Costa’s catastrophe

A catastrophe like the one that befell the NSW Labor Party at the weekend can scarcely be attributed to a single individual, and indeed there were many contributors. But one person stands out above all others as deserving of credit or criticism – former Treasurer Michael Costa. Having risen through the trade union movement, he made his bones in Parliament as a union-busting Transport Minister. Appointed by the utterly hopeless Morris Iemma as Treasurer, he persuaded Iemma to privatise the electricity industry, in direct contradiction of the platform on which Labor had campaigned, and the previous repudiation of privatisation by NSW voters.

As the massive unpopularity of similar moves in Queensland had shown, Labor was doomed unless it repudiated Costa, Iemma and privatisation. The party managed the first two, but, not unfortunately the third.

In keeping with his entire career, Costa quit the day he became eligible for a Parliamentary pension, and immediately emerged in his true colours as an open enemy of the labour movement and the Labor Party.

As I said at the outset, it wouldn’t be possible for one person to do this alone. While I find it hard to attribute any real agency to Iemma, he and/or the Sussex street machine that nominated him to the Premiership could have stopped Costa if they wanted to.

138 thoughts on “Costa’s catastrophe

  1. And add these higher costs (above) to this loss:

    privatisation of the South Australian electricity industry has reduced the net worth of the public sector … the interest savings on the sale price will fall consistently short of the earnings foregone through privatisation. This is consistent with most Australian experience of privatisation (Quiggin, 2001).

  2. “Yes we’re two years out, but the Gillard government already looks doomed.”

    The Gillard government looks doomed? Really? To whom?

    One could only come to this conclusion if you read nothing but the Murdoch press.

  3. thats only the consumption charge jak does no include the massive network charges.

    Ps btw fwiw I was however talking about price changes not absolute prices

    Pps there are a whole heap of factors in the nem that affect the consumption charge

    Pps sa consumption charges have always been slightly higher due to location/specific factors in their market etc

    Ppps nsw/qld network charges are going through the roof and they will also be hit hard by the carbon tax

  4. “Yes we’re two years out, but the Gillard government already looks doomed.”

    I don’t think so unless Abbott gets booted and replaced with someone better. I also think the climate change stuff will go through and no-one will notice anything serious, and Abbott will be all the worse for it. That will be enough to swing the still quite tight battle to Labor. This is why one reason why NSW Labor was in for so long incidentally — because the opposition looked even worse. Of course two woeful parties is bad for everybody.

    “mainstream Australia just wants a fiscally responsible government, socially conservative government”

    Actually, I would think that both Labor and the Libs are more socially conservative than the general population (far more so in fact).

  5. Andrew :
    …peripheral issues like mining taxes and now carbon taxes. Eyes off the ball – ball dropped.

    Hmm… I would have thought that (a) a super profits tax on mining companies was both good labor economic policy and a way of dealing with the real issue of the adverse effects on other parts of the economy by the mining boom; and (b) a carbon tax/ETS to reduce GHG emissions is probably the most important issue a true, socially aware party should tackle – hardly peripheral.

  6. thats only the consumption charge jak does no include the massive network charges.

    Its the actual price paid by consumers. It includes charges as past on to the consumers.

    we have a national electricity market where electricity privatisation is a no brainer.

    Not so much.

    Gross stupidity for govts to be generating power in competiton with an abundance of private firms doing. Flog them off and putting the money and savings into other far more deserving and essential areas that have been neglected and are hurting our economy.

    Or keep them an their revenue, and and use it provide even more services.

    Of great benefit to vic and sa. The other states are paying for their failure to get it through.

    The opposite is the case supported by the evidence.

  7. @jakerman

    JQ’s finding on the South Australian electricity privatization, that public net worth declined as a result of the sale, is something that has been found again and again around the world. In the UK, the privatizers argued that it was a good thing if the assets were sold cheaply. The argument was that the government net worth declining as a result was a good thing. It meant for one that it would be so much harder for government to ever privatize anything again. Also, impoverishing government is the objective of the small government crowd. An impoverished government is unable to do anything much which is exactly the kind of government they love.

  8. thats only the consumption charge jak does no include the massive network charges.

    Its the actual price paid by consumers. It includes charges as past on to the consumers. It also includes the profits gouged by the profit driven olligarchies controlling our essentail services.

  9. I think there is a parallel to refugee policy and neoconservatism, with privatisation and neoliberalism. There could be some rational half way point, but one side won’t compromise.
    Keating and Costa and the Tory right, are the pol-economic equivalent to Alan Jones and Abbott and Dick Cheney in a slightly different context, as to humanitarian policy.
    One objective is desired and it doesn’t matter who is injured as collateral damage on the way (thinking of the nineteen yo lad that suicided in a fit of depression a couple of days ago at Curtin). They are so infatuated with greed and with the Nietzchean and Wagnerian elements of “creative destruction”.

  10. don’t think so jak, network charges are not paid by consumers per kwh

    the govt regulates the monopoly part of the business so they can’t do that unless the govt allows it

    Generation is a competitive market so no issue there and no need for govt involvement

    Haven’t read the report, hope its not ideologically driven.

    I’m in vic and know we got a massive price for our assets here, would be interesting to see what a study here would find.

    Hope it was not a strategic decision not to do the study on vic.

  11. don’t think so jak, network charges are not paid by consumers per kwh

    If the network charges are not paid ultimately by revenue passed along the chain from consumer, then how are they paid?

  12. jakerman :Nick see: http://www.switchwise.com.au/
    Adelaide $/kWh = 0.28Melbourne $/kWh = 0.24Sydney $/kWh = 0.23Brisbane $/kWh = 0.22

    The prices you quote do not correspond to the costing as shown in my last bill.
    a) variable consumptiion costs (to the consumer) consist of a step function. Up to x kwh/day unit price is 17.35 cents. For kwh/day > x the unit price is higher ( I don’t know how high because I am an energy wise customer!)
    c) Off peak: 7.600 cents per kwh.
    d) SAC (supply charge) 43 cents per day.
    The above figures are before GST.

    The switchwise site is of no use to me for switching because there are too many hidden assumptions in the program (eg it asks the user to give the energy consumption from the last bill, after asking for the billing interval, and then gives an estimate of the estimated saving range per annum. This is bound to be wrong for many people.)

    I’ve got a story to tell about AGL and its cost accountants and its marketing people. The left hand doesn’t know what the right hand is doing. The pomo lot of managers head their brochure on ‘explaining costs’ with something like ‘you need to understand’. Well it can’t be understood. I hope this management lot goes out with the NSW Labor government.

  13. @Banned One
    ha ha – I really cant help laughing at Profs comment to banned one….(aka Tony G). I dont know what my friend Paul Walter did to make Prof accept his offer of a beer but ban is post…not my dear Paul!

  14. @nick
    Nick says “we have a national electricity market where electricity privatisation is a no brainer.”

    er ahem no Nick – we own the poles and the wires…and what we have is national energy demand on a pathetic grid that cant handle and handful of extra trains without bowing it, that cant handle what solar energy was generating and putting back into it, and that wont handle a couple of dodgy private outfits trying to rake in as much as they can in a short space of time using the same inadequate old grid.

    Jeez zome people can be stupid. Im beginning to hate the sounds of the words “economic reform”….in this country. “Economic reform” means “flog it off”.

    Oh OK , I give up. Flog it all off and whinge later that it doesnt work. The only thing wrong with solar is not that it doesnt generate enough energy – its that teh bastards in the private electricity markets dont want it because they dont own it and they cant control it – hence these idiot electricity companies would rather deliver us all to nuclear (where 3 decades of radioactive waste can be stored under their roof instead of, like solar on top our or roofs).

    Some people just dont get it.

  15. Current electricity charges for SA from my supplier as at 10 Feb. 2011 notifying me of their rates increase.
    [They seem to be charging the same as other suppliers as far as my research could discover, very little difference one way or the other.]

    First 3 kW [rounded] @ 24.321 cents each

    Next 7 kW [rounded] @ 27.379 cents each

    Summer peak @ 29.150 cents

    Winter peak @ 25.718 cents

    Sevice charge 59.609 cents per day.

    The increase amounts to [according to the company] $3.09 per residential household per week.

    Make of that what you will.

    Incidentally I’m getting solar panels within a month and estimate conservatively that I will save about $800 per year which will pay for the panels within 5 years and I have a warranty for 10 years [I think, as soon as I typed that it occurred to me that it may be 20 years].

  16. Does anyone want to take up my idea of a solar pergola – thats for all those people who are happy to spend money on pergolas but wont stomach solar?

    Connect them all up (house to house) in a sea of hot flat backyards like we have in the Australian suburbs and this could turn into something big?

    Any takers? The electricity companies just arent interested. They have us connected to electricity from the grid and paying through the nose. So does JB hi fi. So does LG. So does Westinghouse. They would rather keep us there and addicted to electricity, where we all are now and if we object strongly to prices they might give us a nuclear power plant.

    All hail the mighty electric power companies. They have us hung out to dry and begging for something, anything and they will offer us nuclear, which it just so happens they can accommodate (under their roof).

    Ask for solar and we will all hear endless pro corporation trolls telling us why its not feasible…lies, lies lies.

  17. who’s we alice ?

    In vic/sa everything, including poles and wires is privately owned and run and regulated by the govts australian energy regulator.

    Ur in nsw I take it ? Can understand ur frustration, should have been privatised years ago. Nsw labor botched things and doubt ofarell will be any better ….

  18. Nick the cost comparison I gave were based on the total cost p.a. (including supply charge) divided by total energy kWh/year. This includes fixed charges.

    Ernestine, this is I suspect why my figures it won’t match your unit price, its factoring total costs not just the unit price.

  19. He wasn’t happy with my repair plan for Costa, Alice. Maybe he thought I wanted to use these implements on Costa in a different, less repair minded way than I obvious meant and thought I was getting a bit close to incitement.
    Same with Abbott, who I might have mentioned.
    I’d still shout him a beer, even tho he barracks for the Eagles, the thread starter was good.

  20. Who on earth are the eagles?? Never heard of them!

    I barrack for the Tartan Army myself, due to their time honoured committment to hoolganism and drunk and disorderly conduct.

    As for Costa, there is a fix – he is surely beyond self correction – its odd but he really reminds me of Keith Windschuttle – I cant put my finger on it – a sort of vacuous loud mouthed publicity seeking type – but its all about him.

    I suggest we put him on the London underground (if it still works and hasnt been economically reformed) with the Tartan army on the way home from a game.

  21. @nick
    Nick – you are obviously in Adelaide. Yes it surely has the same NSW problems with the grid and population….Im sure (not). Glad privatisation works well for you in the outback.

  22. Oh and Nick – wasnt the lack of infrastructure and lack of maintenance (ie cutting back) around poles and wires in VIc responsible partly responsible for the busfires?. You think we forget. I dont. They dont.

  23. Are you descended from the barbarian hordes sweeping down from the north, wreaking vengeance on the ancestors of the Longshanks?
    the Eagles are an Aussie rules footy team from Adelaide the prof reckoned he barracks for, and my team’s most serious rival in SA aussie rules, the last decade.
    I dare not answer as to what I think of your Costa idea. I think it would be cruel and unusual treatment- for the Tartan Army.
    Have had the chance to checkoput Uncle Milton’s suggestion,above, as to”Iemma’s dilemma”, on Utube?.

  24. Sorry, typo. Alice, I meant, did you get the chance to check out “Iemma’s Dilemma”, if you hadn’t seen it before.

  25. jakerman :Nick the cost comparison I gave were based on the total cost p.a. (including supply charge) divided by total energy kWh/year. This includes fixed charges.
    Ernestine, this is I suspect why my figures it won’t match your unit price, its factoring total costs not just the unit price.

    I don’t think so. What are the parameter values in your calculation?

  26. nick :who’s we alice ?
    In vic/sa everything, including poles and wires is privately owned and run and regulated by the govts australian energy regulator.
    Ur in nsw I take it ? Can understand ur frustration, should have been privatised years ago. Nsw labor botched things and doubt ofarell will be any better ….

    Corporatised managerialist-pomo-public sector and corporatist managerialist-promo-private sector are the same problem. The privatisation fixation is part of the economic rationalist (naive market economics)-corporatist-managerialist-pomo non-sense, which brings me back to the topic of this thread.

  27. Alice ,

    I’m in melbourne but more generally have an intimate knowledge of the industry. No other state has the problems nsw has.

    In relation to black saturday no that is not a fair characterisation.

  28. @Ernestine Gross
    You mean which is why NSW Labor lost the election Ernestine –

    “Corporatised managerialist-pomo-public sector and corporatist managerialist-promo-private sector are the same problem. The privatisation fixation is part of the economic rationalist (naive market economics)-corporatist-managerialist-pomo non-sense”

    I think that just means tradtional labor voters felt sold out by labor BIG TIME. so they voted to destroy (I mean destroy) the NSW Labor party and they did (they had it coming). I dont know if Barry will be any better but you back a horse who hasnt had a go when the horse you may have been riding changes direction dont you?

    The majority dont like these privatisations of essential infrastructures. Call it reform, call it vital, call it what you will…the people dont like it and frankly I beleive the common sense of the people is more intelligent than our elected respresentatives.

    I can just imagine what it was like in NSW labor. The minister who can rake in the most donations for Eddie Obeid wins all the perks of office and if there arent any perks he will invent a new committee on higher pay for you. So we pay them their salary apparently not to run the state and deliver useful infrastructure but to hawk and crawl on the husting trails for donations for their party.

    You cant do two jobs 1. run your portfolio effectively 2. run the donation trail for your party.

    Frankly that sucks. Oh I just cant stand the sight of any of them and if another one pops up (PJK, Obeid, Sartor etc) – I really will say something that the Prof will ban.

    I dont want to pay them. They dont damn well deserve it and we dont have to wonder why they have been splurging on their revolting TV ads to solicit votes. On our money.

    Ernestine – re my fixed costs for the solar pergola…Im not really one for numbers Ernestine. Thats your area of expertise and Profs, but if we leave it to private electricity companies – they would kill solar as fast as they can. They have killed solar before in other parts of the world. Its not just about costs. Its about the incentives and degree of control exercised by existing energy suppliers. That unfortunately can be contrary to our best interests.

    I still think the solar pergola is a winner in Oz!

  29. Ernetine from the switch site:

    The pricing information shown in the table below reflects the supplier’s current standard rates excluding any of the discounts or bonuses shown above. If you are comparing these rates to those on the back of your electricity and gas bills please ensure you use the rates in the column with no GST added. Your bill shows rates excluding GST – GST is added on the front of the bill.

    Some suppliers also include discounts in the unit prices displayed on the back of the bill whilst others calculate discounts separately and show them on the front of the bill. This is why comparing only unit prices between suppliers can be misleading and why we do all the calculations for you in the yearly cost figure shown above.

    The pricing applicable to your property is based upon the information you have provided to us and assumptions about your distribution region, meter type and meter configuration. If your new energy retailer subsequently determines that this information is incorrect or incomplete, they will advise you of any changes to your energy plan, and of your options.

  30. @nick

    You say you have intimate knowledge of the industry.

    Have you noticed:

    A pricing structure for electricity (and water and gas) which consists of a fixed price (supply charge) and a unit price (no problem with a step function) does not provide appropriate price signals to consumers for environmental matters such as ghg emission reduction and water savings because those who save on resources (and hence negative externalities) pay a higher fixed cost, averaged over unit consumption. The total network fixed costs should be spread as a function of unit consumption of electricity (and water and gas).

    I had a look at the financials of Envestra and found that retail consumers’ (households) contribution to profits is disproportionately high. I am not surprised.

    Where is the regulator?
    Where is private enterprise to set appropriate price signals?

    Professor Garnaut made an apt comment today: ‘We should be less tolerant of … bullshit’. The following catch phrases came to mind: ‘efficiency gains’, ‘dynamic efficiency’, key performance indicators, transparency and accountability, moving forward, …. ,best practice, flexibility, ……, privatisation, debt ratings ….and this brings me back to the topic.

    What do you say?

  31. Usage is base on mean for 3 bed house with 3 people. Cost is bases on plans for the CBD post codes.

  32. @jakerman

    Text does not help here. One needs to have parameter values (ie numbers). I take it your numbers in your post #1, page 2, are not reproducable.

  33. Pr Q said:

    As I said at the outset, it wouldn’t be possible for one person to do this alone. While I find it hard to attribute any real agency to Iemma, he and/or the Sussex street machine that nominated him to the Premiership could have stopped Costa if they wanted to.

    I would not be too hard on the shadowy “Sussex Street” push. John Robertson (Unions Australia) did much good work to defeat Work Choices and block the privatisation push from Egan, Costa & Roozendaal What a gruesome trio picked to run the finances one Australia’s second largest company.

    Surely substantial debit should go to Eddie Obeid, the “prominent businessman” behind so much of NSW ALP’s branch-stacking, faction-fighting and patronage-distributing. Frank Sator does a good number on him in today’s SMH.

    A dishonorable mention to Graeme Richardson, whose initial worthy-enough Machiavellian persona rapidly degenerated into a politics-as-usual power technician. Too much time spent rubbing shoulders with Rivkin, Packer, Jones, Laws & Singo et al.

    But the bogey prize goes to the majority of the citizens of Sydney who were happy to vote for, or at least put up with, this Mob for 16 straight years. “Sin-dney” was born with Original Sin and can never really erase the stain of its origins. The rackets change, but the siren song remains the same.

    They got what was coming to them, good & hard.

  34. @jakerman

    Here we are. Thank you for confirming that the switchsite is based on a lot of assumptions. As such this web-site is likely to mislead a lot of users. It is as useless as the School web-site for ‘consumer choice’ purposes.

  35. Ernestine:

    Text does not help here. One needs to have parameter values (ie numbers). I take it your numbers in your post #1, page 2, are not reproducable.

    Jakerman’s results are reproducible. The required parameters are bolded.

    Postcode: 2000 for NSW, 3000 for Vic, etc.

    Are you moving into this property? Yes

    What would you like to compare? Electricity only

    Would you like us to estimate how much energy you use? Yes

    How many people live in your home? 3

    How many bedrooms in your home? 3

    What type of property is it? House

    Show me results for: All plans

    Then, on the reults page, divide “est. cost p.a.” by “peak usage”.

  36. @SJ

    You are not reproducing the price data given by jakerman @1, page 2 by an independent method (‘reproducable’), using actual data. You are providing one hypothetical example of cost estimates, using the site switchsite.

  37. Here are my results from applying jakerman’s method.

    Adelaide:

    Cost p.a. – $2281
    Usage p.a. – 8072 kWh
    Unit cost – $0.283/kWh

    Melbourne:

    Cost p.a. – $1864
    Usage p.a. – 7819 kWh
    Unit cost – $0.238/kWh

    Sydney:

    Cost p.a. – $2291
    Usage p.a. – 9789 kWh
    Unit cost – $0.234/kWh

    Brisbane:

    Cost p.a. – $2263
    Usage p.a. – 10137 kWh
    Unit cost – $0.223/kWh

  38. Ernestine, you’re fudging the definition of “reproducuble”. I repeated jakerman’s experiment, and got the same results. That’s what “reproducible” means.

    To get any further, you are going to have to point out what’s wrong with the way switchwise does its estimates, or find some conflicting data.

  39. Brilliant take-down of the NSW ALP “machine” power without glory by Costello in yesterday’s SMH.

    Money quotes:

    NSW Labor made Parliament look like the household in TV reality show Big Brother. Over 16 years it delivered a whole generation of misfits and unworthies into positions as staffers, into Parliament, and eventually into ministerial office.

    One former minister in the NSW government went to prison for under-age sex, one resigned after being filmed visiting a gay sex club, one resigned after visiting adult websites, and one resigned after some crude party antics at Parliament House.

    As the public looked on with horror, real reality provided a set of contestants more vulgar than anything the TV networks could dream up. For all its power and influence deciding who could and who could not enter Parliament, the NSW Labor machine never bothered to find somebody who could administer a government or run a budget. That appeared to be the least of their concerns.

    Costello’s scathing articles are a treat and stand head-and-shoulders above the ocean of Left-liberal rice pudding served up daily by most Fairfax metros. And his reputation as a v.capable Treasurer continues to grow in luminescence given the appalling debt traps other less prudent Treasury’s have fallen into, right round the world.

    What stand’s out is Costello’s essential decency as a human being, a loyal colleague who never once tried to back-stab his boss and an all-round nice guy. Really, the L/NP should bring back Costello & Turnbull to run their show and restore some dignity to the L/NP before Abbott turns it into a circus.

  40. @Jack Strocchi
    Jack says “What stand’s out is Costello’s essential decency as a human being”

    No Jack it doesnt.

    Costello is best remembered for his contributions to the despised workchoices and of course Iraq. His brother, on the other hand does stand out for his essential decency as a human being. Costello stands out for being a politician and not the most energetic one we have ever had.

  41. Ernestine Gross :
    @jakerman
    Here we are. Thank you for confirming that the switchsite is based on a lot of assumptions. As such this web-site is likely to mislead a lot of users. It is as useless as the School web-site for ‘consumer choice’ purposes.

    Assumptions that are checked in a feedback loop by providers.

    Please demonstrate how you believe the site will “mislead a lot of users”.

  42. The disgraceful rantings and bickerings continue

    Obeids reply to Sartor

    Click to access fixed-3301430-0001.pdf

    Do any of these cretins realise WE DONT CARE? Obeid says “it was electricity prices” that did it.

    No – it was much more than that. It was the disgusting behaviour of the internal bickerings of an extremely unprofessional lot of elected representatives. It was their singularly “greasy pole” ambitions. It was their private proiteering on publicly funded pays. Obeid freely admits it – he says “no-one was better looked after than you Frank” referring to his pay for 7 or 8 years.

    Well we paid that money. Even in this letter by Obeid, the sense of personal entitlement to high pays and rewards that came with their greasy pole ambitions is frankly, disgustuing and sickening.

    They dont even know, let alone care, that all their faults are on display. Its worse than underbelly and you could make a TV series out of it.

    Click to access fixed-3301430-0001.pdf

  43. SJ and jakerman,

    SJ, you have gone through the trouble of illustrating
    a) jakerman’s unit electricity price data @1,page 2 is false (because you have ‘reproduced’ the his unit price data for different quantities!)
    b) my statement @13, page 2 regarding underlying assumptions in the switchsite program is corroborated.

    So, I am not “fudging” the meaning of reproducable.

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