Corpratising the Snowy Mountains Scheme: hijacking environmental concerns for commercial gain

The whole Bureau complex of dams, power stations and irrigation supply canals and pipelines in the 17 western states is operated and managed as an integrated dynamic system. It is accepted in America that there will be continued growth and development of that system, and there is a free flow of ideas for development from the public and by the Bureau.

This is all in sharp contrast to the proposals for corporatisation of the Snowy Scheme by NSW and Victoria, where the inland diversion of the Snowy River water is to be substantially reduced, and for a firm period of 75 years. Those proposals are unreal and destructive.

The proposals by NSW and Victoria to reduce the diversion of water to the inland, to reduce electricity output, and to lock these restrictions in place for 75 years, can only be seen as a deliberate challenge to the national purposes of the Snowy Mountains Scheme. The proposals, thereby, are a deliberate attack on the national interest.

The challenge by the states is directed to reducing the so-called unfair competition from Snowy Hydro to state and private thermal power in NSW and Victoria, and to assert state rights. In these circumstance it is useful to review the background in the electricity market that led to these actions by the states.

During the past two decades there was a mood of desperation at state level in NSW and Victoria as they sensed the growing competition from Western Australia and Queensland in terms of new industrial development, population growth, and increasing gross state product. Sydney and Melbourne became the havens of the service sector of the economy, while new production was attracted to WA and Queensland.

Electricity demand is a convenient indicator of these trends, as shown in the chart. Please note that the chart shows market share ratios of national electricity production, not actual kWh.

It is possible to divide the states of Australia into two groups, which we may describe as older industrial Australia and newer industrial Australia. Note that the comparative behaviour on the chart has followed a consistent pattern since 1965.

The state of Victoria under the Cain government tried to correct this matter by greater investment in thermal power, but this was against the market trend. The Kennett government, faced with over-capitalisation on powerplants, then privatised the lot, leaving the new private owners, who overbid, to cope with insufficient revenue to service their investments. There have since been massive capital write-offs by the new thermal powerplant owners.

In all these circumstances the Snowy Scheme was seen as an unwelcome competitor, particularly that capacity of the Snowy to sell into the grid in the middle part of the load curve, at the margin with thermal power.

The attacks on the Snowy Scheme began, initially, on the basis that thermal power was cheaper than Snowy hydro. The argument was irrational, as thermal was base load, and hydro was peak. The Snowy managers were criticised if they charged market prices, and criticised if they charged less than market prices.

The Snowy River lobby in Gippsland, who were advocating the return of waters to the Snowy River, even if for quite obscure purposes, and white-water rafting, were seen by the state governments of Victoria and NSW as providing a reason to reduce Snowy output. This reason had the wonderful advantage that it had nothing whatsoever to do with the financial difficulties of thermal power stations, but it was all about the environment. The state treasurers of NSW and Victoria became friends of the environment, and initiated a grand environmental inquiry into the adverse environmental effects of the transmountain diversion of the Snowy River.