After painfully long reviews, the State Government has finally granted Hazelwood Power station's owners the right to continue providing Victorians and industry with electricity. By all accounts it took considerable pushing and shoving by the more sensible members of cabinet such as John Brumby and Energy Minister Theo Theophanous.
What should have been an automatic sign-off became bogged down in controversy because of the Government's hand-wringing and deference to Greenpeace and other environmentalist fanatics whose agenda is to return Victoria's living standards to their level of a century ago.
The genesis of the Hazelwood saga was the privatisation of the business back in 1996 when a consortium led by International Power bought the generator and its associated mine for $2.4 billion. Under government management, Hazelwood, once the pride of the state's generation sector, had become an inefficient and overmanned poor cousin, which 20 years ago was scheduled to be decommissioned in 2005. But its present owners have transformed it into a reliable workhorse that produces over a fifth of the state's electricity.
International Power refurbished two of the plant's eight generator units at a cost of $400 million. Since 1994-95, its productivity in terms of output per employee has risen 50 per cent and its availability to run whenever required matches its more modern competing power stations.
The application for an extension should have received automatic approval. Victoria is not so capital-rich that it can knock back a proposal that will extend the life of a vital facility when a rebuild would cost $3 billion-plus. Moreover, in the face of development refusal there would be few investors willing to risk committing funds. And in the absence of any action, Hazelwood would be gradually wound down and industry and consumers would find electricity bills eating into their living standards.
International Power has made thin profits from the business, and the money spent on upgrading and extending the plant's life was justified by the "sunk" nature of its investment. Doubtless the company would have gratefully accepted a payment by the Government to close down its facility. This would have pleased the green cheer squad, which would have been full of ideas on how to fill the hole -- one-quarter of the state's electricity production capacity. We would hear an intensification of praise for windmills, dim light bulbs, less air-conditioning and a phase-down of the state's smelters. But the upshot would have been electricity costs rising. The real outcome would have been lost jobs and a gradual winding-down of the state's economy.
The process under which Hazelwood was put through the wringer points to other political deficiencies. The Bracks Government is demonstrating itself to be hostage to every crackpot green group, some of which it funds through our taxes. It only takes a whiff of green lobbying for the Government to dither or to take ill-judged decisions that are contrary to sound public policy. In addition to the Hazelwood issue, this is evident in regard to channel deepening to enable Melbourne to remain a world-class port, the ban on genetically modified food technology, the cruel tax on new home buyers represented by the Five Star energy requirements, and a host of other matters.
A great deal of the angst and time costs in the Hazelwood case stemmed from the political favours extended by the Bracks Government. Subsidising green groups to campaign against the power station was one such favour. Appointing an activist supporter as president of the Victorian Civil and Administrative Tribunal was another. Together, this brew meant that a local planning decision became embroiled in the global issues of climate change that are the responsibility of the Commonwealth Government.
Hopefully the Bracks Government will learn some lessons from the strain under which it put itself in what should have been a straightforward application to extend the life of a factory. Among these is to better understand the forces it unleashes when it provides political oxygen to some of its favoured advocacy groups.
Another is in the regulatory setting. The actual decision on modification of Hazelwood's mining lease is controlled by the Environment Effects Act and 13 other acts. This level of government oversight speaks volumes about the overregulation that is crippling the state's businesses. The existence of all this legislation and the manner in which it can be manipulated is testimony to the need for a regulation-busting outfit such as the Victorian Competition and Efficiency Commission to be given its head to allow a freeing up of business decisions.
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