Wednesday, March 11, 2015

Not sure what this proves...

Jason Soon yesterday tweeted with approval this article by the Grattan Institute arguing in favour of electricity network privatisation.   You know the story - private companies can run networks cheaper instead of the unionised government networks.

Yet one of the key tables in the article is this:

But surely this chart is hardly conclusive of the privatisation argument if the comparison is between government owned network Queensland and privately owned network Victoria.

Given the geography and population spread of Queensland, wouldn't you expect network costs to be substantially more expensive?   Yet they are clearly less than double, and the total cost of electricity is virtually identical.  

OK, people can point to the New South Wales vs Victoria columns (and I admit, it's hard to understand why the NSW network costs should be so much larger than Queensland;)  but the point remains - it seems to me the charts show that public ownership is capable of maintaining reasonable network costs and the same electricity costs to consumers.  

Update:  I see that The Australian is even worse - it runs a "fact check" that privatisation is definitely better for electricity prices - but when you click through to the graphs some of them actually show Queensland with smaller electricity costs than Victoria!

The comparisons they rely on most heavily are always about the rate of price increases over the years, including to the network costs, while conveniently ignoring where we are now at with actual prices to the consumer.  

Update 2:  After listening to John Quiggin on the radio this morning:  I should have also mentioned that South Australia did undergo a type of privatisation, yet has very high network costs for a very small and concentrated population, and substantially higher consumer prices.   How is this supposed to support the privatisation case?

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