Wednesday, January 19, 2011
NSW power sell-off exposed as daylight robbery
Testimony to the NSW Upper House inquiry into the sale of the retail arm of NSW electricity has revealed that only a tiny fraction of the $5.3 billion price tag will reach the public purse, with billions of dollars eaten up by a number of “associated costs”.
These include nearly $1.5 billion in government funding for the new Cobbora coal mine north-east of Lithgow to ensure a cheap coal supply for energy producers, and a guaranteed further $1 billion in coal price subsidies to the private energy companies over the life of the mine.
In addition, the legal and administrative expenses for negotiating the deal amount an estimated $300 million alone.
While NSW Treasurer Eric Roozendaal has crowed that the sale would free taxpayers from future risk in the sector, the Inquiry has heard that this is far from the truth.
Treasury Secretary Michael Schur, who appeared before the inquiry on January 18, criticised the “Gentrader” model under which the sale took place, calling it a “second rate” model that retained future risk for NSW taxpayers.
Schur admitted that taxpayers will have to repay the existing debts of Delta Electricity and Eraring Energy – amounting to at least $1.2 billion – and will also remain liable for up to $360 million in compensation to the new owners for any future outages or power failures during the life of the power stations.
The Treasury Secretary pointed out that the sale means the government will also lose roughly $600 million over the next four years in state taxes that will now be paid to the Commonwealth.
Not counting the loss of the roughly $750 million in annual dividends which the energy retail sector brings in, the proceeds from the sale after costs could be as low as $400 million.
Premier Kristina Keneally – who prorogued NSW parliament early to stifle debate, and sought to prevent the Inquiry from taking place – has continued to hinder the process by intimidating key witnesses.
The eight directors of the state's power companies who resigned over the sale have been summonsed to appear before the Inquiry or face court orders, but remain reticent to do so because the NSW government has refused to guarantee legal protection to witnesses.
In fact, Keneally has publicly stated that the government reserves the right to sue the ex-directors for their testimony.
As a result, on January 20, four directors of Eraring and Delta refused to attend the Inquiry hearing, citing the lack of legal protection.
The Opposition and the mainstream media have limited their criticisms of the sale to claims that the NSW government could have gotten a “better deal” out of the sale.
Coalition leader Barry O’Farrell has called the sale a “charity giveaway”, and promised that if elected he will initiate a judicial inquiry to reverse the sale so it could be redone for “a decent price”. It is likely such a sale would include the full energy sector, not just the retail arm.
In contrast, the NSW Greens and Socialist Alliance have criticised the sell-off outright.
Responding to O’Farrell’s statement that taxpayers been “short-changed”, Greens MP – and member of the Upper House Inquiry – John Kaye was more blunt.
"This is worse than short-changed. This is tied up, bashed and robbed," he told ABC News on January 18.
Kaye pointed out that Keneally had no mandate for the sell-off, as most NSW taxpayers remain opposed to the sale, and has called for the next government to reverse the sale.
Peter Boyle, Socialist Alliance lead candidate for the NSW Legislative Council, was equally clear.
“This sell-off will make it harder to make the necessary moves to address the climate change emergency”, Boyle said. “The NSW government is forfeiting opportunities to shift to renewable energy sources.”
The Socialist Alliance has called for a referendum on any future sale and an immediate freeze on electricity prices.