Podcast special: The black comedy of Australian energy

We are back on at 4pm (Melbourne time) this afternoon for a look at the energy market with an energy expert.

A post with the details is coming shortly but I thought that I would offer this blast from the Clarke and Dawe past that is as apt today as it was five years ago…

 

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  1. Grand Funk RailroadMEMBER

    A Market Too far
    Gunnamatta
    16 June, 2022

    The failure of the Energy ‘Market’ isn’t surprising. The surprise is that it has taken so long for the whole concept to deliver a policy failure of such epic proportions it cant be walked away from or denied. Australia’s energy ‘market’ has always been a fraud and has always been known to be one. Now that the concept, as regards energy, is wreckage in the mind everyday Australians it is time to explore more wrecks in other equally faux markets which shape out lives.

    Who’d a thunk it? Participants in Australia’s electricity market – the one providing the energy for every last thing you turn on every day – indulge in ‘unconscionable conduct’ and like ‘gaming the system’.

    There are circa 25 million Australians who aren’t shocked. The bulk of these can recall an era in which almost every State electricity generator was run and owned by a Government – usually State. Those State run operators became ideological pariahs a generation ago as the Hawke Keating era started questioning whether State controlled energy generation and distribution was in the national interest. Back then they assumed that getting the ‘market‘ in would, as in the US and EU, lead to lower prices and greater reliability. But the privatisation of energy in Australia ensured Australians never did see those lower prices, while they’ve watched on without much say as they, as taxpayers, have been taken for patsies by mainly offshore based ‘private’ companies, and with a load of marketing, a meaningless quasi bureaucracy to ’regulate’ and an entire industry of PR and spin which has never got Australians away from the possibility that their electricity system is all about ripping them off – as consumers and taxpayers – and that the organisations in that industry were never about providing reliable cheap power, but about holding Australians to ransom for their bottom lines.

    Those former state controlled outfits – the Victorian SEC first amongst them – were largely created after an initial wave of private sector failure in the 19th and early 20th centuries. The institutions themselves weren’t corporate in any way, they were bureaucratic. Haggling about the bills could be tedious, and variation to what was provided almost unheard of. But almost every decent sized town would have a couple of apprentices with the SEC, and a maintenance team somewhere close. The whole system wasn’t about ‘risk management’ it was about engineering a system with as little failure as possible. In Victoria at least from the late 1960s blackouts were unheard of unless something like a bushfire took out key parts of the system. And those maintenance teams would be dragged out of pubs, and off cricket fields, or called in the small hours to get out and fix things pronto – yes, at double time and a half on long weekends, but they’d be there, and the punters knew they’d be there. That all went out the window as Premiers like Jeff Kennett broke up the system and created private monopolies in both generation and retail and told the public the system was a ‘market’.

    The public knew from the get go that almost none of them were in any form of market. In the first instance they couldn’t swap between one provider and another, and later when they could the variations between offerings were negligible. Those operators who brought product facilities and distribution networks soon discovered that rather than selling product and ensuring supply, a better way to maximise shareholder outcomes was to ‘gold plate’ the system by investing expensively and then writing off the ‘investment’ for taxation concessions off revenues – which were essentially guaranteed by demand from juiced population growth and a world increasingly requiring a computer and range of screens be turned on 24 hours a day. The speciality became deciphering usage rates and times of day and the often surreal ‘service charges’ which padded out bills, on infrastructure which hadn’t been touched since it was installed by public entities in previous generations.

    In the late 1990s the world wised up to carbon energy generation and started on the road to renewable power. To foster that State governments encouraged feed in tariffs. Those electricity retailers and generators knew this would cream them in the long term so they pressured governments to tone down the feed in tariffs, and started talking up the instability created by people feeding into their systems. They’ve let maintenance go, they have held off on investment. They have done their level best to blackmail governments into cost free funding for capacity. If the public wanted to address climate change then the Government could pay them off first. That is what this issue has been about. They havent finished writing off their ‘investment’, and want more. And they’ve been caught short.

    The South Australian government did the right thing in taking up a massive battery rather than taking up being held to ransom. It is Mike Cannon Brookes and Twiggy Forest putting into action plans to ensure Singapore gets solar power generated in Australia at a price better than our current electricity generators and retailers provide Australians.

    But most of all it has been the ideological bedrock of the age to believe in ’markets’ which don’t fail, which deliver the best of all possible outcomes, which are comprised of participants which somehow have public interest at their core, and should be as lightly regulated as possible – all adding up to the best outcome for you. A Liberal government for 20 of the last 26 years has been just what the doctor ordered for this dynamic. A hesitant ALP, unprepared to address NeoLiberal shibboleths, under Rudd and Gillard in the wake of the GFC, was icing on the cake, a bare faced liar heading a government of tongue talking ideological nutters was the cherry on top. That ideological underpinning has neutered the collection of data and analysis of the Public sector, at a Commonwealth and State level, and embeds private suppliers and even labour hire into Public sectors across the nation, giving rise to multi billion dollar public outlays only which only really are about providing a margin for private suppliers – they game that system too. It has been a golden era for privatised providers for that which Australians need, and government has always ridden shotgun in the ideological wagon.

    Now that we have an overt ‘market failure’ all Australians can ask themselves ‘where else do we have market failure?’ with fresh eyes. Their houses aren’t really a market, their children aren’t educated in a market, and their superannuation isn’t really a market either. When they think of players in markets ‘gaming the system’ what do they see when they think of Health Insurance or pharmaceuticals, or Audit and Consulting firms in the Public sector, or property developers banking land? Or Australian gas producers placing Australian consumers at the end of the queue.

    Gaming the system is what profit seeking enterprises, and people, do. And they will do it wherever they think there is no way the buyer can get back at them for doing so.

    • Loppy68MEMBER

      10000… brilliant summary for those old enough to remember. Should be on the front page of every MSM newspaper! Perfect compendium to Cameron Murray’s ‘Game of Mates’

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