The Guardian’s Michael Slezak has penned a good piece on the losing battle being fought by energy regulators against privatised monopoly power owners, which threatens to leave consumers billions of dollars out of pocket:
A federal court decision this week represents a possible end to a two-year battle that will see New South Wales households charged an extra $3bn on their collective energy bill and put upward pressure on bills in other states too.
The ruling comes after a complex legal stoush between three parties and highlights what some say is a failed regulatory framework where huge monopoly businesses can game the system to gouge consumers for essential services.
One party is the Australian Energy Regulator, which ruled that networks were exploiting their monopoly status and charging billions of dollars more than was necessary by over-investing in (or “gold-plating”) their networks and passing the costs on to consumers.
Another is a small consumer legal group, the Public Interest Advocacy Centre (Piac). It has argued the regulator did not go far enough and was letting the network companies get away with too much.
And finally there are the giant network businesses. They have attacked the regulator’s ruling, saying their spending was efficient and they should be allowed to pass the cost on to consumers.
But the battle was being played out on a field that is widely agreed to be slanted in favour of the huge network businesses. The federal environment and energy minister, Josh Frydenberg, says the existing regulatory framework allows the networks to “game” the system and push up prices – a view mostly shared by both Piac and the Coag energy council.
Underlying the whole issue is a messy set of problems and half fixes: a market that’s not really a market; a regulator that can have its rulings picked over by networks and challenged in very selective ways; and a legal process that benefits parties with more resources – and the networks out-resource both the regulator and consumers…
“Networks have demonstrated that they can spend millions and millions and millions of dollars challenging decisions of the Australian Energy Regulator,” says Craig Memery, from Piac.
“The networks are not only better resourced than the consumers but they’re better resourced than the regulator. When they take the regulator to the tribunal, they have the power of information and resources behind them.”
Not only is there a funding asymmetry but, according to many groups, the very nature of the allowable challenge skews the decisions in favour of the networks…
I wrote an article on this issue yesterday, so I won’t regurgitate it here. All I will add is that when a government privatises a natural monopoly like power (or any industry that has one body controlling the infrastructure) then the likely ‘free market’ solution is for the new private owners to extract monopoly rents by gouging consumers. It’s not rocket science.
It’s also a bit rich for Coalition ministers like Josh Frydenberg to decry such an outcome when it has actively encouraged the states to ram through asset sales via its ‘asset recycling’ fund.
You reap what you sow.
