Explosive testimony by Treasury officials at a parliamentary inquiry into the controversial sale of NSW state-owned electricity retailers has revealed that the original $5.3 billion promised by the Keneally Government was grossly over-estimated.
Treasury officials revealed under questioning that Delta Electricity and Eraring Energy’s $1.2 billion of debt will have to be repaid out of the proceeds of the sale.
This comes on top of $600 million in lost dividend and tax equivalent payments over the next four years and $1.3 billion which will be spent on building the Cobbora coal mine to provide the successful bidders with subsidised coal.
The state government will also have to pay for damages when power outages or maintenence problems occur.
“Every glimpse of information we see suggests this deal stinks to high heaven,” said shadow Treasurer Mike Baird, who will appear before the inquiry next Monday.
“We’re almost going to get nothing.”
Treasury Secretary Michael Schur admitted that he had misled the committee by stating that the $5.3 billion will be transferred immediately into the government’s coffers when the transaction is finalised.
In fact, although the money will appear in the state’s balance sheet, the Government will have to borrow against the profits to spend it on infrastructure or services.
Meanwhile, a leading energy academic who also gave evidence today criticised the sale as a short-term cash grab that may stymie attempts to reduce the state’s greenhouse gas emissions.
In his written submission to the inquiry Hugh Outhred, a professorial visiting fellow in energy systems at the University of NSW, argues the retailers should be left in state hands so that their role can redirected towards investment in clean energy and improving energy efficiency.
“Unfortunately the NSW energy reform strategy appears focused on the 1990s issue of privatisation rather than the 21st century challenge of a transition to a low carbon future,” Professor Outhred writes in a submission to the upper house inquiry investigating the controversial sell-off.
“Moreover, its attempts at privatization is at best a pale shadow of the Victorian 1990s process that detracts from NSW’s ability to meet the more important 21st century challenge that we now face.”
Electricity generation accounts for approximately 40 per cent of NSW’s greenhouse gas emissions.
Professor Outhred told the inquiry that he is not, in principle, opposed to power privatisation. He said full state ownership, private ownership or hybrid models can all work as long as they are organised properly.
In recent days, much attention has centred on the economic impact of the government’s decision to spend over $1 billion to construct a mine in western NSW and provide cheap coal to the successful bidders.
But little has been said about the potential environmental effects of the decision, in particular its potential to undermine any carbon tax or emissions trading scheme implemented by the federal government.
In a speech last year, Kevin Rudd’s former climate change advisor Ross Garnaut said that such subsidies could undermine the impact of a carbon price.
“The implicit subsidy to coal-based generation within these arrangements could work against a carbon price and be much larger than the highest carbon price that has been suggested in Australian policy discussion.”
Amidst the serious argy bargy there was one light moment today when reverend Fred Nile, chairman of the committee, mistakenly welcomed guests and observers to the “transgender” inquiry rather than the “Gentrader” inquiry. The socially conservative Christian Democrat MP has previously described the Gay and Lesbian Mardi Gras as “public parade of immorality and blasphemy”.
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