Consumers pay up for power privatisation

Electricity prices up 170% in Victoria since privatisation

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Consumers are worse off since Australian states decided to privatise their electricity assets, according to think tank, The Australia Institute.

A report released today shows that since Victoria privatised power in the 1990s, electricity prices have outpaced inflation, increasing by 170% compared with an increase of 60% in the consumer price index (CPI).

Falling productivity is being blamed for most of the rise, with power companies employing rising numbers of managers. Since 1997, the number of managers in the electricity sector has jumped a staggering 217%. Yet, at the same time, there has been a much smaller increase in front line staff, with the number of technicians and trades workers increasing by just 28%.

Over the same period, the number of sales workers has risen from 1,000 to 6,000. The report's author, David Richardson said, "It seems remarkable that a sales force of 6,000 people is necessary to sell a product which everyone needs."

During the privatisation of Victoria's network a lot of promises were made that it would deliver lower prices and a more efficient industry. NSW and Queensland are looking at privatising their state's power assets, but it appears unlikely that it will ease cost of living pressures, and much more likely to consign consumers in those states to even higher bills and worse service.

In December last year, AGL Energy (ASX: AGK) announced plans to increase prices by 10.4% from the middle of this year, following price rises by competitors Origin Energy (ASX: ORG), ERM Power (ASX: EPW) and Australian Power and Gas Company (ASX: APK) in response to the introduction of the carbon tax.

According to the Australian Financial Review (AFR), the average household energy bill has risen 80% over the past five years. No wonder complaints over energy bills have soared 43% in NSW in 2012.

Foolish takeaway

Power companies have also been accused by state governments of 'gold plating', or over-spending on their network upgrades. As we wrote in November and December last year, the real issue is that privatisation of energy assets hasn't worked so far, and consumers are bearing the brunt of that mistake.

With its legendary, fully franked 28 cent dividend, Telstra is the darling of Aussie investors. Chances are even if you don't own Telstra shares directly, your superannuation fund does. But with its share price skyrocketing over the past year, is Telstra past its prime? Click here for our brand-new report: Buy, Sell, or Hold Telstra?

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Origin.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »