The 7.30 Report had a fascinating story last night about the impending collapse of the NSW carbon trading system – something which Bob Carr gloated two months ago was one of his finest achievements.

The responsible Minister, Phil Koperberg, tried to explain away the tumbling carbon price as a problem caused by uncertainty about the design of the Federal carbon trading system. Given the Federal system won’t start for another five years, this sounds like rubbish.

The 7.30 Report suggested big private players might be trying to send the scheme under because they want to sell more power. Origin Energy’s Tony Wood was put on the spot as if he had a conflict of interest, when the biggest conflict of all resides with the Iemma Government.

Doesn’t anyone else see the connection between this week’s huge backflip on power privatisation and the impending collapse of the state-based carbon scheme?

NSW is in the worst financial position of any state government and this is after having the highest taxes in the country and putting poker machines on every street corner. In a last desperate act they are now trying to overcome union opposition and flog its $20 billion power industry, rather than borrow another $5 billion to build new stations.

Having 1000 people running around helping people reduce their power bills is the last thing a vendor of power producing assets would want. Lo and behold, this is exactly what might be about to happen if the scheme collapses.

The Iemma Government needs to quickly restructure the scheme to ensure it is viable, even if that knocks a billion or two off the final price it receives for the publicly owned power assets.

And rather than just flogging it in its current structure, why not do a decent review of the whole industry. The Kennett Government achieved superb outcomes – $30 billion and lower real power prices – by breaking up the electricity and gas sector into about 15 pieces.

Flogging individual power stations makes far more sense that retaining the current groupings in Delta and Macquarie Generation. The same goes for Energy Australia – the retail division should be stripped out and the poles and wires distribution boundaries broken into two or three pieces.

The Singapore Government sent me a cheque for almost $300 this week after snaffling the distribution assets from Alinta and they’ll no doubt be at the forefront of any electricity privatisation push in NSW, even though they are already the monopoly gas distributor having picked up the old AGL pipes network.

Stephen Mayne publishes the shareholder activism website