Privatising energy networks to impact NSW electricity prices

The New South Wales government revealed earlier this year that it was considering privatising electricity networks throughout the state - and the announcement was met with mixed reactions.

Several months later, the McKell Institute has released a report that investigates some of the potential impacts the decision could have on homeowners and businesses in NSW.

One of the main findings of the study was that electricity prices are likely to escalate, putting further pressure on anyone who is already struggling to pay their bills. Stephen Koukoulas, Market Economics managing director, was the author behind the report and argued there is "no logical case for privatisation'".

Mr Koukoulas continued: "As a natural monopoly, the fundamental privatisation canons of competition and benefits of efficiency do not apply to electricity networks in the same way as a normal market."

Privatising the electricity networks is likely to lead to greater investment in transport infrastructure. Experts argued that this simply equates to felling a stable revenue stream in order to give way to new assets, which in most cases will have "recurrent liabilities attached to them".

The 2013 Residential Electricity Price Trends report from the Australian Energy Market Commission found that prices in NSW are expected to fall 0.7 per cent a year from 2012-2016.

However, this was before the privatisation announcement was made, so it is unclear what impact this will have on future forecasts. Residential customers in the state were found to have a great choice of electricity products, potentially saving by switching to an alternative provider.

The McKell Institute noted that higher overheads are likely to lead to an increase in electricity prices, while variations in capital and operational expenditure are also expected to arise. Not only this, privatisation is unlikely to bring any short-term gain to the state budget and could prove damaging in the long run.

Posted by Nikki Wilson-Everett