Power play set to spark bill shock


At any other point in history, a government presiding over economic growth at 4.2 per cent, a jobless rate at 5.2 per cent and inflation in the vicinity of 2 per cent would have been sitting pretty, even been lauded for its prowess.

Especially if the rest of the world was in far worse shape than us, as is the case.

Somehow, though, they have managed to make a meal of this exquisite set of numbers. Grumpiness is high. It is a miracle of unpopularity.

And governments, state and federal, may find popularity increasingly hard to come by in the next couple of years as rising power prices really start to bite.

“Bill shock” is a looming nightmare for low-income households. Electricity is a basic commodity. And rises of 15 per cent and more each year in a basic commodity are not merely a menace to the welfare of the household but a threat to small business and economic growth, period.

It is no small irony that although the cost of electricity is rapidly rising, demand is actually falling. Economics 101 would suggest prices should fall when demand falls.

But when it comes to the supply of power, there is a flaw in the regulatory framework that leads to a “gold-plating” of the grid, the poles and wires that make up the network.

In NSW for instance, where consumers will be hit hardest, network upgrades will constitute 60 per cent of the total rise in electricity costs. The carbon tax is often painted as the villain in the piece, and that will hurt too, but network upgrades are the big offender.

Wholesale prices, meanwhile, are the same as they were 12 years ago.

The “gold plating” – something rejected by TransGrid last month when we put it to them – arises because the network providers make a margin on the size of their asset base.

The more they spend on their assets, the higher is the dividend they pay the government each year.

And they are proposing to spend big. TransGrid expects to expand its asset base by 24 per cent at a cost of $2.6 billion over the next five years, a cost that will drop straight into consumers’ electricity bills.

There is nothing official yet but it is reasonable to surmise the NSW government may face a conflict of interest here.

In Victoria, the network was privatised under the Kennett government. In NSW, Barry O’Farrell’s brains trust must at least be contemplating further privatisation. They could do with the money.

And TransGrid must be high on the list of things to sell. It would also be a lot easier to sell with a prospectus that included rising revenue forecasts.

Demand for electricity has been falling since 2008 in Victoria, NSW and Queensland at roughly 1 per cent a year. That is despite forecast rises of 2.2 per cent a year. Demand is now 10 per cent below where the industry forecast it would be four years ago.

Mild weather, changing consumer behaviour and rising input costs have all been factors.

The billions earmarked to upgrade the grid for the National Electricity Market have been based, erroneously, on assumptions of rising demand.

Now even the utilities Origin Energy, TRUenergy and AGL argue there is no need for new baseload power before 2020, but the big capital expenditure plans remain afoot nevertheless.

The Independent Pricing and Regulatory Tribunal and the Australian Energy Regulator have expressed concern about network costs – as yet to no avail.

And while the state government ignores the issue in NSW, we have the bizarre spectre of Canberra compensating the biggest polluters as part of its carbon tax package, in effect, keeping them up, running and polluting.

Incidentally, the question remains: if the Coalition wins office and cans the carbon tax, do the beneficiaries of the Gillard government’s compo package – mostly foreign multinationals – have to pay that $1 billion cash gift back?

”Justice is open to everyone in the same way as the Ritz Hotel” – Judge Sturgess.

There was some consternation at last week’s piece about the threat to freedom of speech from lawyers and Australia’s draconian defamation laws.

Lawyers do not make the law, Parliament does. Indeed. And lawyers act on the instructions of their clients. Indeed they do, and hopefully they would demur should they receive instructions to jump off a cliff.

This correspondent can muster some sympathy for lawyers as they, like journalists, tend to rank down the bottom of those vocational surveys.

You know the ones; doctors and nurses are high in the public esteem while politicians, journalists, lawyers and pre-loved automobile vendors rank last.

This is fair enough – except that we have always personally found it baffling that TV reporters are somehow more popular than we embattled newspaper hacks.

No matter. What we were getting at was strategic and vexatious litigation. That is, lawyer arguments aimed at achieving a business rather than a proper legal objective.

In defamation, that means threatening media to stop, water down or deter the publication of stories that are in the public interest.

Consumers do not see it. It all happens behind the scenes. Media companies constantly repelling vexatious defamation threats. Worse, the likes of small website operators railing about some financial services rip-off, for instance, cannot afford the cost of a stoush with a big city law firm. They give up. The information just disappears.

Strategic litigation is a huge cost to society, though one that will never be properly identified let alone solved. Billions in wasted court time, lawyers costs, spurious actions – all tax deductible as a business expense. That is bad enough. But when it comes to defamation, there is a cost to free speech and democracy.

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