Explosive testimony by Treasury officials at a parliamentary inquiry into the controversial sale of NSW state-owned electricity retailers has revealed that the original $5.3 billion promised by the Keneally Government was grossly over-estimated.
Treasury officials revealed under questioning that Delta Electricity and Eraring Energy’s $1.2 billion of debt will have to be repaid out of the proceeds of the sale.
This comes on top of $600 million in lost dividend and tax equivalent payments over the next four years and $1.3 billion which will be spent on building the Cobbora coal mine to provide the successful bidders with subsidised coal.
The state government will also have to pay for damages when power outages or maintenence problems occur.
“Every glimpse of information we see suggests this deal stinks to high heaven,” said shadow Treasurer Mike Baird, who will appear before the inquiry next Monday.
“We’re almost going to get nothing.”
Treasury Secretary Michael Schur admitted that he had misled the committee by stating that the $5.3 billion will be transferred immediately into the government’s coffers when the transaction is finalised.
In fact, although the money will appear in the state’s balance sheet, the Government will have to borrow against the profits to spend it on infrastructure or services.
Meanwhile, a leading energy academic who also gave evidence today criticised the sale as a short-term cash grab that may stymie attempts to reduce the state’s greenhouse gas emissions.
In his written submission to the inquiry Hugh Outhred, a professorial visiting fellow in energy systems at the University of NSW, argues the retailers should be left in state hands so that their role can redirected towards investment in clean energy and improving energy efficiency.
“Unfortunately the NSW energy reform strategy appears focused on the 1990s issue of privatisation rather than the 21st century challenge of a transition to a low carbon future,” Professor Outhred writes in a submission to the upper house inquiry investigating the controversial sell-off.
“Moreover, its attempts at privatization is at best a pale shadow of the Victorian 1990s process that detracts from NSW’s ability to meet the more important 21st century challenge that we now face.”
Electricity generation accounts for approximately 40 per cent of NSW’s greenhouse gas emissions.
Professor Outhred told the inquiry that he is not, in principle, opposed to power privatisation. He said full state ownership, private ownership or hybrid models can all work as long as they are organised properly.
In recent days, much attention has centred on the economic impact of the government’s decision to spend over $1 billion to construct a mine in western NSW and provide cheap coal to the successful bidders.
But little has been said about the potential environmental effects of the decision, in particular its potential to undermine any carbon tax or emissions trading scheme implemented by the federal government.
In a speech last year, Kevin Rudd’s former climate change advisor Ross Garnaut said that such subsidies could undermine the impact of a carbon price.
“The implicit subsidy to coal-based generation within these arrangements could work against a carbon price and be much larger than the highest carbon price that has been suggested in Australian policy discussion.”
Amidst the serious argy bargy there was one light moment today when reverend Fred Nile, chairman of the committee, mistakenly welcomed guests and observers to the “transgender” inquiry rather than the “Gentrader” inquiry. The socially conservative Christian Democrat MP has previously described the Gay and Lesbian Mardi Gras as “public parade of immorality and blasphemy”.
CRIKEY: Matthew Knott is filing from parliament and will be updating this story post publication, click through on the comments button below to go through to the website for updates.
So the State pays for the maintenance costs and the cheap coal. Who pays for the research and development so that we can move to a future not based on coal – no doubt the State?! So what do the private sector pay for?
I still don’t understand what it is they have sold.
Can someone point me to a resource that outlines the structure of the deal that the State has proposed or has closed the deal on?
The whole problem with this sale is the disposal of public assets that provide an indispensable service. As the original status of a government monopoly guaranteed the long-term profitability of power generation, the sell-off represents a base betrayal of the inhabitants of N.S.W. The future will be controlled by owners fundamentally concerned with profits, NOT the provision of an essential service. New Zealand and Victoria have already learned some hard lessons — why can’t we profit by their mistakes, rather than make our own?
At the next election we are expected to choose between the party that represents the ‘big end’ of town (frequently to the detriment of the broader community), and the party that ostensibly represents the ‘workers’ but has repeatedly demonstrated its willingness to betray its core constituency: a choice between Right and Right. Surely a vote for anyone not affiliated with a major party (and opposing the sell-off) must be an improvement over voluntary acquiescence in the betrayal of the State.
The alternative is to watch our elected representatives flog off all profitable public assets and then bemoan the chronic inefficiency of Government-run departments that are inherently non-profitable. Rest assured that buying assets back and restoring them to a reasonable condition will cost much more than any profits to be realised from their initial sale.
State governements, not only in this country but around the world, in what looks like a coordinated internation program for the last 40 years have sold out their populations through the relinquishment of control over their natural resources to not even the highest bidders in many cases. They should be punished.
We the people have not agreed to the wholesale selloff of our birthright and I want to know on whose authority government officials are able to sell off our sovereign wealth to private business and lately foreign countries such as Singapore for a one time lousy payout?
Is there no way that we the people can legally challenge what to me are blatant treacherous acts on ther part of our political classes? Once we sell off our heritage, we become resource rent slaves destined to be forever under the thumb of some foreign entity who owns the water we drink, the energy we consume and, at this rate, the food we eat.
If I were cynical I would say this PPP crap was a tool to dismantle the power of states which have protection, via their constitutions, from federal governments which really have no bsiness being involved in anything other than borders and wars. However, once states have become so poor through what to me looks like programmed mismanagement, they have the grounds to relinquish our resources to anyone and everyone thereby completely emasculating their ability to protect the interests of the people. This farce in NSW has got to be stopped. Isn’t it illegal? Where is the Opposition and where are the national media? Those supposed champions of liberty! Ha! Ha! Ha!
What was the actual date of the sale, and is there a cooling off period?
The reason I ask: is there still time for someone to request an injunction in the Supreme Court to halt the sale until the inquiry is complete? I have no doubt the democratic process will eventually get to the bottom of what’s being done and why, and who benefits, but by then the damage will be done. If at all possible, this needs to be halted to allow Parliament time to catch up with events and perform its constitutional function.
Another question: why did Governor Marie Bashir agree to prorogue the Parliament at the Premier’s request? She wasn’t obliged to do so. If she can’t see that the constitutionality of doing so is suspect, what’s the use of having a Governor?