Letter writers are perplexed about the sale of ACTEW. They wonder at the proposition put by Chief Minister Kate Carnell that if Actew is kept in Government hands its value will decrease sharply and ACT taxpayers will lose.
Surely, they argue, smart private operators would equally aware that Actew’s value is falling, so why should they pay over-value?
Other letter writers have wondered, if the private sector can make a go of it and get the income, why can’t the public sector do it and share the income among all ratepayers?
What about security of supply, service and safety?
Why are we selling the family silver to pay debt? And anyway what has future public-service superannuation got to do with Actew?
In deciding whether selling Actew is a Good Thing, ideological blinkers have to be removed. Some things are done better by the public sector than the private sector. Others are done better by the private sector.
The public sector has done well in areas of natural monopolies and providing mass services in health, education and welfare. The private sector has done better in selling things.
In the past 20 years some of the big natural monopolies have been broken down by technology and a willingness by government to break down some of the natural monopolies. Parcel delivery, telecommunications are good examples, and electricity is about to join them.
The big trouble with keeping Actew in public ownership is what has happened elsewhere. The electricity industry has been split into generation, transmission and sale. Moreover, each state and territory can no longer shut out other generators and transmitters from their grids. The states and territories have signed agreements to open the grid. Some states have privatised others have corporatised. But customers can buy their electricity from anywhere.
It means Actew has to compete with other transmitters and sellers for business in the ACT. It no longer has a monopoly protected by law to be the only supplier of electricity to businesses, and soon residences, in the ACT. Actew does not even generate electricity, so it is behind the eightball straight away. Further, no matter what initial loyalty will lie with Actew, eventually people will go with the cheapest. In the electricity business that will often be the larger operators who can get the benefits of economy of scale.
A stand-alone government-owned company would have a grim future because it does not even generate electricity; cannot buy out-of-ACT electricity companies; and cannot get economies of scale by buying electricity in bulk for millions of users.
A private sector owner, however, would not be in the same bind — sitting waiting for its customers to be picked off. Rather it would join another electricity-generating company to form a profitable whole.
Actew’s value to a private sector operator (especially one in an adjacent area) is far higher than to the Government. It is a bit like a farmer being willing to pay far more for 100 hectares of land next to his own than for 100 hectares miles away. At present several private sector companies are sniffing about. Actew presents them with good value. And selling presents good value to the ACT taxpayer. We get a good bankable asset now rather than keeping something we can no longer operate in a way that will provide a bigger return than putting the money in the bank or paying off debt.
That could be for superannuation, but the super is a red herring, nothing to do with Actew, except it will provide an excuse for the independents to support a sale if they are faced with overwhelming financial reasons for doing so but need an emotional peg upon which to justify their decision to the public.
In short the competition agreements signed by all governments make Actew an asset that will increase with a private owner and decrease in public hands.
From a ratepayers’ view we are better selling our 100 hectares to the big farmer next door and putting the money in the bank because we will get a higher return. And so will the farmer next door.
And as to security of supply, service and safety, I haven’t noticed any problem with private-sector gas.
The Government’s role is to put in some tough regulation (which is allowed under the competition agreement) to ensure the competing private suppliers meet community standards — like gas suppliers.
The Government’s role is to put in some tough regulation to ensure the competing pri-vate suppliers meet communi-ty standards — like gas suppli-ers. Right now there are no regulations on Actew to sup-ply promptly and safely, and no means of enforcing prompt and safe supply because the Government has the conflict-ing roles of both regulator and supplier. Or the ACT can behave like panglossian investors every-where who fail to adapt to changed circumstances. It (meaning us) will lose.