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Oct 16, 2017

Australian neoliberalism meets its conqueror: electricity

The problems of our failed electricity market are the same problems that crop up time and again when market economics is applied to crucial services.

Australian Competition and Consumer Commission chairman Rod Sims

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28 thoughts on “Australian neoliberalism meets its conqueror: electricity

  1. wilful

    It’s actually capitalism, and it was identified by Adam Smith. So yeah, the problem has been known about for some time…

    1. Ian Lowe

      Yes, Adam Smith warned about oligopolies and argued that markets only provide real competition if they are well regulated. The ideologues of the Chicago School, and their disciples in Australian governments, obviously did not ever read that far into The wealth of Nations, leaving after chapter 2 when they reached the comforting statement that society as a whole benefits if individuals pursue their self-interest.

      1. old greybearded one

        Adam Smith’s words were something like “Results in a contrivance to increase prices”

    2. Draco Houston

      Yep.

      Capitalism requires at least some degree of concentration. Anyone doubting this should ask themselves where the small business artisans went. Where are all the peasants?

      The same for the remark that the companies primarily operate to maximize their returns instead of provide a service. Oh word?

  2. paddy

    Excellent work today Bernard.

  3. Ian Lowe

    Bernard Keane and Ms Tips are both right to point out the comprehensive failure of flat-Earth economics in the critical area of electricity supply. But the failure goes even further. The Thwaites review in Victoria found that 30 per cent of the average bill is the cost of retailing! The ideological imposition of “competition” has created a zoo of small companies, all paying temps to cold-call us and lie about the better deal they can provide. In western Europe, retailing typically accounts for about 5 per cent of the cost of power, not a scandalous 30 per cent. As the gold-plating of the network slows down and more renewables drive down wholesale costs, retailing will be an even larger share of our power bills if we persist with the current system [pun intended].
    Ian Lowe

    1. MJM

      ” … 30 per cent of the average bill is the cost of retailing!”
      I installed PV panels earlier this year. For the winter quarter supply charges were 29% of my bill and the amount exceeded the rebates for the electricity I supplied to the grid.
      Dealing with the electricity company is a trial. I have now received three accounts since the PV installation and none has been correct: the first bill was in error as the account charged for what I had supplied to the grid instead of deducting this amount; the bill for the second quarter charged me for a second meter reading which I had not requested; the account for the winter quarter treated the deduction, due for the extra meter reading, as a debt on my part.
      With such inefficiency it’s no wonder the retail costs are so high.

  4. leon knight

    Identifying the problem as clearly as this is great stuff Bernard – but how do we achieve a government capable of fixing the mess, and controlling the unmitigated greed into the future?

    1. brian crooks

      leonknight , Oh how we forget, labor gave you the old age pension, sick and holiday pay, 8 hour day, decent pay and conditions, medicare, sickness benefits, and the libs since howard are hell bent on taking it all away to give 65 billion to their rich mates, just keep voting lib/nat till you`re living under a bridge somewhere.

  5. brian crooks

    This article clearly shows the rewards for the dimwits that voted howard in and then abbott and now turnbull, this is the future for australia under these neo con economic lunatics and the f/wits that keep voting for them, your grandkids will hate you.and deservedly so, a pox on the lot of you.

  6. John Newton

    And the headline on today ‘a UnAustralian ‘renewables force up energy costs’

  7. MJM

    ” … the corporations whose interests are central to neoliberal economics simply don’t know when to stop in their exploitation of the communities in which they operate.”

    Absolutely nailed it Bernard. It’s simply rampant greed.

  8. Wayne Cusick

    I always thought that the inevitable conclusion of unregulated markets is zero competition.

    That is, over time less successful companies will go out of business or will merge with or be bought out by the successful ones, leading to a single company having total control of that area of the market.

  9. Dog's Breakfast

    “And they stuffed it up.”

    Bernard, I could almost be convinced by this article that the penny has finally well and truly dropped.

    I’m personally not against privatisation, just give me a system that actually works as the ‘market economists’ are so wont to tell us.

    The problem is in the very system. These things can work, provided they are well regulated, and that regulation has to include regulated profit margins, how much they spend on marketing, no vertical integration (which inherently undermines the market mechanism) and all manner of things. The intrinsic monopolies, like the actual delivery system (the poles and wires) must remain in public hands, preferably a state/federal authority with a legislated goal of delivery of lowest possible cost, without it being gouged by politicians to prop up the level of deficits. Generation should probably fit into that as well, as we aren’t big enough to have multiple players in a billion-dollar industry.

    Unfortunately, modern politics sees the constant cries of de-regulation, and those cries have power as they also come with donations to parties. This system is inherently corruptible, and capitalism is all about corrupting the corruptible.

    There are areas of our economy where this just won’t work, and it has to be made beyond the reach of the day to day pollies to stuff up. Delivery of essential services is the lifeblood of the economy, and that is why I have often lumped together the energy markets (gas and electricity, water, sewerage, health and education and telecommunications as being areas where the neoliberal experiment will always be to the detriment of society, and ultimately to the detriment of the economy.

    This was all foreseeable. Money talked, and money got what it wanted.

    1. Hunt Ian

      There cannot be a system where neo-liberal economics works. Our system goes nowhere near it. Consumers know less than providers about what is sold to them in practically all markets. This inequality of power is compounded in the case of utilities by lack of competition, as Sims points out, but is compounded by the lunatic artificial rules of the NEM. Privatisation will never work where customers cannot take it or leave a purchase, as with all utilities and where inequality of income restricts access, as in education, and urgent needs open people to exploitation, as in health care. Give us nationalisation of the utilities and companies run by people who care for customers. We will not get this under capitalism.

      1. IanG

        Yes, and as the folk in charge get to dominate the executive pay agenda, they get richer and pay themselves more and more, and we know that the richer people in power get the less compassionate or more self centred they get, the less they think of the needs of their consumer / customer other than how to fleece them and hoodwink them even more.

  10. Xoanon

    Neoliberal capitalism is cooked. If only its disciples in Canberra would realise this, and get the **** out of the way.