PLAN B TO SELL ELECTRICITY ASSETS

Iemma flicks bypass switch to save sale

Nick Ralston, smh

August 29, 2008

MORRIS IEMMA has reinvented his power privatisation plan just enough to resurrect it, sidelining the Opposition - and Parliament - in the process.

It started out looking like a disastrous day for the Premier and the Treasurer, Michael Costa, yesterday.

But matters took a sharp U-turn just hours after the Coalition confirmed it would vote down the enabling legislation.

It cost an estimated $500,000 to recall Parliament to vote on the power proposal, but after less than an hour of discussion in the upper house, the debate was postponed - never to be resumed.

The Premier accused Opposition Leader Barry O'Farrell of killing the sell-off for five minutes of political gain.

But Mr Iemma and Mr Costa - the architect of the original $25 billion sale plan - were not prepared to accept defeat in their long-running power struggle.

Last September, Professor Anthony Owen recommended the NSW Government look at privatising the electricity industry in order to have the private sector build a new baseload generator.

The generator is needed by 2014, and the only other option was for the State Government to build it at a cost to taxpayers of about $15 billion.

Three months after Professor Owen's recommendation, Mr Iemma declared he would sell the three electricity retailers and lease out the power generators.

Battle lines were immediately drawn - within Labor, between Labor and the unions, and between the political parties.

The union movement was the first to take up the anti-privatisation fight, insisting it was a bad move for power workers and consumers.

Dissident Labor MPs joined in, claiming privatisation was at odds with the party's platform.

The battle reached fever pitch at Labor's state conference in May, when Mr Iemma was heckled by rank and file members during his address. Mr Costa was booed and jeered as he told the conference opposition to the sell-off within the party was "all about ego".

The position of the premier and treasurer was overwhelmingly rejected by ALP delegates when their proposal was defeated 702 votes to 107.

Were they humiliated? Perhaps. Deterred? Certainly not.

The next day, Mr Iemma said he would defy the party and proceed regardless.

So, it came as no surprise that when the privatisation plan was set for defeat in the upper house, Mr Iemma and Mr Costa found a way to effectively defy Parliament and proceed regardless.

A day after saying there was no "plan B", Mr Iemma put one to Cabinet, and then caucus.

His revised plan involved selling off the state's three electricity retailers - EnergyAustralia, Integral Energy and Country Energy.

It differed from the original proposal in that the power generators would remain completely under the state's control and, more importantly, it could be achieved without a vote in State Parliament, thus sidelining the Coalition.

The compromise, and the methods employed by the Premier, are likely to further agitate the Labor MPs he has already got offside over the sell-off.

It will also anger the already irate ALP state head office, which has previously attempted to unseat Mr Iemma as premier and replace him with the Emergency Services Minister, Nathan Rees.

Unions NSW secretary John Robertson, who has spearheaded the anti-privatisation campaign, said that if Mr Costa and Mr Iemma proceeded, they were "effectively signing their political death warrants".

But Mr O'Farrell is also likely to face some opposition from within his own ranks for his stance in the debate.

The business lobby warned Mr O'Farrell their relationship would be strained if he opposed privatisation, which is essentially Liberal philosophy.

Mr O'Farrell is also yet to put up any alternative to the Government's plans to secure NSW's electricity past 2014.

However, political strategist Bruce Hawker said Mr Iemma's "plan B" could provide both parties with "a way out with some credibility".

"I think the new plan has a lot of merit and it is probably what should have been adopted initially," he said in an interview.

He said the value of electricity assets were declining all the time.

"That is the flaw in the O'Farrell argument," Mr Hawker said.

Mr O'Farrell refused to support the sell-off, saying the Government would not get the "best possible price" for the assets because the timing was wrong.

But Mr Hawker said the new plan steered Mr Iemma away from the previous "complete collision with the unions".

It would also clear the way for Mr O'Farrell to offer his support "because it doesn't go to the heart of the case he was making about the value of the power stations".

AAP

Sept 2007 NSW Premier Morris Iemma says he will consider part privatisation of electricity sector to meet future power demands, following inquiry by Professor Anthony Owen.
Dec 2007 Labor Left faction opposes Owen proposals. Iemma says he plans to sell NSW electricity retailers and lease power stations for about $15 billion.

Jan 2008 NSW government forms committee, headed by former Labor premier Barry Unsworth, to establish whether sale conforms with Labor policy platform.
Mar 2008 Unsworth committee favours sale.
May 2008 State Labor conference votes 702 to 107 to oppose privatisation of stateowned electricity assets.
June 2008 Legislation to allow sale of electricity retailers and lease power generators introduced in parliament. Government delays privatisation bill to satisfy opposition demands after rebel ALP MPs refuse to vote for it.
Aug 21, 2008 NSW auditorgeneral finds "no major issue" with the plan.
Aug 22 Iemma says he will recall parliament a month early to debate the privatisation bill.
Aug 27 Costa denies reports he threatened Labor MPs' seat funding if they didn't support the power selloff but warns blocking the bill would impose massive financial burden on NSW.
Aug 28 Govt kills debate on legislation to avoid defeat in upper house after opposition says it will not vote in favour. Caucus considers compromise plan to sell electricity retailers and potential development sites for power generators, while retaining ownership of current generators.