The real cause of electricity price rises in NSW

As the political debate around rising power prices and the carbon tax heats up, there is a renewed debate around the privatisation of electricity distribution in New South Wales. With power prices sure to be a hot topic in the next federal election, it’s worth taking a broader look at the history behind the deregulation of Australian energy. The mid-nineties saw State Government’s agree to privatise swaths of public infrastructure, including electricity, under pressure from the then Howard Government. In each state, the generation, transmission, distribution and retail supply of electricity were separated and corporatised. Barriers to interstate trade were removed and open access to electricity networks established. In preparation for privatisation, a pricing formula was set for the newly formed transmission and distribution corporations because they are “natural monopolies” and not subject to competition. Governments traditionally charged electricity rates that covered the actual costs of transmission and distribution and were accountable to the electorate for any dividends they squeezed out of the system.