Although the carbon price has often been blamed today we get another insight into a far bigger diver of utility price increases. From the SMH:
Surging power prices have resulted in NSW government-owned electricity companies emerging as among the most profitable companies in Australia, as they boosted profits 50 per cent in the year to June.
Figures released by the NSW Audit Office show that the state government’s electricity companies boosted their combined profit to $1.54 billion in the year to June, up from $1.03 billion a year earlier.
This includes the electricity distributors that have been big spenders on new equipment over the past several years, triggering a heavy round of power price rises – and a public backlash which has resulted in lower electricity usage.
Their high profits pushed their return on equity to 15.2 per cent from 10.7 per cent, which is well ahead of most ASX-listed industrial companies which earn closer to 10 per cent.
This is also significantly higher than the 5.7 per cent return on equity from government-owned water utilities. Additionally, the return on investment of the electricity companies rose to 19.9 per cent from 17.4 per cent, the report by the public audit office found.
Only private rentiers can generate these kinds of returns: the big miners and the protected banks. The publicly owned utilities have very high mandated rates of return to ensure peak levels of investment and reliable service delivery. On the downside, however, it means higher prices. Some mandates are so strong that when demand falls prices automatically rise to offset volume declines. Nice work if you can get it!
