Hard News: A week being a long time in politics
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Sacha, in reply to
Once they are built, and have a proven revenue stream, like our current ones, of course plenty of people are happy to privatize those profits.
Gordon Campbell's latest article says the energy SOEs just had a big surge in capital investment - the profits of which will now be privatised after the costs were socialised. Textbook.
Too bad the taxpayer will now be losing out once those assets are sold down, because they’ve just paid for the capital investment that will be driving those even higher returns – and which the private investors will begin to reap.
The evidence is clear on this point. The $1.7 billion return over the last three years from the four energy companies would have been even higher, as Greens Co-Leader Russel Norman pointed out yesterday, if the SOEs in question hadn’t chosen to double their investment in new plant and machinery, in order to deliver even higher returns in future. As Norman says:
Now that the earning potential of our SOEs has been enhanced through this capital investment, the Crown can expect to see considerable growth in dividend streams from this point on. Treasury makes this point explicit in their last 2010 Annual Portfolio Report. They say the Crown should now expect to receive higher returns.
We have seen this before. Like our energy SOEs, Telecom had invested significant amounts of capital in building a modern telecommunications network in the years before privatisation. In the years following Telecom’s privatisation, dividend streams for its new private owners doubled, then tripled within six years. History now seems to be repeating itself with our energy SOEs. National has allowed the taxpayer to build up the asset, only to then on-sell it to the benefit of others.
More than anything, those current 17.5% returns on average over the past five years are an astonishing testament to the efficiency of the SOEs. Despite the election campaign propaganda that asset sales will bring private sector disciplines to bear on the SOEs, the reality is the exact opposite. The SOEs are at serious risk of being reduced to the same general levels of incompetence as the private sector.
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Ian Dalziel, in reply to
Clyde dame project
aaarh! But it's a Bonnie lake...
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nor would I be in favour of a government monopoly where you could only get your electricity from one supplier
You do already, more or less.
To start with there is (and can only be) one distribution network. At any given time, there is an optimal set of power stations that should be in use. That varys depending on whether one is trying to minimise cost or carbon emissions (and fuel use) but it's a calculable value. Power generation is a mature technology where there is limited scope for operational innovation, so one operator of the same asset would have the same costs as another.
The current system of pricing is a pseudo-market with an artificial, fluctuating price and a system of middle men. (Powershop is an example of what's wrong with 21st century capitalism - a completely unproductive and useless business).
The best way to deliver electricity would be to choose power stations with a carbon-emission optimising model and price the electricity on a fair and transparent cost+margin basis.
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