Magazine of Socialist Action in Australia

Energy industry: The privatisation scam

Reading Time: 3 minutes

Private companies in the energy industry are charging consumers an average of $600 for “retail competition” expenses per year according to a recent report from St Vinecent de Paul Society. Focussing on the breakdown of energy bills the report adds to the mountain of evidence showing private control of energy is a disaster for everyone except corporate profiteers.

Former Victorian Premier Jeff Kennett began the nationwide process of privatising energy production and distribution when he sold the State Electricity Commission of Victoria (SEC) in 1995. His argument was that public ownership and operation in the electricity industry was inefficient and wasteful. His promise was that efficiency would increase and prices would fall if the power industry was sold to private corporations and different retailers competed to sell electricity.

Twenty years later none of these promises have come true, yet profits have soared and communities have suffered.

Before privatisation the publicly owned State Electricity Commission (SEC) provided the lowest power prices in the world, while the state government earned $100 million per year to be invested back into public services. Today there are more than 20 companies involved in the Victorian power industry. This means 20 separate CEOs, boards, and corporate support teams that are paid for by consumers. Now, only 11% of an energy bill is estimated to go towards the actual cost of energy production while between 30% and 46% goes toward ‘retail competition’ costs.

Hundreds of apprenticeships were provided every year by the former State Electricity Company (SEC), but these programs were scrapped when the industry was privatised. Consequently, the energy industry is now facing a shortage of skilled workers to maintain the network. The SEC was also known for providing specific employment to people with disabilities, something the private companies don’t do.

Under public ownership there were well trained, permanent employees to ensure proper maintenance of the network infrastructure. This helped prevent blackouts and fires. Now, with companies competing to cut operation costs, a system of ‘reactionary’ maintenance is common, meaning a limited number of employees only fixing things that have already broken. This system of maintenance is far less efficient in the long run as problems build up year after year and produce a growing backlog of faults. As a result emergency power blackouts last longer under privatisation and high voltage equipment fails more often. More fires have been caused by poorly maintained power infrastructure. Five of eleven fires on Black Saturday in 2009, Australia’s deadliest bushfire disaster ever, were caused by faulty power infrastructure maintained by private companies.

It is clear that the privatisation experiment has failed. On measures of cost, efficiency, quality, employment and public safely, public ownership of the energy industry was far superior. Yet both of the major parties continue to advocate the selling off of public infrastructure, and the Greens are increasingly agnostic on the issue.

The energy industry is just one example of how government policy is not neutral, but instead favours big business. The privatisation of the industry was never about improving service. It was always about creating new markets for private investors to profit from. This has cost working class people dearly, first through the loss of jobs, then through the hiking up of energy bills, now through the serious threat to our health and climate.

Coal fired power stations continue to dominate electricity production in Australia. Big mining and energy companies make vast fortunes digging up and burning fossil fuels. As a result they actively block any attempt to make the much needed switch from fossil fuels to renewable energy.

One way they do this is to threaten communities with massive jobs losses if the use of fossil fuels is wound back. This would not be an issue if the energy industry were brought back into public ownership, as the decommissioning of the coal power stations could coincide with new jobs and training in massively expanded renewable energy. In fact, thousands of new jobs could be created, regenerating communities devastated by privatisation and the plague of social problems that came with it.

Importantly for every household in Australia, bringing the industry into public ownership would mean energy bills could be kept down by ending corporate overheads like huge CEO payouts and wasteful competitive advertising.

The energy industry will continue to exploit and endanger our communities for as long as the privatisation agenda of the major parties goes unchallenged. The alternative to privatisation is to bring the industry into public ownership under democratic workers control. Only this way can we be sure that energy production and distribution is done in the interests of workers, our communities and the environment, rather than the interests of private profit.

By Kirk Leonard


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