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Milton Caine

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This Weeks Featured Article

Some thoughts on this week in politics…

Electricity – The Problem

Electricity – The Problem

 Electricity – The Problem

The electricity problem is the rising cost for domestic consumers. There is a lot of concern among low income earners about the ever increasing electricity prices; but before we can resolve the issues we must understand the history of electricity and the problem of the price rises that have occurred.

History: 

The world’s first commercial power station for incandescent electric lighting commenced operation on 12th January 1882, at Edison Electric Light Company, 57 Holburn Viaduct London.

In 1832 Governor Richard Bourke drew attention to the need for a local government body in Sydney that would establish and maintain a street lighting service. In a minute to the Legislative Council he wrote: “The time has arrived at which inhabitants of Sydney may be expected to administer their own convenience and comfort by providing, by means of a body elected among themselves for the repairing, cleansing and lighting the streets…..” 

On the 20th July 1842 the Legislative Council passed a Bill “to declare the town of Sydney to be a city and to incorporate the inhabitants thereof”. In November of the same year the Sydney Municipal Council, the body that was to concern itself with “lighting the streets” – and eventually to set up its own undertaking to generate electricity and supply the city and many suburbs with light heat and power – held its first meeting.

The first occasion on which a public demonstration of an electric light was given in Sydney was on 11th June 1863 when the city was illuminated in honour of the marriage of the Prince of Wales.

http://www.ewh.ieee.org/r10/nsw/subpages/history/history_electricity_syd_county_council.pdf

In 1904 the Municipal of Sydney was using electricity to light a small portion of the city; in 1929 all of the streets of the city and those of 34 suburbs were being lit by the Electricity Undertaking. Beside lighting the streets. the Undertaking was selling electricity direct to 181,000 customers in an area of 155 square miles. It was also supplying electricity in bulk to nine Local Government bodies, which carried out their own reticulation. The aggregate area controlled by these bodies was 616 square miles and the total number of customers they served was 199,536.

In 1935 The Minister for Local Government, The Hon. Eric Spooner referring to the inherent weakness in the existing situation said, “The Electricity Undertaking is at the present time on a very dangerous foundation and those who understand the position fear the disintegration of the Undertaking within a few years and a huge waste of capital which is bound to result.” 

The Bill to establish the Sydney County Council was passed by the Legislative Council on the 9th April 1935 and was assented to by his Excellency the Governor on April 11th. The name of the Act was The Gas and Electricity Act 1935. (NSW Government Gazette, 20 December 1935, Vol.4,p.4874 and 12 July 1935, Vol. 3,p,2799)

In 1950 the Electricity Commission of New South Wales was established by the Electricity Commission Act, 1950 (Act No 22,1950). The new Commission was to do all things necessary to maintain and supply electricity to the customers both private and public.

On 1st January 1992 the Electricity Commission of NSW changed trading name to Pacific Power and this was divided into 6 business units; and by 1994 a new subsidiary was created and named PacificGrid Pty Ltd to manage the transmission lines; which eventually became Transgrid.

The rest of the details can be read in the attached link above.

Reflection on the History:

As I read the history of the supply of electricity to NSW I find that there were many good decisions made up until the 1950’s for at that time the supply of electricity was wholly government owned; and without an artificial competition regime. Over time there were a series of decisions that established business units within Pacific Power. By the various decisions of the both sides of government and the commission culminated in creating the 6 business units of Pacific Power. This artificial competition became the foundation of the so called competitive billing system that customers began to endure. This was created to deliver competitive pricing, but prices just began rising. The claims of this competition driving down prices were continually made and yet increases in unit cost of electricity exceeded price increase in most other commodities, which demonstrated that the path that was undertaken was not driving down prices. Governments of both persuasions were convinced that greater competition was needed to drive down prices and the business units were then packaged for privatisation; the most recent was the 99 year lease of the 49% of the poles and wires – the transmission of the power. As these changes were taking place the price increases of electricity began rising very sharply. While it is true that many consumers used more volume of kilowatt hours the unit kilowatt hours of electricity prices increased by a whopping 183% while general prices increased by only 64%.

The Reason for the Problem:

The huge increase in staff to man the 6 newly created businesses with other administration costs demonstrate the extent of the fallacy of how these 6 business units would deliver competitive prices.

 

With a 214% increase in managers and a 396% increase in sales staff is it any wonder that electricity prices had to increase a the rare of 183% over the same period that general prices increased by 64%. A graph showing the comparison of prices clearly shows the problem in stark reality to all who care to look at it. Any claim by any government that wants to say that price increases,over time, are reasonable are totally out of touch with reality and dead wrong.

  

While the governments may offer concessions to disadvantages groups (under current circumstances it is imperative that the concessions be increased), these concessions are only ban-ads covering a problem that is getting worse and worse every day. Today we are seeing the customers are needing to phone their suppliers and to get better prices – this in my mind is reducing customers to beggars and that is appalling in my view. This is unacceptable and causes more difficulties to those who are frail aged, with communication difficulties, and those with poor English skills.

Solving the Problem:

Solving the problem is academically simple and that is to bring all the electricity assets and sales components back under government control since it is a natural monopoly, however in the real world the unwinding of this web is not an easy path. The way we produce electricity must also be carefully managed. There is an expectation that we use the least polluting means of the generation of electricity and while there are many businesses attempting to obtain lucrative contracts to supply electricity via variable methods of generation we have not actually done a full comparative study of the best and least polluting options of supply while having the essential base supply guaranteed at all times.

The use of solar, wind, wave etc. must be included in a full study of all sources of potential electricity production from a “dirt to dirt” principle of examination.The dirt to dirt principle is a comparison tool simply to discover the full cost of a plant and its produced products. To create the generating system the whole plant must be established by obtaining raw materials that must be manufactured to form the plant – (the solar panels, generators, turbines, and other hardware) and such a plant will have a finite life expectancy with some assess-able maintenance costs before the plant is discarded and recycled to the extent that can be foreseen. All these costs whether they be economical, environmental or any other discover-able costs must be compared and contrasted and then when this is done the final decision must be with the consent of the people of the democratic society. From my view prior to the process I would suspect that a mixture of a number of types of generation would be most suitable for the vast Australian continent for the range of demands and weather conditions would make it necessary for different applications in different places.  

 

The call for action:

A full comparison of all possible generation systems must be conducted and in the mean time a full examination of the legal impediments to unravel the privatisation of the electricity market must commence. While this problem is being assessed we must clearly support the most disadvantaged with government assistance because the problem of excessively high prices was caused by poor planning and understanding of the price increases that were foreseeable by government if they looked in the right places. The “beggar system” must be addressed as it is unacceptable to reduce the nation to a people who must beg for reasonable pricing of their electricity.

It has been brought to my attention that a two year contract price of the supply of domestic electricity by a consumer has a quarterly bill of $116.00 for a retired couple. This price is considered very reasonable by me. The kilowatt unit price is unclear at this time but sufficient to say; if this price is available to one consumer it should be available to all consumers in NSW. The Christian Democratic Party will fight to have the best and cheapest price available to all domestic consumers in each and every State. Inability to negotiate a special price ought not to be an impediment to obtaining cheaper electricity prices. We will fight for value and equity in electricity prices!!!    

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