A South Australian Council of Social Service (SACOSS) submission to the Legislative Council Select Committee on the Privatisation of Public Services in South Australia has found that the privatisation of the South Australian electricity network increased inequality.
“This new analysis draws on the internationally famous work of economist Thomas Piketty on the drivers of inequality," said SACOSS CEO Ross Womersley. "While the data is not perfect, it is still pretty clear that the privatisation of the electricity network in SA has contributed to increased inequality."
“And while it is concerning that the privatisation of the South Australian electricity network looks to have increased inequality, it is even more alarming that the energy regulator is setting rates of return on capital at levels which will continue increasing inequality in years to come.”
“It is also a major problem that, by law, the Australian Energy Regulator is not allowed to consider the impact of its decisions on economic inequality. With this in mind we really need legislative reform to ensure that the regulator takes account of social impact embedded in its determinations,” he stated.
The SACOSS submission puts 3 propositions about when privatisation will increase inequality, two of which apply to the electricity network:
- The rate of return to the owners of the network is greater than the growth rate of the economy, which (as per the analysis of economist Thomas Piketty) will lead to increased inequality.
- This is the case based on both the regulated rate of return and the final return to shareholders.
- Because of the regressive consumer expenditure patterns,* in theory, new capital investments, and in practice schemes like the Residential Energy Productivity Scheme, are more equitably funded from the tax base (i.e. by government expenditure) rather than by the electricity companies where costs are passed on to consumers.
The SACOSS submission can be accessed here. SACOSS will appear before the Committee today (Monday 16 August at 2.40pm) to provide additional evidence on privatisation.
*Electricity accounts for proportionately more of the household budget of low income households than for those on higher incomes