Two years ago this week, Labor's Chris Minns prepared for his first parliamentary sitting as the state's new Premier. He girded himself with old-fashioned Labor rhetoric.
"We've seen what 12 years of privatisation of our electricity network, ports and toll roads has done," he said. "It's led to people having to pay higher prices to pay for services they used to own. This ends this week. Under Labor there will be no more privatisation of our essential assets."
Maybe Mr Minns has a different understanding of privatisation to me, because from what I can see NSW is awash with more privatisation, and the Hunter is front and centre.
I refer to the rollout of an electricity system based on renewables, the most costly infrastructure investment NSW has ever seen. The federal government wants 82 per cent of Australia's electricity to be sourced from renewables by 2030. All the new capacity will be private investments. The grid will need giant new transmission lines, 10,000kms nationally by 2050, a half to be built by 2030. The NSW share of the new grid will be financed, built and operated by private corporations.
A state-owned corporation, EnergyCo, is pivotal. EnergyCo is the NSW electricity infrastructure planner, under control of the Energy Minister, Penny Sharpe. EnergyCo says where solar and wind farms can be built, areas it calls Renewable Energy Zones (REZs). A REZ is planned for each of four regions in NSW: Central West-Orana (CWO), New England, the South West (around Hay) and Hunter-Central Coast.
REZs need to be linked to electricity consumers in the cities, hence the need for new high voltage transmission lines. EnergyCo selects the route for these lines, does the basic design, organises the environmental impact assessment, and guides the project through the approval process. Conveniently, being a State Significant Infrastructure Project means the sole approval authority is the Planning Minister, Paul Scully. There is no appeal mechanism. It's a tight ship.
Once approved, the project is sold by NSW treasury to a private entity. A concession is drawn up. The winning bidder builds, operates and maintains the transmission service for the concession period. The CWO transmission concession period is 35 years. The winning bidder is a consortium, two Spanish infrastructure companies, Acciona and Grupo Cobra, and the privatised NSW supplier Endeavour Energy. The Financial Review says the tender was worth more than $5 billion, although government has yet to cough up any details. The secrecy is no surprise. That's what happens in NSW with privatisation deals, like the Port of Newcastle.
It is likely the New England and Hunter transmission projects will follow the same model. EnergyCo will do the planning, organise the environmental impact assessments, and secure the approvals. Treasury will then sell concessions to private firms to build, operate and maintain the system for decades hence.
Bidding for concessions is serious business. A concession guarantees the payment of a tariff, at a rate determined by the Australian Energy Regulator. It's a regular, staged payment, in part to compensate for construction, operation and maintenance costs, but also to deliver an annuity-style return on the initial outlay. Large global funds love these large, long-term, low-risk infrastructure investments.
Where does the funding for these regularised payments to the private investor come from? From customers' electricity bills. In NSW about 40 per cent of every electricity bill goes to the private network operators.
It seems the winning consortium paid more than $5 billion for the CWO concession. This is uncommitted lip-licking cash straight into state coffers. What if the New England and Hunter transmission projects yield similar windfalls?
When the old NSW electricity assets were privatised, the cash windfalls paid for expensive Sydney infrastructure. The proceeds from the sale of concessions for new electricity assets - call it privatisation if you will - look equally bountiful. Where will they be spent this time?
