin to publicly come out and back the many families in his electorate that rely on the electricity generation industry for decent jobs.

“If Mr Martin prefers to choose Joe Tripodi over his electorate we will be encouraging him to come out publicly and explain why.

“This is not an issue that anyone can sit on the fence on.

“The events at Vales Point last Friday show that anger among power workers is very real and it is a matter if when, not if, this issue will emerge locally.

“When that happens workers in the power industry, and the broader community, want Mr Martin to stand by his community and publicly state that he is opposed to privatisation of the power industry and especially the Tripodi plan.”

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• Lithgow radio station radio 2LT also ran the story in their news bulletins on Monday.

• We have also sent a letter to Gerard Martin (which we will publish here soon.)

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Victorian bushfires highlight the folly of electricity privatisation

Jeff Sparrow, editor of Overland writes (for crikey.com.au):

Arsonists, says Kevin Rudd, should rot in prison. But who will be punished if the pending law suits find private power companies liable for the fires in Kilmore East, Horsham, Mudgegonga and Dederang?

Why, you will, dear reader -- thanks to the terms that state governments negotiated when they sold off our public assets. Consider the case of SP AusNet, the subject of a class action for negligence around the Kilmore fires.

The Insurance Council of Australia has estimated the damage of those fires at about $500 million. But SP AusNet's legal liability has been capped at $100 million under a deal struck by the former Kennett government with private utility operators, when the former State Electricity Commission was privatised in 1995. Legal sources said this
meant the Brumby Government could be forced to cover a shortfall of hundreds of millions of dollars.

The recent heatwave highlighted some other results of the great privatization binge carried out a decade or so ago.

Connex, the group that seized Victoria's rail network, recently excused the 2300 services it cancelled last month on the basis of ... wait for it ... the weather. Its trains can't, you see, function in weather warmer than thirty-five degrees. Given that each year there's this phenomenon called "summer" (you may have heard of it), operators of a transport system designed for the benefit of the public -- most of whom, strangely enough, still have to work on hot days -- might conclude that cool-weather-only trains simply don't cut it.

But Connex, of course, is a private company, and makes its decisions on the basis of an entirely different calculus. That's why, though Melbournians would clearly prefer to buy their fares from a conductor, we're stuck instead with dysfunctional ticketing machines, unable in most cases even to provide change. Not surprisingly, there's now a widespread culture of fare evasion, which the private owners attempt to counter with hectoring advertisements and roving gangs of thuggish inspectors.

But there's a bigger issue relating to climate change. Now, we don't have to believe in global warming. The science is complex and most of us don't fully understand it. But many of us are also sufficiently mathematically challenged as to not follow the process by which Eratosthenes of Cyrene first calculated the circumference of the planet. But we don't therefore sign up with the Flat Earth Society, since we possess sufficient common sense to accept the consensus of the scientific world.

If we adopt that methodology with climate change -- aligning ourselves with the vast majority of scientists rather than the small but shrill denialist faction of oil-company flacks, shock jocks and the tabloid journalists who are professionally wrong about everything -- certain things follow. We can expect a small but real increase in average temperatures, and that means bushfires will become more likely and more devastating. No, you can't ascribe the blame to climate change for any particular fire, just as you can't definitively link your heart attack to your pack-a-day habit. Heart problems kill non-smokers, too -- but only a fool would conclude that means you can puff away without risks.

In other words, if we don't do something, we can expect more tragedies like the one we've just endured.

But that brings us directly back to privatisation. It's not only that the process by which we swapped our public assets for a bag of magic beans has led to an appreciable degradation in services, it's also disarmed us in the fight against the causes and consequences of climate change.

How is the private company that makes money from selling you electricity -- and thus becomes more profitable the more of it you use -- going to foster energy efficiency?

The short answer is that it will do so about as effectively as, say, a pub campaigning for sobriety, a casino against problem gambling -- or, to use a more apposite example -- the private utility in charge of our taps for water efficiency.

The world financial crisis has already exposed many of the ideologues behind the neo-liberal excesses of the last decades as at best charlatans and at worst overt fraudsters. By all means, prosecute the arsonists. But let's also have some genuine accountability about the policy makers who got us into the mess we're now in.

The Rees Electricity Privatisation Plan

The plan involves:

1. Sale of generation development sites (with "use it or lose it" conditions)

2. Sale of retail arms of Energy Australia, Integral Energy and Country Energy

3. Lease of the trading function to the private sector. Selling electricity will be performed by the private sector.

The three big problems with this plan:

1. It shifts all the cost-risk onto households

2. It leaves the management of change to the discredited free market

3. It does nothing to promote a transition to sustainable energy

The way forward?

"Could you imagine filling up your car with a tank of fuel and then going into the service station to find out what the price is? This is effectively what the government is asking us to accept."

The latest proposal purports to be different, but in reality contains much of Iemma's scheme and leaves the door open to bringing in the rest of the plan by stealth – without requiring enabling legislation.

The new government plan is to privatise the retail sector – Energy Australia, Integral Energy and Country Energy – and lease the right to sell electricity on the wholesale market.

Current power generators would remain in public hands, as would the transmission infrastructure. Development sites – earmarked for future generation needs – would be sold off. Private electricity wholesalers would have the right to build new power plants, effectively privatising the industry over time.

This plan holds the underlying view of the discredited Owen Report that to guarantee the future of the state's energy needs, energy generation and retail must be opened up to private profit.

It does not have any mechanism to cope with future energy needs in a world where climate change is forcing reorganisation of carbon-intensive industries, such as base load electricity generators.

Nothing in this plan will help create a sustainable energy industry. This is left up to the market.

There are no guarantees that privately owned electricity marketers would invest in new power stations, let alone sustainable ones.

Even if they do, the new generators would likely be the cheapest available – based on dirty coal. The future of the electricity industry – and indeed our own future – would be left up to the markets.

While the government claims that retail prices will be capped until 2013, it has decided to review the cap based on the extent of private generation of electricity.

Despite the Owen Report, the future of the state's electricity supply is not in dire circumstances. Owen omitted the crucial fact that potential energy efficiency savings using currently available
technology would rule out the need for new power plants and would allow the phasing out of current coal fired plants.

Under the Rees plan managing electricity demand would go out the window as private retailers and traders sought to maximise demand and through that, maximise profit.

The government is effectively selling the wholesale electricity market to the private sector.

This market is very volatile – a futures trading market on electricity – and when deregulating the electricity retail market, the government is seeking to wash its hands of the cost-risks associated with this market.

The hedge will be to pass on the cost-risk to retailers, who in turn will pass it on to households.

Any private corporation looking to get into this sector is going to need a very big carrot to smoothen the road for them.

One carrot will be the possibility for wholesale distributors to become generators.

There will this be no requirement for the wholesalers to buy their electricity from government owned generators. Indeed, another possible carrot potential wholesalers may demand is to be able to buy from cheaper, privatised generators elsewhere on the national grid.

Electricity, by is very nature, is not a commodity that can be packaged and labelled with the company's logo as other goods and is distributed alongside electricity from other retailer through the same power lines. The only reason for these reforms is to place the system
in private hands run for private profit, rather than any efficiency gains.

Workers in the electricity retail industry have been told that their jobs and conditions will be safe. However, from a government that is looking to massively cut jobs in the public sector, these guarantees are not worth the paper they're printed on. Award workers will face
pressure to accept cuts, whether at the end of the 5 years if not before. AWA workers could find themselves out of a job at the end of their contract.

Any new power stations built by the wholesale corporations would become greenfield sites – open to new employment conditions worked out by the company themselves before they even employ anyone. This alone would place great pressure on the wages and conditions of workers in other plants.

So what does the government get for this? It has been estimated that it will receive $10 billion for the lease of the wholesale rights over 10 years. A further $3 billion is assumed to be the price for the retailers. Total: $13 billion for the next 10 years, with a decreasing amount after that if private corporations generate their own electricity or buy from cheaper sources. The figures used to estimate the sale of the electricity sector were based on seven-year-old
figures and have not been tested in the marketplace. In a time of global warming, a global credit squeeze and carbon trading tax, the amount the government will get will likely be much smaller.

Compare this to the $1.5 billion in income the government gets each year from its state owned generators and retailers. NSW taxpayers will be behind even before the ink is dry on the sale contracts.

The environment will certainly suffer as a result. With wholesalers able to buy from the cheapest available source they will not be interested in investing in renewable energy or bringing online any sustainable industry until the costs are lower.

The consumer will ultimately be the loser. Cost fluctuations – particularly in peak periods – would be passed on to the consumer. Reliability has been shown to suffer under a system of private generation and distribution. In a profit driven system, the price of electricity is likely to jump just to satisfy the private investors.

The package currently stands at the sale of retailers and lease of wholesale trading rights, but it is still possible that these will be a package deal if companies are interested, leading to a privately controlled monopoly.

This proposal is seriously flawed. Even the Owen report couldn't stomach the idea of a stand-alone sale of the retailers, while the privatisation of generator trading has been rejected in 2001 and 2004 because it wouldn't work.

The Rees Privatisation Plan is not the way to go if we are to keep electricity affordable, reliable and sustainable in NSW.

By Liam Mitchell and Phil Doyle