Privatised electricity industry will bring sustainable benefits

It is ironic that, the same day the NSW Government announced a tax on electricity distributors, the AFR reported that the CEO of the industry's biggest firm had been sacked ("Energy chief sacked", AFR May 7).

As the new tax falls only on businesses, it seems a highly inefficient levy.  Uncharacteristically, the Treasurer may have decided he can obtain a cost-free revenue stream by milking business.  But other considerations would include a wish to offset deficiencies in the market process that were likely to rob the Treasury of dividend income.

Since major electricity users in NSW have been freed to shop around, NSW distributors have been offering them very low-priced energy contracts.

They have been able to do so because they been given generous prices for those customers not free to seek competitive supplies.  Some NSW distributors, rather than accepting the high profits from their captive customers, are seeking to buy other customers by selling electricity at a loss.

Now, while it often makes sense for firms to accept low profits on pioneering sales, in private enterprise, the judge of the wisdom of such acts is the board of directors and the shareholder.

For government-owned firms, these commercial disciplines are much reduced.  Notwithstanding corporatisation, the fact that the Government is the shareholder means a diminished incentive for business to maximise its profits and a greater incentive to look after other "stakeholders", like employees.  This can distort the whole market.

And this brings us back to the sacking of the CEO of energyA.  The CEO, with an eye on lean privatised competitors south of the border, sought massive cost savings.  But a board of directors, which included a union representative, found this meat too strong and made its own savings by firing the CEO.

What these two events must surely bring home to the NSW Government is the urgent need to complete the electricity reform process that it has embarked upon, and privatise its businesses.

Only then can it obtain for the taxpayer-shareholder the true value of their assets, and allow the customers sustainable benefits from true competition.

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