In a classic piece of political sleight-of-hand, the anti-privatisation McGowan Government has not only privatised parts of a publicly owned power utility’s assets, but has put them in foreign hands.
Labor boasts it won government on the back of its promise to stop the sale of any of Western Power to Australian investors, but last week it sold off part of Synergy to a European fund.
This was Mark McGowan’s position in the final week of the election campaign: “Everyone knows that when you privatise State-owned utilities, power prices go up, and services go down.”
But saying one thing and doing another is only part of the problem here.
The Government’s announcement of the Synergy deal neither admitted it was an effective sale — instead calling it an investment — and referred only to “a joint venture with a private sector investor” when the reality is that it handed taxpayer assets to a foreign owner.
Once again it is necessary to make the point: a party that campaigned long and hard in Opposition about transparency and open government falls way short of the mark when it gets into power.
And missing from the sparse amount of information made public is the effect this expansion of Synergy’s reliance on renewable energy will have on WA’s power prices.
Any government confident that a new energy policy takes the pressure off one of its hottest political problems would be shouting it from the rooftops.
Treasurer and Energy Minister Ben Wyatt was silent on that important matter when he finally put out a media statement last Thursday after the story broke in this newspaper’s business pages the day before.
And when he was given the opportunity during question time in the Legislative Assembly to say that the sale would not force up power prices, he declined to take it.
Wyatt’s official statement was more noteworthy for what it didn’t say than for any details it gave the public.
He didn’t name the “private sector investor” as the Dutch Infrastructure Fund which has been hoovering up renewable assets all over Australia to cash in on government subsidies.
The statement didn’t say DIF would own 80 per cent of the assets and Synergy only 20 per cent.
And he didn’t reveal that Synergy’s existing Albany and Grasmere wind farms and all the assets of the Warradarge project near Eneabba — all publicly owned — would be transferred into the new partnership as its equity, which is what confirms it as a sale.
If it’s such a great deal for WA, why was the Government so tricky with the announcement which, apart from this newspaper, consequently received limited news coverage and very little scrutiny?
When McGowan was confronted in the Assembly last Thursday with his pre-election opposition to selling any part of an energy utility to Australian superannuation funds, he blustered.
“Western Power and the provision of electricity through poles and wires is a natural monopoly and we did not support the sale of a natural monopoly,” McGowan said.
That is simply a canard. As a report in Energy Source and Distribution magazine said about the Barnett government’s sales plans:
“Western Power is a regulated monopoly, which means a number of independent regulators will continue to oversee the various parts of the business, including safety, reliability, prices and performance.”
And Labor has previous experience in breaking up energy monopolies — although not very successfully.
Also, the Australian Competition and Consumer Commission has stated that any problem with poles and wires privatisations on the east coast has not been the selling, but the lack of adequate regulation by the governments that oversaw them.
Regulation and taxation are natural activities of government. Governments crowding out commercial enterprises by competing with them is not.
The “natural monopoly” argument is a left-wing myth popular with the sort of Marxist economists who write for The Conversation. It again shows how far Labor has drifted from the sensible policies of the Hawke-Keating years.
Interestingly, when Wyatt — an economist — was confronted in question time by Geraldton Liberal MLA Ian Blayney with the Premier’s pre-election aversion to selling bits of the energy utilities, he chose not to quack like a duck about monopolies.
While privatisation of assets like these makes economic sense and the Government understandably wants to finance ex-Budget the renewable capacity it needs to meet the 2020 national target, the way it was done is unacceptably obscure.
The repercussions are unclear for Synergy’s energy customers and the growing renewables industry which is now battling an even bigger government-backed competitor.
Synergy chief executive Jason Waters told an estimates committee hearing in September that the business would retire 380MW of old generating capacity within a year and will add about 250MW of renewables by 2020.
So I asked if this would lead to more expensive power caused by the former being cheaper to produce than the latter.
Waters said meeting the 2020 target would be done “with least impact on the State Budget and at the lowest cost to consumers”.
“The current tariff cost reflective path, as determined by the State Government through the Public Utilities Office and the annual State Budget process, does include the costs associated with Synergy meeting the 2020 renewable energy target,” Waters said.
“On this basis, no tariff increases beyond those currently forecast in the forward estimates will be necessary as a result of Synergy’s renewables strategy.”
And what about even more wind power unbalancing the South West grid as had been problematic with the Collgar plant near Merredin?
“Synergy has, and will always remain mindful of the requirement to balance generation on the SWIS (South West Interconnected System) by utilising its fleet of gas-fired assets and is best placed to ensure new renewable generation build is undertaken responsibly with oversight of the best mix of generation required on the system,” he said.
At least it’s now on the record for future reference. And now that McGowan has broken his duck on privatisation, who knows what will happen to Western Power when WA’s debt crisis worsens next year?