BRIGHT LIGHT: NSW politicians should note the great success of publicly owned energy retailer Robin Hood Energy in the UK, the author says. History moves in cycles, like fashion.
In the early 1800s energy was normally provided to towns and cities by private Joint Stock Companies; they brought gas-light into towns and cities throughout Britain, Europe, America and Australia.
By the second half of the 19th Century, however, the provision of essential services by private companies had fallen out of fashion; for good reason.
Australia and Britain had both experienced price gouging by monopolies; the same market failures recently reported by the ACCC in the Australian energy sector.
By 1891, the Sydney Morning Herald was editorialising that electricity supply should be in public hands. The NSW Parliament agreed and gave the rights to generate and distribute electricity to the Sydney Municipal Council. This type of “municipal socialism” emerged in Britain during the 1870s when Joseph Chamberlain became Mayor of Birmingham. Elected on a Liberal platform, Chamberlain forcibly purchased two companies supplying gas to the city and set up the publicly owned Birmingham Corporation Gas Committee, providing inexpensive energy while still turning a profit.
Australian public ownership of energy generation evolved, as technological change allowed, from individual municipalities to the state-wide NSW Electricity Commission.
Although widely derided by proponents of privatisation as a cumbersome and inefficient government dinosaur, the NSW Electricity Commission more than trebled the state’s power capacity in its first decade.
The dinosaur also produced the cheapest and most reliable power supply in the world.
Then fashion changed again.
From 1992, successive stupid and/or corrupt state governments, espousing the dogma of privatisation providing customer choice, competition and cheaper electricity, embarked on a process to dismantle a successful utility and offer its components to corporate raiders.
A measure of the foolishness displayed in this privatisation can be seen in the disposal of the stateowned coal mines which supplied NSW power stations. In 1992 these mines were split off into a separate entity; Powercoal. In 2002 the Carr Government sold Powercoal to a private company, Centennial Coal, for AU$306 million. In 2010, Centennial Coal was sold to a Thai company, Banpu, for US$2 billion.
At today’s exchange rate, that’s a transfer of more than $2.4 billion Australian dollars in value from the taxpayers of NSW to the shareholders of Centennial Coal; nice work if you can get it.
The transfer of coal supply to foreign ownership is just one of the factors that have contributed to the failure of privatisation to deliver any of the promised benefits and the market failures listed by the ACCC.
Similar conditions have prevailed in the British energy market which was also privatised in the 1990s. Control of their power supply fell into the hands of an oligarchy known as “The Big Six;” companies who now control over 80% of their market.
As in Australia, this concentration of ownership and consequent market failure has resulted in unaffordable price gouging and “energy poverty”. In response to the failure of British privatisation, in 2015 the Nottingham City Council set up a publicly owned energy retailer called Robin Hood Energy.
Although criticised by opponents as a “naive” adventure sure to cost the Council money, Robin Hood has been able to offer energy at over $420 p.a. less than the Big Six and still repay their startup costs within three years.
In fact, Robin Hood’s success has spawned a number of similar municipal enterprises across Britain, including London, Bristol, Liverpool and Islington.
With a state election due next year, Luke Foley and the Labor Party could do worse than look at these examples of public ownership introducing actual competition into the energy market.
The pendulum of history has swung in that direction.
Chris Craig is a Lake Macquarie author and commentator