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December 2, 2016

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Privatisation is a dirty word - federal election fallout

July 7, 2016

The federal election is over but the 'Mediscare' campaign lives on.

In the 2016 federal election, the Labor party ran a campaign against the privatisation of Medicare Australia, which runs the nation's publicly funded universal healthcare scheme. The Liberal party denied any plans to sell-off the company, but our politicians have heard a resounding vote against privatisation of our essential services.

 

Earlier this year, Premier Colin Barnett was committed to a privatisation plan designed to get the state budget back to surplus and avoid the forecast $40 billion deficit expected by 2018. The Liberal party platform was to increase revenue by almost $20 billion by selling public assets, including Fremantle Port,  Western Power and the TAB. It should be noted that, at this point WA had already missed out on the extra 15% that the federal government would have contributed under the Asset Recycling Initiative. 

 

Fremantle Port could have seen the government take $6 billion. However, the National party opposed the sale of Fremantle Port on the basis of concerns around the proposed legislation detailing the government's control over contractual arrangements including prices and access arrangements with any future buyer.

 

Estimated at $12 billion, Western Power has seen significant change since its privatisation was put on the table. Its CEO Paul Italiano left the business for the recently privatised New South Wales network operator - TransGrid. Western Power has also placed a huge focus on cost-cutting, starting by reducing its 3,000 large workforce by over 200, with an expected reduction of 30% of its workforce by the end. It is not clear whether these changes are a last-ditch attempt to reduce the burden of the transmission and distribution network operator on the government, or whether it is preparation for sale. Either way it is a significant step towards its commercial viability.

 

The TAB is estimated to fetch around $1 billion - a far cry from the $40 billion needed - but it is the least controversial asset and therefore most likely to be sold to provide some relief.

 

Merely a week after the nation voted no to privatising Medicare, today, Colin Barnett backed away from his privatisation plan, and more specifically the sale of Western Power, stating that the Liberal party's decision on asset sales would be informed by the "public mood" prior to the March 2017 election.

 

Despite this, it appears that Western Power is being privatised by stealth.

 

WA's electricity system operation functions are currently undertaken by System Management, a financially ring-fenced part of Western Power. On 1 July, these functions were transferred to the national energy market operator - AEMO. AEMO has already taken accountability for the operation of the power system, and will in the near future also accept the property, rights and liabilities of System Management as part of a financial transaction. AEMO is 40% industry owned, with the remaining 60% state and federal government owned. It is not yet clear how much, if anything, the WA government will receive from the transaction.

 

Also on the cards as part of the energy reform agenda is the transfer of the electricity retail market operations functions from Western Power to AEMO, and the introduction of competition in metering services. This will remove the requirement for Western Power to provide these services, instead they will be provided by privately owned companies. The very definition of privatisation.

 

These changes in ownership and service provision are intended to complement last year's transfer of market operation functions to AEMO and intended wind-up of the state-based Independent Market Operator.

 

The wait is on to see what if anything remains of WA's energy assets by the March election.

 

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