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Background to Electricity Privatisation

This page gives a more detailed background to the issues surrounding electricity privatisation.

Read on or follow the links below to find out more about a specific topic:


What is the NSW Government planning?

The NSW government has announced plans to sell power retailers Energy Australia, Integral Energy and Country Energy, and lease the state's power generators to the private sector.

The Iemma government claims that that the sell-off will provide up to $15 billion to the Government over 10 years. This figure does not take into account the loss of dividend payment (as part of the money from electricity bills is currently passed on to the government), because the new private owners would take all of the profits.

Premier Iemma has committed the funding from the power sale for a new metro rail system, road extensions and rural water initiatives, as well as $200 million for a Clean Energy Fund to fund renewable energy industries. To see the copies of media releases by the NSW Government promoting the sale visit the Owen Inquiry information page.

While The Greens support the development of public transport infrastructure and clean energy investment, the sell off of important public assets will see private companies, rather than the taxpayers, profiting in the long term. There are also dangerous environmental risks from allowing a private company to encourage people to use more energy, in order to make more money. In the end rising prices push the cost back onto the consumer. For more information about the problems with privatisation, scroll below.

Responding to some of the concerns raised by the union movement about job losses the government has committed to cash payouts for electricity workers and to security for worker's jobs over the first few years. These have been rejected by the union movement, as concerns remain particularly about the jobs in the energy retailers, where there is the threat that 30,000 Australian call centre jobs will be pushed offshore. For more information about the union campaign visit LaborNet or the United Services Union campaign page.


Electricity privatisation would be a greenhouse disaster

Privatisation of NSW’s electricity industry would undermine efforts to meet greenhouse gas reduction targets.

Public ownership is essential if this state is to reshape its electricity industry to slash emissions.

A privately owned electricity industry will be driven by the need to sell more energy to make greater profits. Helping consumers to reduce energy use and ease the burden on the climate will just get in the way of the corporate bottom line.

In theory regulations and incentives can be created to force privately owned utilities to do the right thing. In practice, the banks and the overseas utilities who will end up owning the electricity industry are wealthy and powerful and governments will not want to pick a fight with them.

There is no evidence to suggest that either Labor or Coalition governments could deliver a regulatory regime that would be able to stop privatised retailers pushing up demand for energy.

Selling off the generators effectively creates a licence to pollute. Sooner or later, this state will need to massively reduce its greenhouse gas emissions. Privatising the generators will make that much more expensive as the owners will almost certainly demand financial compensation for reducing output.

Part of the Owen Inquiry report’s enthusiastic support for privatisation of the retailers was so that the (privately owned) generators could buy them and use them to “manage risk”. This is short hand for “sell more electricity, drive up prices and make the generators even more profitable”.

Allowing retailers to be owned by generators would make it even harder to increase efficiency and reduce demand.

Publicly owned retailers on the other hand can work with customers to improve energy efficiency and to shape demand to match renewable energy sources. Achieving demand reductions will require sophisticated partnerships between household consumers and their suppliers. Retailers will have to become much more than the people who send you a bill every quarter.

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Electricity privatisation would be an economic and social disaster

Public ownership provides the flexibility to respond to changing circumstances, the ability to protect households from a complex and dangerous market and the opportunity to develop new and innovative ways of generating and supplying electricity.

Privatised utilities are driven purely by profit. The experience with Telstra tells us to expect senior executive salaries to skyrocket while jobs are lost or outsourced to India. Costs to consumers will go up to feed profits while investments in new capacity will be chosen purely to maximise return, without regard for environmental or social consequences.

Privatisation would inevitably lead to jobs losses, particularly in rural and regional areas. It would result in a lower standard of customer services and could increase the number of times the lights go out. Apprenticeships, job opportunities and economic development would be threatened.

The experience with Telstra is that the promised reductions in price and increased “customer focus” never materialised. All we got was a group of corporate executives who pay themselves exorbitant salaries while outsourcing the jobs of other employees.

If Australia is to survive economically in a world increasingly focused on reducing greenhouse gas emissions, we need an innovative electricity industry that provides quality employment opportunities. Privatisation would be a dead-end of Australia’s path to world-leading clean technologies.

What is needed instead is a rejuvenation of the public sector and a focus on the possibilities of clean renewable supply options. It will be possible to completely reshape publicly owned electricity retailers so they focus on community and public benefit. It will be much more difficult and expensive if they have been privatised.

Public ownership can maintain quality employment, lead to reductions in energy consumption and foster clean, renewable energy sources.


The baseload power myth

Through much of the 20th century, growth in overnight demand for electricity was deliberately encouraged to reduce the difference between the daily maximum demand and the overnight low. The aim was to allow large coal fired generators to operate on a continuous basis without changing their output.

In effect, electricity suppliers shaped the demand to suit the technical and economic characteristics of large baseload generators.

Changes in both supply and demand side technology have significantly reduced the relevance of 'baseload' to a modern electricity industry.

In particular, developments in information and computing technology have created a far greater potential responsiveness in demand. Dynamic prices and other information can now be cost-effectively provided to consumers. For example, for some consumers washing machines can be left loaded and ready to run for days, waiting for available energy.

With the application of appropriate policies, much of the current demand for electrical energy could be made responsive to this supply-demand balance.

Further, it is no longer correct to assert that adequate levels of reliable baseload power can only be provided by large-scale central generation and in particular in the NSW context by coal fired power stations.

Building a new baseload power station in NSW would

  • increase greenhouse gas emissions: one 1400 MW station would produce about 8 million tonnes of CO2 each year, boosting the state’s emissions by more than 5.6%.
  • undermine the development of a renewable energy industry and energy efficiency: a new plant would need to sell energy to pay off the cost of construction. Aggressive marketing would push out renewables and increase the barriers to improved efficiency.
  • be completely unnecessary.


The Greens' Solution

The Greens’ analysis shows that there is no need for a new baseload generating plant if the state begins to phase out inefficient household electric hot water units.

All that the NSW state government needs to do is ban the installation of new electric off-peak hot water units, and provide interest free loans for solar and high efficiency gas hot water units.

This would reduce demand for electricity to the point that existing supply would be more than adequate for many years to come.

Our analysis shows that the total cost to the NSW government of interest free loans to households to cover the installation cost difference between a solar unit and an off-peak unit would be less than $4.6 million a year.

NSW does not need a new coal fired power station, and selling off the energy retailers will only serve to further undermine this state’s ability to manage future energy needs and the environmental impacts of energy use.

Premier Iemma is bowing to the demands of Treasurer Michael Costa. He is also about to break one of his core election promises – to keep the energy retailers in public hands.

Tell the Premier you don’t buy it.

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How we got here: The Owen Inquiry Report

The Premier, in announcing his plan for sell off of the electricity industry, argued that he was following the recommendation of the Owen Inquiry. The Owen Inquiry was an inquiry commissioned by the Premier which was set up to justify the sell off. For more background about the Inquiry, which reported in September 2007, click visit the Owen Inquiry page of this website.

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Explanation of electricity industry terms


baseload: energy used on a constant 24 hours by seven days a week basis. Traditionally baseload power has been provided by large coal fired power stations that for technical and economic reasons cannot change their outputs. The baseload demand is the overnight demand.

peak load: the largest demand for electrical energy that usually occurs in the early evening and on hot days in summer or very cold days in winter.

demand side measures: anything which can be done by consumers to reduce the need to build or operate power stations. This includes replacing electric-off peak water heating with high efficiency gas or solar and cycling air-conditioners so that they do not all come on at the same time.

energy efficiency: technologies and measures that reduce the amount of electricity and/or fuel required to do the same work, such as powering homes, offices and industries. (from www.nrdc.org/reference/glossary/e.asp) Examples include improved building insulation, compact fluorescent light globes and passive solar design.
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