This is a follow-up to my previous post in response to the IEEFA report on the $10bn supernormal profits reaped by energy network providers within the National Energy Market. In that post I suggested that neoliberal ideal of energy provision via the regulation of monopoly energy transmission and distribution networks reflected neoclassical economic orthodoxy. Other schools of economic thought would give rise to different approaches to regulating the energy market, with different methods of analysing returns on investment and hopefully different outcomes of revenue and pricing determinations.
However, all that discussion was still within the parameters of a regulated market. The commentary was relevant (though slightly different) regardless of whether the monopoly owner of the network was publicly or privately owned. In this post, I want to extend the analysis, not with further economic theory, but with a thought-experiment going beyond neoliberal energy frameworks.
Imagine if energy transmission and distribution was delivered the way we provide most school education – by a government department with a goal of service provision rather than profit. This is not simply government ownership of a business enterprise (though who owns and reaps the profits of such enterprises is an important question), but rather de-commodifying energy transmission and distribution.
Imagine a government department running the network. It might be the same engineers, tradespeople and staff providing the service, but without the same need for value-capture (and the restrictions and investments that that requires). Each year (or five) the department would put up budget bids for government funding of new infrastructure required to maintain, upgrade or expand the network (much as the current network providers put proposals to the AER).
The energy network would be paid for by a (hopefully still) progressive tax system, rather than the current customer base which sees disproportionate impacts on poorer households.
Imagine – I wonder if you can?
Of course, such a proposal of government provision of energy would bring howls of “inefficiency!” from neoclassical economists, right-wing pundits and those who simply can’t imagine any other options beyond neoliberalism (which incidentally has delivered economic growth rates over the last 30 years well below those of pre-neoliberal period – but that is another story).
However, as I noted in my previous post, the current regulatory regime does not and cannot imitate market disciplines and alleged efficiencies. But even if it did reflect a real market, would the alleged “market efficiencies” make up for the $25bn of profit/costs (including $10bn “above the reasonable costs”) quantified in the IEEFA report?
That is an empirical question. Any claim of public inefficiency without an analysis of relative in/efficiencies is simply ideology and/or vested interest.
Doubtless though, at the thought of a government department providing energy network services, energy system analysts would also tell us the electricity grid and economics is all very technical and complicated, and too important for pricing and investment decisions to be left to government departments and politicians without the expertise or discipline of the market.
Granted, politicians do have limited time-horizons by virtue of our electoral cycle, and the mathematical models for determining costs and revenue are truly complex. But at the base level, is the flow of electrons down a wire really more complicated than the development of the human mind, with all the complexities of childhood learning and social contexts? The education of the next generation is certainly no less important than the provision of energy. Yet the market is an attachment (and often a parasitic attachment) to the education system in Australia. It is not its centrepiece and regulatory mechanism.
In Governomics, an excellent book published a few years ago, Ian McAuley and Miriam Lyons set out arguments and criteria for when a good or service is best provided by public service provision, and when best provided in the market. On their criteria, as a natural monopoly it is a no-brainer that energy networks should not be privatised. However, as energy is a saleable commodity, even where public ownership has been retained the default has been to a government-owned business model – publicly-owned corporations mimicking private corporations selling to retailers or consumers. The same model was adopted for the NBN, for the same reasons.
But my thought experiment here challenges us to leave the market and neoliberal energy behind altogether. It is hard, because we have been so socialised into neoliberal ways of thinking, we are losing the ability to think of different possibilities. And yet, direct government service provision is how we provide much large-scale education, health and other services.
Of course, the universal government provision of energy is not going to happen in the foreseeable future – although in a SACOSS submission to a parliamentary committee, I did argue for an iterative approach of government investment in new energy initiatives. And there are hopeful signs here. The previous Labor government in South Australia brought new emergency energy production online via publicly-owned generators (although later sold off), but on a much bigger scale we have just seen the Federal, Victorian and Tasmanian governments announce public funding for a huge new electricity transmission project across the Bass Strait, albeit through a publicly-owned corporate entity model.
More importantly though in the context of this argument, even to contemplate government provision opens a new window on the current neoliberal energy model which is failing on so many fronts. Profits from energy transmission and distribution are ripped out of the system (and the country), environmental impacts remain an externality, equity and social justice outcomes are morphed into narrow consumer rights issues, prices are increasing, and those who can afford to are bailing out via solar and non-grid options.
We need to imagine alternatives.