Powering the economy

In this chapter the reform processes relating to the electricity and natural gas markets are examined, beginning with the changes that occurred in the early 1990s and tracking through the first two decades of the new century. In doing so, the influence of international trends are considered, and the various benefits and problems associated with the reform process are discussed in detail. In addition to looking at the structural and ownership changes that occurred during this period, specific attention is given to the manner in which prices for monopoly assets were determined, changes in regulation of electricity pricing for retail customers and the impact of the measures used to promote renewable energy. Related to these various reforms has been the problems that have arisen from the need to ensure security of supply. Additional attention, therefore, is given to an examination of these issues, including the pros and cons of establishing a domestic gas reserve policy.

Conclusion

The final chapter provides a summing up of the book along with some speculation about the future development in this sector. In doing so it provides a description of some of the main issues that have arisen in the process of reform of the utilities sector. The chapter also raises a number of issues that need to be addressed looking forward, including the escalation in prices of many utilities services, environmental impacts, as well as the problems associated with economic regulation. Finally, this chapter reflects upon the manner in which reform of Australia’s utilities industries has taken place over the past three decades, and the implications this process may have for policy development and future reform more generally.

National Competition Policy—its genesis and design

This chapter looks more specifically at the reform process leading up to the making of the Competition Principles Agreement in 1995. It also provides an examination of what this Agreement meant for the utilities sector more specifically. In doing so it explores the relationship between the state and federal governments and the impact that this had on the development of the National Competition Policy. The main principles of the Policy that were applicable to the utilities sector are explained, as well as the general background of the reform process and the Competition Principles Agreement 1995.

The vital connections

In this chapter attention is directed at the communications sector (telecommunications and post). This sector was one of the first to be reformed starting with the creation of the Australian Postal Commission and Telecommunications Commission in 1975. The role of technological change in driving the reform process in the case of telecommunications is examined, along with the role of industrial relations concerns and the commitment of universal service obligations in the case of post. The extent of public ownership in the communications sector is also considered, including the decisions to initial sell off Australia’s telecommunications company, Telstra, and then later to reinvest in the National Broadband Network (NBN), as well as the decision to maintain Australia Post as a government business enterprise.

Corporatization and privatization

In this chapter the issues of corporatization and privatization are examined. This means looking at the reasons behind the dissatisfaction with the performance of the government business enterprises that arose in the 1980s and 1990s, and exploring some of the steps taken to address them. In addition to providing an account of the process and elements of corporatization, a survey of the privatization of government-owned enterprises in Australia since the 1980s is presented. This includes an analysis of the sequence and pace of the sales, the industries in which they occurred, and by jurisdiction. In addition, the quantum of Australia’s privatisations since 1990 is illustrated, with estimations of sale prices shown in terms of Constant $ values.

The hardest reform of all

This chapter provides an examination of the reasons for the continued government ownership of service provision in the water and wastewater services industry. In doing so it assesses the monopoly and the environment- and rural-related reasons for the slower reform of this sector compared to the others in the utilities sector. This chapter also provides a discussion of the types of reforms that have taken place in this industry in the absence of privatization. These reforms include such tings as the merger of various water authorities, the corporatization of government business enterprises, the introduction of more commercially orientated water prices, and increased use of non-surface sources of water.

The historical development of Australia’s public utilities

This chapter sets out the historical background to the utilities sector in Australia up until the 1980s. In doing so it provides an account of the predominant, government-owned model of utilities ownership that existed in Australia at that time. Australia’s utilities were created as government-owned enterprises in the 19th century (post, water, and rail) or in the early years of the 20th century (electricity, telecommunications, and airports). Material in this chapter traces these origins up until the immediate pre-reform years of the 1980s, and examines some of the weaknesses in the government-owned models that had arisen by this time.

Dealing with natural monopolies

This chapter looks at the nature of utility regulation as it has been conducted in Australia since the 1990s and the manner of the issues that have arisen in its conduct. It looks at the nature of the natural monopoly elements that exist in the utilities sector and the changing perceptions on where these elements lie. Over time the perception has arisen that only parts of the utilities have natural monopoly characteristics, and it is only these that need to be the subject of economic regulation. The role of the regulators and the various approaches to regulation are also examined (including the light-handed approach, rate of return, CPI-X, and efficient cost of service).

Moving the nation forward

This last industry-specific chapter places its focus on the transport sector. This means looking at a variety of industries – rail, airports, and seaports – in turn. Each of these has industry-specific characteristics that make reform of them distinctly different to each other. These unique characteristics are examined and explained in this chapter. In the case of rail, for instance, the vertical integration and separation possibilities are considered, together with their impact on efficiency. In the case of airports and seaports, the issues surrounding vertical integration and separation are less important, and the focus is weighted more heavily to matters associated with privatization.

Regulation, corporatization, and privatization—assessing the economic impacts of reform

This chapter presents the results of the arguments made earlier in the book, with in-depth discussions to illuminate and explain the sector reform process. The performance of the utilities since they have been reformed has been varied and variable, with some seeing very substantial improvements, which have been passed onto consumers, while in other cases the results have been mixed. As part of this process of examination a range of studies that look at the post-reform performance of the utilities are examined. In doing so the nature and extent of performance change since the reform of the utilities occurred is evaluated.