National Electricity Market A Success, July 2003
Tue 27 Jul 2004
09/07/2003
Australian Financial Review
There is no doubt that the Australian national electricity market could be improved, and is being gradually improved through the co-operation of all market participants generators, retailers, and transmission and distribution network service providers.
But this reality seems far removed from the assessment provided by Sharon Beder ("For sale: the power of the people", AFR Review, July 4).
Not letting the facts get in the way of an alarmist story may help sell books, but is not a constructive contribution to the evaluation of the market.
Yes, some attempts around the world at deregulation of electricity have proved disastrous, but through a combination of luck and good judgement the national electricity market has so far succeeded where others have failed, even though much still needs to be done.
In contrast to the entirely negative tone of Beder, a few facts might be helpful, such as the private investment of billions of dollars in new generation capacity in the market (e.g., in Queensland).
Critics are keen to point to price spikes in the wholesale market, without mentioning the hedging facilities which enable market participants to mitigate if not entirely remove the risk of such spikes.
The absence of such facilities was a significant factor in the failure of the Californian market.
It would also be interesting to compare average spot wholesale market prices in the electricity market with the prices paid to generators before deregulation.
And the equity investors in Loy Yang must wonder where they should go to obtain the government bail-outs which Beder claims are available to cover their losses of over $1 billion.
Complaining of generators trying to maximise profits while failing to point out that few, if any, are able to earn excessive returns on investment hardly conveys the full story.
Improvements in the electricity market require that attention be given to numerous details such as streamlining procedures for approval of regulated transmission investments.
Such progress requires hard work from all involved which is not quite as sexy or dramatic as sweeping alarmist generalisations but is far more productive.
J. K. Winsen, Belmont North, NSW.