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Transcript
25/06/01
State
meeting to address increasing electricity prices
PETER DOBNEY, ENERGY
USERS ASSOCIATION: Consumers should be looking for a price rise of between 15
and 20 per cent.
KEITH ORCHISON, ELECTRICITY SUPPLY ASSOCIATION: Prices have obviously got to
go up because of the increase in demand.
ALAN KOHLER: Are electricity prices going to rise in the short-term?
PROFESSOR STEPHEN KING, THE UNIVERSITY OF MELBOURNE: Yes.
I don't think there's really any alternatives.
ALAN KOHLER: There's a very simple reason that electricity prices in
Australia are heading higher, especially in South Australia and Victoria.
It's because the privatised generation companies in those States have been
caught short by the air conditioning boom.
Everyone is installing air conditioners.
It means the power industry can no longer cope with summer.
PETER DOBNEY: The prices have fallen because there was a surplus of capacity,
and now that surplus capacity has been eaten up, largely, strangely enough,
by domestic customers with air conditioners.
It's only for a small period of time over the summer months when the system's
really constrained, and there's a shortage of generating capacity.
And that's when the generators make all their money.
The rest of the year they don't make a lot of money.
KEITH ORCHISON: If you take Victoria as an example, demand in Victoria has
gone up of the order of 23 per cent, in the past decade -- driven by air
conditioning demand, use of computers and of course by economic growth.
ALAN KOHLER: NSW and Queensland don't have the same problem as Victoria and
South Australia.
And that's partly because it's hotter there and they discovered air
conditioners long ago.
But it's also because their power industries have not been privatised.
As a rule, State-owned industries suffer from over-capacity, not shortages,
because politicians hate being blamed for blackouts.
PROFESSOR STEPHEN KING: State Governments cannot survive having rolling
blackouts over summer.
If you just remember back a few years to when the lights went out on a couple
of AFL matches or a cricket match actually I think one was, they were
disasters from the point of view of the electricity industry.
Imagine if the State Government was running that industry, would still be the
owner of that industry, the political flak that they would have caught.
ALAN KOHLER: There are two reasons that the air conditioning boom has caught
the industry short.
After privatisation in Victoria, the price collapsed to $20 a megawatt hour,
instead of rising to $40 as expected.
So the last thing the companies wanted to build was more power stations.
And secondly, the State governments couldn't get their act together and build
enough interconnections between the States, so the overcapacity in NSW and
Queensland could be sent south.
KEITH ORCHISON: Through the second half of the 1990s, of course, the
wholesale price of electricity in Victoria went through the floor.
When competition came in, wholesale prices crashed, the business community
benefited from that but so did the residential community.
PETER DOBNEY: Basically we have plenty of capacity in NSW.
And why -- if that's truly a national market, that power capacity should be
available interstate.
But because of constraints on the systems, that we've got at the moment,
we're not seeing a free market take place.
ALAN KOHLER: Tomorrow Australia's emergency Ministers will meet for the first
time, to develop a plan to deal with the shortages and the price rises.
But it's not a crisis meeting, of course.
CANDY BROAD, ENERGY & RESOURCES MINISTER, VICTORIA: It's not a crisis
meeting.
It's something that I've been working on very hard since I became the Energy
Minister.
I was astounded to discover when I became the Energy Minister in Victoria,
that there was no ministerial level forum or council for Ministers to get
together and determine policy that these structures had been set up and left
to the people in those structures with no capacity for ministers representing
governments, to get together, review how the market is going and change
policy if that's what is needed.
ALAN KOHLER: But is fundamental change what is needed?
What about the system itself?
Do you think it works?
PROF STEPHEN KING: The national electricity market as a whole?
It works -- let me give it a score -- probably around a 'C'.
It's been going OK.
The electricity hasn't actually turned off or the lights haven't turned off
too often, but it's still got a long way to go.
ALAN KOHLER: A few things are needed to prevent blackouts and huge price
rises in Victoria and South Australia.
First the links between the States have to be upgraded.
PETER DOBNEY: The interconnect between NSW and Victoria could be upgraded by
1,000 megawatts, which would overcome all our problems in Victoria and allow
NSW generators to sell more power into Victoria.
ALAN KOHLER: And more power stations need to be built.
With all the air conditioners being installed, demand will rise by 50 per
cent in the next decade.
KEITH ORCHISON: In order to meet that higher amount of demand, we are going
to have to build somewhere between four and 7,000 megawatts of new generation
capacity.
ALAN KOHLER: Finally, the national electricity market with its mix of private
and Government-owned parts needs to be made to work properly.
CANDY BROAD: I'm very conscious, having been elected as part of a Government
with an objective of delivering affordable prices and secure and reliable
electricity, that in a situation where we have a totally privatised
electricity system in Victoria and wholesale prices determining a national
market, that this is something of a challenge.
ALAN KOHLER: In the meantime, there's higher prices.
It's the downside of competition policy and privatisation.
Unlike governments, private companies like tight supply because it lets them
keep the prices up.
PROF STEPHEN KING: I think privatisation is one of the elements that has led
to the crunch -- that private companies don't face the same pressures to have
continuous supply, no greyouts no blackouts, as political owners would have.
ALAN KOHLER: But any discussion on price caps here is cut short by the
mention of California, where price controls led to disastrous shortages.
KEITH ORCHISON: So long as we are sensible about allowing electricity prices
to flow through to the consumers, so long as investors are given a reasonable
return on their investment, the shadow of California ought not to fall across
this country.
KERRY O'BRIEN: Well, we can only hope.
Alan Kohler with that report.
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