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Beattie's why generation

By Mark Christensen - posted Wednesday, 13 December 2006


You have to hand it to Peter Beattie. While New South Wales chases its tail, Queensland is quietly but surely privatising a selection of its energy assets.

It has secured a handsome price from Origin for the bulk of Energex retail customers without any major political fall-out.

But the difficult question still stands: what to do with the generation side of the equation? While NSW has put itself into a fix due to ideological dogma, the Premier and his deputy, Anna Bligh, are at risk of becoming too pragmatic, only doing what they have to do rather than implementing policy based on sound principles and vision.

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Queensland's so-far successful privatisation formula is built around a simple and practical set of principles.

First, the community is convinced that competitive markets are great for the community but risky for shareholders. Intense competition provides for innovation, keeps prices down and hopefully services up. But it's not very compatible with public ownership.

Governments don't have a good record. Public ownership works in theory, but it takes 100 per cent continual commitment and focus, something most politicians and bureaucrats are unable to give.

Governments are too slow to make commercial decisions, are overly risk-averse and find it hard to cough up additional capital for growth.

Voters can easily become nervous about pouring billions of dollars into businesses that could just as easily be run by the private sector. This is especially the case when funds are needed in traditional government areas like health and education.

Second, the sale proceeds should be dedicated to long-lived public infrastructure investment.

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A major fear with privatisation is the prospect the proceeds will be spent on short-term political imperatives. This has led to the emergence of the "Future Fund" concept. It was used by John Howard for Telstra and will now operate in Queensland to help develop water assets and support clean coal technologies.

The third prong in the privatisation package is don't sell monopolies.

The sale of retail does not include Energex's network of "poles and wires". The infrastructure system that transports electricity around the state will remain in public ownership. The community sees sense in not privatising assets that face no direct competition.

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First published in The Courier-Mail on November 29, 2006.



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About the Author

Mark is a social and political commentator, with a background in economics. He also has an abiding interest in philosophy and theology, and is trying to write a book on the nature of reality. He blogs here.

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