April 2008

The title of today’s speech originally began as “Labor’s electricity sell-out”. Then I thought I should at least acknowledge some benefits of privatisation in general, so it became: ”The Good, the Bad & the Fraud – Labor’s Electricity Privatisation”.

But before we get to the good, the bad and the fraud, let’s quickly review relevant political history and the real motivation for what could prove to be NSW’s most expensive fire sale.

* Political Reality of Electricity Privatisation

Australia’s experience with electricity privatisation began in earnest when Jeff Kennett sold Victoria’s gas and electricity businesses for $29 billion between 1995 and 1998.

The following year, Jeff Kennett’s Government was defeated at the 1999 election.

In NSW, Bob Carr and Michael Egan jealously watched the Victorian process through the mid-1990s and dreamed of spending similar billions by selling NSW electricity businesses.

But, the Carr/Egan plan was derailed at the 1997 Labor Conference when they were shouted off the stage. The NSW Labor privatisation plan died or rather – it went to sleep.

In 1998, the NSW Coalition was approached by investment bankers amongst others and convinced of the net positives of privatising electricity – all that money to spend!

So the Coalition went to the 1999 state election proposing electricity privatisation and with the help of a few other problems we suffered a 7% swing against the Coalition and our seats fell from 46 to 33 (in a reduced Parliament).

Two years ago, Premier Beattie decided to chance his hand and privatise Queensland’s retail electricity. Labor reaped a few billion but within a year Peter Beattie left Parliament to hand over to a fresher face.

Also in 2006, the usual suspects went to NSW Labor and also came to me as NSW Liberal Leader and again promoted the privatisation of NSW electricity and the subsequent spending of billions as an election policy.

My colleagues and I said No - privatisation was not a positive policy and transformation of the industry was a critical objective best done with Government involvement.

They persisted throughout 2006 and we again said No but I also arranged research and confirmed the NSW community’s view that electricity privatisation was political suicide.

Before last year’s election, the Premier and I were both asked by the media, on a number of occasions, if we would privatise electricity. I said No. The Premier said No.

But after last year’s state election, the privatisation promoters were enthusiastically embraced by the Iemma Government.

Morris Iemma had decided the siren call of all that cash to spend in the run-up to the next election was simply too enticing and Michael Costa was unleashed to deliver the billions.

To fully appreciate the risk of Labor’s electricity misadventure, we need to understand the political spinning top that is Michael Costa and also understand his views.

* Michael Costa – The Wild Card

He is a leading actor in this unfolding drama and if you haven’t met him, it’s worth a brief sketch of Michael Costa – the wild card.

He says of himself he “started off by accident on the far left and in more recent times has been regarded by my political opponents as being on the far right.”

He says his “political education began when, by accident, with a group of high school mates [he] attended a Marxist education camp” and Costa now proudly proclaims that “if Marx were alive today he would … in all probability … be a member of the Centre Unity faction of the Labor Party of New South Wales.”

NSW’s Treasurer is a former socialist revolutionary who had an awakening, roared through economic rationalism and is now an economic fundamentalist.

A review of his parliamentary history shows no sense of perspective on grassroots public services or community interest.

Michael Costa is always argumentative, never in doubt but frequently wrong.

He entered Parliament in 2001 and, over the top of many Labor colleagues, went straight into the Police Ministry.

He proceeded to decimate senior police ranks, demoralise experienced police and blow the police budget so badly in the run-up to the 2003 election, that frontline police were squeezed for the following two years as Treasury clawed back funds.

After the 2003 election, Costa was moved to Transport Services and distinguished himself by cutting city and country services and offending workers and passengers alike.

2004 proved to be the annus horribilis for public transport in NSW thanks to Michael Costa.

In January 2005, Bob Carr moved him sideways saying Costa would be “relieved” to leave Transport behind after the pressure he’d been under.

But that year, as Roads Minister, he so infuriated the community and his colleagues that a special caucus meeting was convened in April 2005 to vote on his future as a minister. But his faction protected him.

As Roads Minister he also set the scene for the opening of the Cross-City Tunnel and the Government’s humiliation over the ensuing year.

Michael Costa’s big break came in August 2005 when with his mate Joe Tripodi he schemed to shift caucus support from Carl Scully to get behind Morris Iemma.

In return, new Premier Morris Iemma nominated Costa as his Treasurer.

Michael Costa became Treasurer in early 2006 and his Labor colleagues have since then anxiously awaited his next disaster.

It now appears his “crash-through or crash” electricity privatisation will be his parting calamity for NSW Labor.

Importantly, he’s also a climate change sceptic and as such he’s still fighting the last war.

Regularly he argues that global warming is not a concern and the Kyoto Protocol was a mistake. This week, Michael Costa told Parliament “I could take some of the money that we are spending on, you know, bogus policies in relation to climate change ...”

Well, Mr Treasurer the world and Australia have voted on global warming and despite your scepticism, our community wants action now.

Now I’m all for debate whether on global warming or anything else. But when you put the future of the NSW electricity industry in the hands of a belligerent climate change sceptic, you know you’re asking for trouble.

Given NSW’s electricity industry is our biggest challenge in terms of addressing global warming and the state government is failing to take its responsibilities seriously, then with the passage of time Michael Costa could well be remembered as an environmental vandal.

* Privatisation – Pros & Cons

Labor also propose privatising electricity assets at the worst possible time. Volatility is the current name of the game.

Privatisation is itself politically volatile and while we are coming to grips with global warming, the electricity market is also volatile. Add to that the current volatility of world financial markets and the volatility of Treasurer Michael Costa and you have an explosive mix.

Now you could argue that in this volatile situation you should dump risk as quickly as possible by privatising, but as a Government you can’t also dump the responsibility to achieve significant and urgent change in the nature of the electricity industry and that is best done under Government ownership. Clean energy is a public good – the market has simply not delivered it to date.

Personally, I have no philosophical difficulty with privatisation per se – indeed to fund environmental policies for last year’s election, we proposed the sale of state lotteries and waste services and there was no voter backlash on privatisation because we clearly stated what we would spend the funds on and the community agreed.

Iemma and Costa are doing the reverse. Using misleading arguments, they are selling critical public assets for whatever cash they can get but the ultimate use of the funds is uncertain.

It is not a good time to privatise electricity especially when there are very pressing challenges in the industry to resolve.

While the finance end of town are salivating for their fees and Labor HQ in Sussex Street is already planning the marginal seats spending spree, divestment of the NSW businesses does not address the real issues – it’s the structure of the NSW businesses, the market rules and most importantly - the need to transform the industry to clean energy.

* Premier Iemma – Sell, Sell, Sell

As soon as he was appointed Premier, Morris Iemma did take some action on electricity. He buried the Energy Directions White Paper, which was due for publication three years ago and it hasn’t been sighted since. Presumably, that was done to smooth Labor’s path to privatisation.

Whether we as the Coalition agree or disagree with Labor’s electricity privatisation, the Premier and Treasurer do have the numbers in the Lower House and can rent them by the vote in the Upper House to force privatisation through Parliament if indeed they need legislation – and that remains uncertain.

But the NSW Labor Party itself still has a decision to make on privatisation and that will be decided at Labor’s Conference in three weeks - on Saturday 3rd May.

The Premier and Treasurer are sticking to their mantra of “Sell the businesses to attract investment to keep the lights on.” That is not true but it is a simplistic and convenient mantra.

The NSW Government does NOT have to sell businesses to “keep the lights on”.

Because of financial mismanagement over the term of this Labor Government, they do need more money to splash around in the run-up to the next election. It’s as simple as that.

In relation to global warming, Michael Costa’s strategy is to extract the maximum cash now to spray around in the next election while leaving the environmental challenges to the academics, to the economists and to the bureaucrats and eventually, in due course, hopefully, maybe they will probably arrange market conditions to encourage clean energy.

Michael Costa doesn’t believe anything needs to be done about global warming so putting it on the never-never is not a problem – to him at least.

Now students of history would suggest that if Iemma and Costa successfully bulldoze the privatisation through the Labor Party, then it also clear the two of them will NOT contest the 2011 state election.

Under this scenario, Iemma and Costa see their job as retiring gracefully, post-privatisation, having delivered a war chest of funds to whoever leads Labor to the 2011 election – whether that ends up being Premier John Watkins or maybe Premier John Della Bosca or perhaps that rising Labor apologist (and former Chief of Staff to Milton Orkopoulous) Premier Nathan Rees.

Whoever is the new Premier in the run-up to the next election, they’ll be throwing the privatisation money around like there’s no tomorrow - a lot of spending for little value.

Given the political history of electricity privatisation, you could suggest that we should just keep our mouths shut, let Labor privatise electricity and let them suffer the electoral consequences at the next state election.

That is one option but there are also other ways forward if we want to stand for something.

* For Future Generations – Clean Energy

Last year, I addressed a Conference on the need to urgently change electricity policy and on the need to respond to global warming.

That speech built on our election policy titled “For Future Generations – A Plan to protect the Environment and tackle Climate Change”.

This will be the year of electricity policy debate but regrettably it won’t be the year of action. That is the problem - no real action anytime soon.

But given the very low level of public debate about promises versus action on climate change you have to ask “Does anybody really care that very little has been achieved to date and very little is going to happen in the short term?”

Well, I think the community does care.

Last month, most of us participated in Earth Hour - taking a stand against Government failure to act on greenhouse gases.

As their website says, “Earth Hour uses the simple action of turning off the lights for one hour to deliver a powerful message about the need for action on global warming.”

It’s people power at it’s best and when so many people get involved you know they are really frustrated about a lack of government action.

And global warming represents an enormous economic opportunity for NSW and Australia.

NSW can lead the world in championing renewables, especially solar, and in aggressively pursuing energy efficiencies to keep household and business costs down.

If it proceeds, Labor’s electricity privatisation will provide a mega-billion dollar windfall to NSW Treasury and we must ensure it is not leaked to recurrent expenses to shore up Labor’s dysfunctional budget.

The funds released by the privatisation must be openly and strictly hypothecated for debt repayment in the short term, infrastructure investment and transformation of the electricity market in NSW.

In transforming the electricity market in NSW, the privatisation funds provide a once in a lifetime opportunity to embrace leading edge efficiencies for households and businesses, transform the generation sector towards clean renewables and moderate the price shock of the transfer to renewables.

25% of the privatisation proceeds should be quarantined for these objectives because to date the State Government has failed in its responsibilities.

For more than a decade, since Kyoto was negotiated, State Governments and Electricity and Coal Industries have had notice of the need to transform to clean energy. Their efforts have been token at best and certainly arrogantly negligent.

Even “clean coal” which largely depends on carbon sequestration has received token support.

Clean coal is an oxymoron. Coal cannot be carbon-clean but coal-fired generators can be “clean” once carbon capture and storage (CCS) is fitted.

Despite more than a decade’s warning of the need to act, the Electricity and Coal Industries have failed to act in the community interest. Progress on CCS has been glacial.

This week, Greenpeace flew “No Future in Coal” balloons over Hunter Valley power stations.

They are right to the extent that Governments and Industry have failed to date but they are wrong if we can get CCS operating on a commercial scale.

As a major coal user and exporter it is clearly a national priority to get CCS up and running urgently. You would have thought NSW and other states would have been screaming for urgent CCS results. But no – Costa’s answer is to wait for compensation.

To date the negligence of the industry and Governments has been breathtaking.

I think only one thing will get the industry off it’s profitable backside and that is ruling out the approval of any more coal-fired generators in Australia until CCS is fitted and 100% operating in at least one major generator in each state.

In last year’s election campaign, I released the policy titled “For Future Generations – A Plan to protect the Environment and tackle Climate Change” and it’s on my website (peterdebnam.com.au). It set out a plan to invest $300 million in a range of environmental programs.

The energy policy initiatives included:

·Fast track roll-out of smart-meters;
·Incentives to use electric vehicles;
·Solar power systems for all schools;
·Replacement of peak electric hot water systems;
·Installation of Solar hot water systems in new homes;
·Increased funding for CSIRO research into renewable energy;
·Mandatory 20% Renewable Energy Target by 2025; and
·Construction of a large scale Solar Power Station in North West NSW.

At the time these initiatives were very well received but really they were too cautious. A year on, there is a growing need for urgency.

In the next twelve months, with the prospect of billions of privatisation dollars, NSW can take a quantum leap in energy policy and fast-track these policies and others to lead the world in efficiencies and renewable energy.

Even if Labor’s privatisation fails, we must find ways to accelerate NSW towards clean energy and efficiencies. Remember that apart from privatisation, almost $200 billion will flow through NSW treasury over the next three years in the normal course of business. Spending it is all about priorities.

Professor Garnaut is suggesting that in due course billions of dollars from emission trading will be available to go towards many of the initiatives we are discussing, but I’m saying we can get a jump on that and re-position NSW.

For the sake of future generations, let’s find a genuine commitment to renewables and efficiencies.

Australians have a one hundred year history of early adoption of new technology and a thirty-year history of innovation in solar energy (mostly photovoltaic) and unsurprisingly Australians are demanding clean energy now.

* Large Scale Solar Generation

We have a world beating sunshine resource and many relatively small, scattered population centres conducive to disaggregated power generation.

We already use thousands of small photovoltaic installations to power or light remote area services. Despite these obvious assets, our Governments have spectacularly failed to date to embrace large-scale solar generation.

While the Victorian Government is trying to establish a lead in solar, NSW is sticking with tokenism – eg the innovative but small Liddell solar farm.

For the next few years, there is an opportunity to lead the world in large-scale solar generation.

Let’s use some of those privatisation funds to encourage the construction of three large-scale solar generators in NSW – at least 100MW and up to 500 MW each and to expand the Liddell solar farm and to extend the Liddell solar farm to other power stations in NSW.

Let’s encourage solar R & D but let’s also provide financial incentives for NSW firms to drive solar generator construction costs down the learning curve.

* Efficient Use of Electricity

Additionally, despite agreement that the quickest way to reduce greenhouse gases is by aggressively pursuing energy efficiencies, Governments have been unwilling to invest in and mandate fast-tracked efficiency programs.

The world is moving on with energy innovation. We have to keep up but can lead if we want.

In the Sydney Morning Herald a few months ago, two articles caught my eye.

One item referred to San Francisco’s Berkeley Council proposing to pay all up-front costs of installing solar panels on homes within its jurisdiction. Costs would be tacked onto owner’s property tax bills and repaid over twenty years.

With the NSW Government selling the community’s electricity assets, we can use those funds to roll-out solar power panels and water heaters on homes across the state.

The second article discussed Australia’s long history of rating energy efficiencies of appliances such as fridges and washing machines. But it also noted the program is simply too slow and just scratches the surface.

Governments have been too scared of demand management thinking it meant largely jacking up electricity prices. Governments haven’t grasped the reality that, even after price increases, efficiency investments can reduce costs for households and businesses.

With the history of lost opportunity in NSW and across Australia, it behoves us all to demand quick progress now.

Instead of just talking about it, NSW has the ability to deliver clean energy efficiently used and lead the world.

But it must be driven from the top of Government and wholeheartedly supported by the Parliament with the oversight of a bipartisan Standing Committee of Parliament – just as we do for road safety.

* The Next Challenge

On the night of the state election last year, I said the people of New South Wales had given Labor one last chance to fix the state’s problems – including our infrastructure.

That infrastructure includes electricity generators and you don’t fix them by just flogging them.

I suspect Labor will continue to be driven by Michael Costa’s scepticism and fail to deliver clean efficient energy.

Labor’s fire-sale of electricity will simply prove to be another lost opportunity in NSW’s economic development. 

But at the next state election, Labor’s failure to deliver clean energy will be an election issue.

It is now up to the NSW Coalition to show voters that we are collectively and individually committed to delivering clean energy not tokenism.

That commitment can’t be an election policy alone for March 2011.

Our commitment must be demonstrated throughout the next three years.

Each Coalition MP must be recognised as the voice of their community on clean energy and energy efficiencies.

That is our challenge.

Thank you.