Keeping the lid on household costs

The proposed long-term lease of 49 per cent of the State’s electricity network businesses will be subject to strict conditions, including a guarantee on network prices and reliability for NSW households, NSW Premier Mike Baird said today.

Mr Baird said conditions to be laid out by the NSW Government include:

• All net proceeds will be invested in new productive infrastructure, through the Restart NSW Fund;
• Electricity network prices will be discounted by 1 per cent off the forecast regulated prices until 2019;
• Job protections consistent with previous transactions;
• The transaction will have no adverse impact on electricity reliability; and
• The regional presence of the network businesses will be maintained.

“I am committed to do all I can to keep downward pressure on electricity prices,” Mr Baird said.

“Not only will this transaction allow for a once-in-a-generation investment in critical infrastructure, but it’s the best thing we can do to keep downward pressure on power prices for NSW households and businesses.”

An independent analysis by Ernst & Young, commissioned by NSW Treasury, has found network prices for typical residential customers in Victoria and South Australia have fallen in real terms since privatisation in the 1990s.

By contrast, network prices in NSW and Queensland have increased in real terms by well over 100 per cent in the same period.

“I am confident that following this transaction electricity prices will be lower for customers over time than would be the case if government retained 100 per cent ownership.

“The electricity network businesses will remain tightly regulated. Prices will be subject to regulation by the Australian Energy Regulator and standards such as reliability and safety, which are enshrined in legislation, will continue to be enforced through licences.

“These businesses will always require skilled staff to build, maintain and operate the NSW electricity networks, but to provide additional assurance, the NSW Government will put in place job protections consistent with previous transactions and maintain the regional presence of the electricity networks.

“Employees and regional communities can be confident about their future.”

Mr Baird said the NSW Government will appoint advisers and commence a Scoping Study to determine the best structure of the transaction in order to maximise the return for NSW taxpayers. The transaction will proceed only if the NSW Government win a mandate at the 2015 election, and if it is in the best interests of taxpayers.

The NSW Government proposes to lease 49 per cent of the total network sector while leaving Essential Energy in public hands. The Scoping Study will determine the proportion to be leased of Ausgrid and Endeavour Energy, which operate the electricity distribution networks, and TransGrid which operates the high voltage transmission network.

The remaining 51 per cent will be held in the NSW Future Fund - an independently governed statutory asset fund with the potential to fund future liabilities of the State, including public sector superannuation, and have responsibility to protect the value of assets held by the State.

The Scoping Study will determine a retention value and a transaction would also only proceed provided the price exceeds retention value.

The earliest a potential transaction program could be fully completed is in 2016.