ETU rejects recommendations for public infrastructure projects

The Productivity Commission’s report into public infrastructure, released on 14 July, has found that there is an urgent need to comprehensively overhaul processes for assessing and developing public infrastructure projects.

But according to the Electrical Trades Union (ETU), the report has failed to grasp the features of the energy industry that make it different to other infrastructure types such as roads, public transport and ports. The union said the mature, competitive nature of the electricity generation market, along with extensive regulations and legal restrictions specific to the poles and wires distribution and transmission sector, means challenges facing productivity and competition are vastly different to other infrastructure types.

In response to recommendations for further electricity sector privatisation, the ETU noted that the rules that dictate what investment costs are recoverable from consumers make no distinction between public or private ownership, with ownership not considered by the Australian Energy Regulator. With approximately 70% of the capital cost of investment in transmission and distribution infrastructure recoverable via the allowable pass on cost to consumers, the ETU said the only difference between public or private ownership would be whether revenue earned went into the pockets of overseas owners.

ETU National Secretary Allen Hicks rejected recommendations to privatise public assets, saying it “is not in the long-term economic interest of governments or consumers and will not deliver increases in productivity”.

“On the contrary, there is strong evidence that the retention of public infrastructure in public hands - particularly energy assets - is critical,” he added.

Hicks said analysis produced earlier this year by economist Professor John Quiggin found that the Queensland Government had gained approximately $15 billion by not going through with a proposal to privatise energy assets in 1996.

“His research found that not only had there been substantial capital gains, but that a steady flow of dividend income and tax-equivalent payments meant that a sale would have left the Queensland public around $15 billion worse off,” Hicks said.

The union acknowledged other elements of the report, saying it accepted the importance of productivity growth as a driving factor for lifting the economy, creating jobs and increasing the material living standards of workers.

“We also welcome the suggestion that privatisations should only proceed following a scoping study that proves a net benefit to the community,” Hicks said.

“Based on the experiences of electricity sector privatisations in Victoria and South Australia, where prices have increased and maintenance standards have dropped, there is clear evidence that previous sales have not delivered such a benefit to consumers.”

Hicks also hit out at ideological elements of the recommendations, including the push for a national expansion of the Victorian Code of Practice for the Building and Construction Industry along with the reintroduction of the Australian Building and Construction Commission (ABCC).

“If you move past the rhetoric and look at the facts, the Victorian Building Code has led to decreases in occupational health and safety standards, increased industrial disputes, lengthy and expensive court proceedings, and an added cost burden to all parties involved,” he said.

“In our experience, this model has been extremely difficult and costly to work with, in a large part because it is predicated on a foundation of adversarial behaviour, rather than interest-based negotiation.

“The federal government is using productivity growth as a screen to reintroduce the ABCC for ideological reasons that are far removed from productivity.

“This is confirmed in the Productivity Commission report that shows the degree to which the ABCC improved productivity could not be shown in any statistically meaningful manner.”

The report can be viewed at http://www.pc.gov.au/projects/inquiry/infrastructure/report.