Power sell-off: bad news for Victorians

By Bronwen Beechey
MELBOURNE — Premier Jeff Kennett's dream of a privatised Victoria moved one step closer to reality on August 7, with the announcement of the sale of the first of Victoria's energy suppliers. United Energy, one of the five electricity distribution companies created from the break-up of the former State Electricity Commission, has been sold to the Power Partnership consortium for $1.8 billion. The other four companies (Solaris, Citipower, Powercor and Eastern Energy) are to be sold off by the end of the year, as is one generator, Yallourn W.
Power Partnership is led by the US-owned Utiliticorp with a 49.9% stake. The other 50.1% is made up of the Australian AMP Society (40.9%) and the NSW Superannuation Board (9.2%). Utiliticorp, based in Kansas City, will operate United Energy.
Bob Green, the company's chairperson-elect, immediately foreshadowed up to 200 job cuts. This drew a heated response from unions, which pointed out that under an enterprise bargaining agreement struck in June, any reduction in the work force can come only by voluntary departure or natural attrition. Unions are anticipating a fight after the agreement expires in December.
"Our position will be that there will be no compulsory redundancies or targeted packages", Gary Main, Victorian branch secretary of the electrical division of the CEPU, told Green Left. "We are insisting that the number of our members not drop below 250, and that vacant positions be filled. We are also concerned about the use of contractors already taking place within United Energy."
Michael Rizzo, Victorian assistant secretary of the Australian Services Union (ASU), said that even before the sale, the company had been attempting to undermine the union by offering workers individual contracts. "This was an obvious attempt to soften up the work force in the lead-up to privatisation."
The ASU was able to put a stop to those tactics, but Rizzo believes that the new management will try to reinstate the practice. "We are also disappointed that two CEOs have been given the chop. We have been told that 20 managers from the US are to be brought in, so not only is United going to be run by a foreign multinational, but local people are being thrown out of jobs."
The ASU is also concerned about the implications that the sell-off has for service and pricing. "We have always opposed privatisation, not just out of concern for our members' jobs, but because our members are consumers as well", Rizzo said.
Jim Ritchie from Public First, a coalition opposed to the privatisation of public utilities, dismissed claims by the government and media that the sale was a "windfall". "What we have here is a pea-and-thimble trick. The treasurer has set a target of $13.56 billion from the sale of electricity. So far he has got $1.5 billion, and he's sold the best bit."
Ritchie dismissed the government's claims that selling off utilities is necessary to remove the state's debt. "All they are doing is shifting the debt from the public to the private sector."
Ritchie also believes that the privatisation will have adverse environmental implications. "Because the private sector is committed to increasing their profits, there is no incentive for them to reduce energy demands, or to move to more cost-effective or sustainable sources."
United Energy supplies power to the south-eastern suburbs and the Mornington Peninsula, areas with large concentrations of low-income earners. The new owners have done little to allay fears that privatisation will lead to higher bills and more disconnections.
Green claimed that Utiliticorp has "very fair payment schedules" for customers having difficulties paying bills, but added, "At the end of the day we're running a business, and we've got to collect from our customers". He also refused to say whether consumers will be required to pay security deposits before power is connected.
"Poor people are hidden in a privatised system", Ritchie said. "In Britain ... poor people were forced to self-disconnect — they had meters installed and then went without power if there was no money for the meter."
While the government has claimed that electricity prices will be reduced by privatisation, others disagree. Age economics writer Kenneth Davidson has claimed that electricity bills could rise by 10%.
"The average wholesale price of electricity of 4.2 cents a kilowatt hour in 1994-95 only covered the cost of production and the interest on the debt attributable to the five generating companies", he commented in the August 12 Age. Davidson pointed out that for the new owners to cover interest rates and still make a profit, the wholesale electricity price would have to rise by 23% to 5.2 cents per kilowatt hour, with the increase being passed on to consumers.
Ritchie is also sceptical about claims that competition will help to keep prices down. "Six energy companies are going to be unsustainable in the long run", he says. "We will end up with an energy monopoly again, except that it will be run by a private firm instead of by the government."
Power Partnership has drawn up plans to sell United's customers a package deal called EnergyOne, a US Utiliticorp package which offers discounts on new electrical equipment, insulation and repair services. There is also talk of teaming up with telecommunication companies such as Optus, or pay TV companies, and using their cables to monitor customers' energy use.
AMP will gain access to half a million potential customers for life insurance, superannuation and housing loans. Organisations like the Consumer Law Centre have expressed concern about these add-on services, claiming they are unnecessary and often disadvantageous to low-income earners.
The Labor opposition has condemned the sale of United Energy, saying that it will stop the sell-offs if elected, but honour binding contracts. An AGB-McNair Age poll taken August 12-14 revealed that 60% of respondents opposed the selling off of power, with 48% of coalition voters also disagreeing.
With the government planning to sell off gas and water next year, there is clearly a need to translate this broad-based opposition to privatisation into a campaign rejecting the user-pays philosophies of both Liberal and Labor.