Zoe Kenny
In the face of mounting public pressure, PM John Howard announced on June 2 that the federal government would not sell its 13% share in the Snowy Mountains hydro-electric scheme. Shortly after Howard's announcement, the NSW and Victorian Labor governments — the major owners of Snowy Hydro Ltd — announced that they would abandon the plan to privatise SHL, which supplies about 74% of the renewable energy in eastern mainland Australia.
The proposed sell-off, which was due to go ahead later this month, was opposed by an unlikely alliance of the Greens, farmers, environmentalists, local residents and a number of Coalition MPs, led by Liberal Senator Bill Heffernan.
The decision to privatise SHL was spearheaded by the two Labor state government and endorsed by Howard. However, in announcing his government's back-flip on the issue, Howard told reporters in Canberra: "I've been surprised by the level of public disquiet about the sale."
Howard said that the proposed privatisation had "created a lot of unhappiness in the Australian community and across the political spectrum". He added: "The reason we are changing our position on this is that the public is unhappy with the sale of the Snowy and there's no good public policy reason from our point of view why the sale should go ahead. I mean if there were some huge policy gain in selling the Snowy we would have maintained our position, but there's not."
Responding to Howard's announcement, NSW Premier Morris Iemma said that the "prime minister has pulled the rug out from under the sale".
Macquarie Bank, UBS and Goldman Sachs were hired in March to manage the sale, which EL & C Baillieu Stockbroking estimated might raise $3 billion for the three governments.
There has been widespread condemnation of the way that the scheme, which is regarded as a national icon and invaluable public asset, was being treated, with many believing that the NSW Labor government (which owns 58% of SHL) was simply looking to use the cash windfall — estimated at $1.74 billion — to buy itself back into power in next March's state election.
NSW finance minister John Della Bosca has said that SHL needs large investments and "re-capitalisation" to keep it financially afloat and that it would be irresponsible for the government to go into debt to provide the necessary funds and therefore the best action is to "raise capital on the stock exchange".
However, according to Max Talbot, who held senior executive positions with the Snowy Hydro scheme from 1979 to his retirement in 2003, and who has written a dossier of facts arguing against the sell-off, the Snowy scheme is well-managed. It has an annual income of around $450 million and a pre-tax profit of $200 million.
The scheme's capacity to produce large amounts of electricity on demand (by releasing water through turbines or through firing up one or more of the gas-fired power stations it has recently acquired) gives it a monopoly position within the national energy market — mainly by selling peak-demand insurance to other electricity companies, which gives it the capacity to make huge profits.
According to Talbot, only $20-25 million is needed per year to maintain the scheme which can easily be achieved, leaving the rest of the profit to its three governmental owners. If the scheme is privatised, all the financial benefits would only increase private wealth, rather than contributing to the public good, he argues.
Another major concern about the privatisation plan was that it would result in loss of control of the water managed by SHL, which is needed in order to maintain the health of the Snowy, Murray and Murrumbidgee rivers.
When the scheme was corporatised in 2002, forming SHL, it was granted a 75-year water licence. This gave SHL proprietary rights over the collection, storage and release of water from the Snowy Mountains. Although the licence binds SHL to release set amounts of water for the Murray and Murrumbidgee rivers, any other releases have to be paid for by governments or private interests (mainly farmers).
The SHL is not obligated to release more water, even with compensation, if it decides that using the water for electricity generation will be more profitable.
The privatisation of the SHL would have meant that in times of drought, which are likely to increase in frequency and severity as a result of global warming, precious water could be withheld simply for gain of the SHL's corporate shareholders.
Local residents of the Snowy region have been particularly concerned about the privatisation plan, fearing that the long-running campaign to regain water to restore the health of the Snowy would be permanently jeopardised. A protest of 500 local residents took place in the town of Jindabyne on May 28 to voice public opposition to the sell off.
Irrigator groups, including the National Farmers Federation and the Ricegrowers Association, also expressed concern about the impact the sale would have on their access to water.
Greens Senator Bob Brown attacked the proposed sale as being illegal because the proper process for getting parliament's approval was not followed.
On June 1, an open letter opposing the sell-off was presented to the federal, NSW and Victorian governments. It was signed by 56 prominent figures including former Coalition PM Malcolm Fraser, former Coalition deputy PM Doug Anthony, former Reserve Bank governor Bernie Fraser and Oscar-winning actress Cate Blanchette.
Fraser told ABC Radio National's June 1 World Today program that the proposed sale of SHL was "privatisation gone mad".
From 91×ÔÅÄÂÛ̳ Weekly, June 7, 2006.
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