South Australia's Best Premier

[GWW]

I dont think the debt has been paid, and yet electricity prices through privatisation are going through the roof.

[Psyber]

I dont think the debt has been paid, and yet electricity prices through privatisation are going through the roof.

I don't know for sure whether the state bank debt was paid off fully then run up again or never fully paid off.
But, not having learned from the Bannon experience the current lot have spent the state superannuation fund again..

The high energy prices are being driven by the governments **"green" policies, "encouraging" the privatised utilities to buy "green" energy at high prices to supply expensive "green" energy to the desalination plant..
This also enables the solar energy industry to charge like wounded bulls for solar systems to soak up the subsidies, promising people they'll get it back then make profits on this artificial bubble.
But it does create good will for Mike and his mates in some circles at least.

[** Since the energy cannot be kept separate from energy from non green sources it is all hypothetical/nominal - hence my use of "green".]

[dedja]

I have a different angle on this ... considering I've worked in the water, electricity and gas industries I have some first hand knowledge of the subject.

Electricity prices are rising because of the lack of investment. All state governments had been underinvesting in their state owned power utilities for years and instead had been using them as cash cows to prop up their budgets. The Feds realised this and hence the national electricity market (bar WA) was born.

All Olsen did was realise that the State couldn't fund the capital investments required for the aging electricity assets, so ETSA was first broken up into generation, transmission, distribution and retail, then finally 'sold' (technically leased for 199 years).

The national electricity market is governed by the Australian Energy Regulator (AER) and managed by the Australian Energy Market Operator (AEMO). the are supposed the keep the energy companies in check.

In reality, the high prices we are starting to experience now is a direct result of the private sector recouping the costs of their investments and trying to get the some further funds to replace aging assets.

So all Olsen did was transfer the risk of these assets to the private sector but ultimately we as consumers are carrying the burden.

The uncertainty about the price if carbon from the Federal government is also a factor as it is stifling investment.

After working in the utility industry for a number of years I'm yet to be convinced that privatisation is the way to go.

By the way, our State government is raping SA Water in the same was it used to rape ETSA prior to privatisation and the same thing will happen in that the rate of replacing and upgrading aging assets is unsustainable due to most of the 'profits' being sunk into general revenue.

Finally, on the question of debt, it's all relative. Those on the right are obsessed with minimising debt, while those on the left think it's a necessity. If debt is low wrt GDP then there is nothing to worry about. This is the case for all current State and the Federal governments, so the size of debt thesedays is immaterial.

[Psyber]

I tend to agree with you dedja about not being convinced privatisation is the way to go with core utilities, but I think the debt load of the late 1980s was the trigger for the pattern of doing so.
On the other hand I don't believe we can feel safe about piling up debt just because it is lower, relative to GDP, than that of most "developed " countries.

I think today's developed countries are tomorrows collapsing economies as industry and income moves to the developing economies.
We should be carefully controlling debt now in case a time comes later when we can't pay it, or even the interest on it.
I suspect the US may become the new Greece in a few decades.
Admittedly our mineral wealth will help buffer us, but I'd like us to develop Thorium fission technology so we can be the ones selling it to China - instead of India doing so - when the Chinese finally admit they have to clean up their carbon output for the health of their own people.

[dedja]

I don't disagree that we shouldn't knock up debt just for the sake of it but in relative terms the debt carried by all governments in Australia today is nothing compared to the debt carried by the SA and Vic State governments in the 1980's.

Back to electricity, the industry is headed for very stormy waters as it's not sustainable and the price hikes we are starting to see will be ever increasing.

I have strange belief that we should de-centralise rather than further centralise the industry.

Imagine if each household was self sufficient in power (and water) ... it actually wouldn't be too hard if the right research and investments were made.

Industry on the other hand will always be dependent on our current system and any way to change the way base load power is being generated should be embraced as quickly as possible, but alas, there are too many self-conflicted, self serving interests in the sector for this to happen any time soon.