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Joe Poprzeczny: State Scene - Labor leads on utility reform

TEN years ago the newly elected Court-Cowan Government received a report from a team headed by CRA’s former chief, Sir Roderick Carnegie.

Commissioned by Labor’s defeated Lawrence Government, it recommended breaking up WA’s huge gas and electricity monopoly-conglomerate, the State Energy Commission (SECWA), into competing business components, with gas and electricity divisions separated.

Breaking up, or what’s called disaggregation, was to mean cross-subsidisation between generation, networks (transmission/distribution) and retailing arms, so the inevitable hiding of inefficiencies could no longer prevail.

If that report had been fully implemented by the conservative governments of 1993 to 2001 we’d now have several gas retailers, not just one – a privatised AlintaGas – and more than one electricity generating and retail entity, not just Western Power, which has a 97 per cent share of the market.

Competitive enterprise was to displace the deadening hand of monopoly in both gas and electricity.

Interestingly, WA Labor has a far better reformist record than the Liberal-Nationals in the crucial energy area, primarily because several far-sighted Labor MPs in the 1980s moved for across-the-board energy sector reform.

Energy Minister Eric Ripper’s present electricity market reforming moves fall within this civic-minded tradition.

Conservatives have tended towards lethargy and, whenever inclined to reform, they do the minimum, opting instead for selling-off (privatising) public assets, as with the $2.4 billion sale of the Dampier-to-Bunbury Natural Gas Pipeline (DBNGP) and $970 million Alinta sale.

But anyone can sell public monopolies to instead create private monopolies.

What a silly, indeed futile, and anti-competitive exercise that was.

There are many reasons why Labor is WA’s energy market reformist party.

Probably the most important is that, within its ranks, several MPs were receptive to the ideas and findings of an outstanding academic scholar who more than anyone was instrumental in formulating and highlighting problems arising from WA’s high energy costs, and convincing key people these weren’t insurmountable.

WA could, he contended, ‘self-strengthen’ its economy.

He is former Murdoch University economist Dr Frank Harman, brother of a one-time Labor Legislative Assembly Speaker, John Harman.

The unassuming Dr Harman was someone I was privileged to know well during my time at the University of WA’s Economics Department, where he greatly inspired students with his belief in full employment, efficiency and

economic growth.

Not long after we’d met he left Perth and taught at New Zealand’s Waikato University and Canada’s McMaster University.

He was also an economist with the Commonwealth Secretariat in London and the Canadian Government in Ottawa.

On returning to Perth he began to systematically investigate WA’s energy sector, searching for ways to ensure cheaper energy became available.

Those researches quickly revealed that SECWA, through its legislative monopoly status, had a stranglehold over WA’s export-oriented economy.

And unless something was promptly done WA’s competitive edges would be steadily eroded.

Dr Harman and several others associated with him, all generally outside the SECWA bureaucracy, unearthed an array of telling details which, until then, only a handful of accountants, economists and other boffins employed by that huge conglomerate, plus coming and going energy ministers, knew anything about.

Dr Harman’s work slowly convinced others that SECWA’s monopoly was the over-arching problem and it should be dismantled because the energy giant had isolated itself legislatively from market pressures that ensured lower costs.

In other words, no matter who governed SECWA prevailed, with energy and development ministers overseeing it, backing its monopoly status and contending that was the only way things could be done.

But Dr Harman’s arguments were coming to the fore, even if tortuously slowly.

From serving on a State government committee inquiring into petrol prices in 1983 he became involved in investigating electricity and gas tariffs in 1984-85.

In 1987 he was seconded for two years to WA’s public service to help create an energy policy agency.

By 1995 he’d written many influential studies, some jointly, including, Comprehensive Costs of Electricity Supply in WA, and Gas and Coal and Politics: Making Decisions about Power Stations.

A culmination of his efforts came in 1993 with the presentation of the Carnegie Report.

Crucially in August 2001 – eight years after the Carnegie Report was submitted – Mr Ripper invited him to join the Electricity Reform Task Force (ERTF) to consider Western Power’s future and the creation of a competitive electricity supply industry.

The ERTF recommended breaking-up Western Power into generating, networks and retail arms with competitors able to generate and retail electricity for the grid, thereby ensuring competitiveness.

The transmission/distribution network would remain publicly owned, so unlike what the conservatives had done with gas by privatising the DBNGP and Alinta, and thereby transforming public monopolies into private ones.

Mr Ripper convened an ERTF because his conservative predecessor, Colin Barnett, hadn’t dismantled Western Power’s monopoly to permit competition as the Carnegie report had recommended.

A fortnight ago Mr Ripper wrote to all non-Labor MPs offering briefings on the reform process the ERTF had urged.

Conservative leaders Colin Barnett and Max Trenorden, and other non-Labor leaders, were also offered briefings on legislation that will institute what Dr Harman, Sir Roderick and many other far-sighted specialists have so doggedly worked for since the 1980s.

Let’s hope WA’s conservative leadership ceases further hindering long overdue reforms that seek to institute a competitive electricity sector.

 

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