New South Wales Shadow Treasurer Mike Baird
Victor P Taffa
It has been an extraordinary week in State politics, even for NSW. The NSW Government has sold the State’s power assets for half what they are worth in a deal that involved a mass walkout of Board members including Union Head, Tony Maher who slammed it as a “rort”, a “dud” and a “disgrace”.
“The sell-off of the State’s Electricity Retailers, trading rights of the generators (via the gentrader structure) and development sites will leave the following problems for NSW.” New South Wales Shadow Treasurer Mike Baird said today.
Taxpayers will continue to be exposed to the risks of electricity trading, competition has not been increased to force down electricity prices, and there is no certainty the private sector will fund new generation. Additionally the Government has had to re-enter coal mining, after exiting in 2002, and offer a Billion-Dollar Coal Subsidy to push the deal through.
“The Government set itself four objectives when it announced the gentrader structure of its power sale back in 2009. Incredibly it has failed at every single objective. For households across NSW already battling to pay their power bills, this is more bad news.” Mr. Baird said.
The first objective was to deliver a competitive retail and wholesale electricity market in NSW:
“By ensuring at least one new market entrant is able to establish itself [to] increase competitive tension… thereby producing more competitive market outcomes and more efficient prices for consumers”.
“This has not happened. There is no new market entrant as a result of the sell-off and instead the Government has entrenched a structure where two players dominate the retail market.” Mr. Baird said.
The Keneally Labor Government’s second objective was to encourage private sector investment into the NSW electricity sector.
“The Government must completely exit the competitive market, [both] …the retail sector… [And] the Generation Sector”
And importantly they acknowledged that:
“If the Government remains partly present in either of these sectors, the Private Sector will remain apprehensive and will continue to be reluctant to invest in new Generation”.
“This objective has not been met. The Government has re-entered Coal Mining with its many risks and is still involved in the Generation Sector.” Mr. Baird said.
The third objective was to ensure reliable electricity. The Government stated:
“Competitive electricity prices are an important input for the NSW economy, and have a significant impact on small, vulnerable consumers… the strategy is designed to ensure an effectively competitive market …to encourage efficient prices.”
“There is little hope this objective will be met, as the transaction has not provided a new entrant.” Mr. Baird said.
The Government’s fourth and final objective was to optimise the sale value of the assets. Valuations done by various market estimates based on comparable transactions put these assets at $12-15 Billion.
The Treasurer Eric Roozendaal on Tuesday night signed off on proceeds of $5.3 Billion. That is less than half the low-end of what was forecast. This doesn’t even take into account the $1.3 Billion the Government has committed to develop the Cobbora coal mine and the $1 Billion coal subsidy. There is no doubt NSW taxpayers have been dudded by this deal.
Furthermore, in relation to the fourth objective, the Government stated that:
“Taxpayers are currently exposed to significant risk as a result of the Government owning retailers and generators… it is important that the strategy reduces the Government’s exposure to electricity market risk.”
“This risk has not been removed and taxpayers will continue to be exposed.” Mr. Baird said.
“The Keneally Labor Government’s electricity transaction has failed on the test it set itself and it has failed the people of NSW.” Mr. Baird said.