ACCC head Rod Sims’ opposition to further asset privatisations has received another shot-in-the-arm today, with The AFR reporting that Sydney water users are about to pay more thanks to an 11th hour rule change by the Liberal Government that helped it raise more when it sold the Sydney Desalination Plant (DSP) for $2.3 billion in 2012:
The SDP at Kurnell on Botany Bay has never actually pumped any drinking water but Sydneysiders pay about $200 million a year to SDP to keep the plant on stand-by in case of drought…
When then NSW treasurer Mike Baird sold the desalination plant he said the transaction would have “no impact on customer water bills”. But sources say that the upcoming IPART review is likely to increase the price of water more than it otherwise would as a result of the rule change imposed on IPART during the 2012 sale process.
…in February 2012 then finance minister Greg Pearce issued an amended order to IPART that transferred important risks from SDP back to consumers.
Mr Pearce’s letter was sent two days after the government received indicative bids for the SDP and three months before the deal was closed.
The Victorian Government is also expected to cash-in on its upcoming sale of the Port of Melbourne, which is expected to take place in September-October this year and net the Government some $6 billion in proceeds. Like the example above, the Port has ratcheted-up rents by 750% for some customers leading up to the privatisation in a bid to maximise the sale price.
The common theme in the above examples is that the state governments have ignored the interests of end-users and sold-off what are natural monopolies to private players without adequate regulatory controls.
In such circumstances, the new private owners will almost always use their market power to force-up user costs and boost their profits. We have seen this time and time again with ports, airport parking, toll roads, and utilities (e.g. electricity, water and gas). In every case, the cost-of-living burden for users is the same as raising their taxes, albeit it in a less transparent manner since monopoly profits are easier to hide from public view.
Rod Sims is right to raise the alarm. The public is being gouged by these privatisations.
