Frontier (Australia) addresses misleading electricity price comparisons

During the New South Wales election debate on Friday 13 March 2015, the Opposition Leader, Mr Luke Foley, implied that a Frontier Economics analysis supported his view that privatisation results in higher network prices.

Frontier Economics’ Managing Director, Mr Danny Price said that “our analysis showed the opposite to what Mr Foley implied on Friday”.

“We found that privatisation will benefit consumers with lower prices compared to retaining government ownership. The reason is that the private sector does not waste resources in providing services to its customers”.

Mr Foley has confused comparisons between the price performance of privatised and government owned networks by mixing concepts of price rises and price levels.

The level of retail electricity prices in each state varied prior to privatisation. Victoria and South Australia initially had higher prices. The Frontier Economics analysis clearly shows the difference between government owned and privatised networks – government-owned networks have experienced the highest network price rises and the privatised networks achieved the smallest rises in network prices.

Putting to one side the flawed price comparisons, Mr Price noted the principal point of Frontier’s report for the NSW Government was to review the arrangements for regulating electricity network prices.

“Our conclusion was that the regulatory arrangements for setting network prices will apply in the same way regardless of whether the NSW network businesses are government owned or leased to the private sector. In other words, NSW consumers will benefit from the same pricing protections regardless of whether the businesses are leased to the private sector.”

The Frontier Economics report for the NSW Department of Premier and Cabinet is available here.
For more information, please contact danny.price@frontier-economics.com.au or phone +61 3 9620 4488.

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