A sensible privatisation
I was somewhat alarmed to read in today’s Australian that “THE Beattie Government will today put up for sale the state’s two monopoly power retailers – Ergon and Energex – in an attempt to get the best price for the assets before they have to compete with private-sector companies.” While Ergon and Energex are indeed power retailers, their much more important role is running the electricity distribution network, an area where there is no capacity for competition.
The Courier-Mail does a better job, saying that the retail arms will be sold off, though it also fails to say what will be done with distribution. The estimated price of $1 billion is reasonable (maybe a bit optimistic, but I haven’t looked in detail) for the retail businesses, but far below the value of the distribution network.
To the extent that the current electricity model, including retail competition makes sense at all, selling off the retail arms of public distribution monopolies is a good idea. Retail and distribution don’t fit together at all well in this model. In fact, it would make some sense for electricity generators (most of which are publicly owned in Queensland) to buy or establish their own retail outlets. This would enable an efficient matching of risk.