Public Electricity Selloffs Will Lower Prices: ACCC

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Friday, February 20th, 2015
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The head of the national competition regulator says selling state electricity networks does lower power prices, but has criticised governments for seeing public asset sales as cash-raising exercises.

Australian Competition and Consumer Commission chairman Rod Sims says electricity prices would be lower in NSW and Queensland if the “poles and wires” networks in those states had been privatised five years ago.

Mr Sims said the sale of monopoly assets such as the electricity networks did not concern him because they were regulated independently regardless of ownership.

“There are no issues there from our point of view,” Mr Sims told a Committee for Economic Development of Australia lunch in Sydney.

“If the private sector owns them, it will run them more efficiently and therefore, given a constant regulatory regime, prices in NSW will be lower in future if they are privately owned.

“You’ve only got to look at the performance of the publicly owned networks against the private ones – it’s chalk and cheese.”

With electricity privatisation a hot issue in the coming NSW election, Mr Sims’s comments contradict claims from the union movement that prices will be higher in Victoria and South Australia, where networks have been sold.

However, Mr Sims took issue with governments spruiking asset sales as a way of raising money.

NSW Premier Mike Baird has based his election campaign and a massive infrastructure package on raising $20 billion from the sale of the state’s poles and wires.

The competition boss said the result was governments tried to maximise sale proceeds by raising prices before a sale, or introducing arrangements that allowed prices to rise afterwards.

“In a sense it’s no wonder that consumers associate privatisation with higher prices,” he said.

Mr Sims said the ACCC was taking an advocacy role to “get people to focus on the fact that we privatise because the government is not the right owner of the asset, not because we’ve got a fiscal problem”.

“The fiscal gain is once-off. Inappropriate arrangements will cause damage for years to come.”

NSW Labor is opposed to the sell-off, with shadow treasurer Michael Daley questioning whether it can raise $20 billion and saying it would forgo $1 billion in annual distributions from network ownership.

Mr Sims also signalled a push for tougher penalties for breaches of consumer laws as he launched his list of priorities for the ACCC in 2015.

Consumer law protections are high following criticism that penalties handed to Coles supermarkets for illegally pressuring suppliers, and Flight Centre for attempting anti-competitive conduct, where not heavy enough.

New competition laws in effect mean companies that fall foul of regulations can be fined up to 10 per cent of their turnover, but those laws do not apply to breaches of consumer law.

Mr Sims pointed to statements by Federal Court judge Michelle Gordon last December, when she said Coles had engaged in illegal and unconscionable conduct with suppliers, but penalties available under law were “arguably inadequate”.

“I’m pointing out that Justice Gordon has said that maybe parliament ought to think about it,” Mr Sims said.

By Peter Trute
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