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Legislative Assembly for the ACT: 1998 Week 11 Hansard (8 December) . . Page.. 3192 ..

MR QUINLAN (continuing):

The equation that we look at in this debate is that, on the one hand, we get the superannuation liability funded, we get some debt paid off and we get a slush fund, a community facilities or development fund, which sounds very much like an election fund to me. But what do we lose? First of all, we have sold the business to somebody for $1 billion. That will be financed, no doubt, by a mixture of equity and debt and that equity and debt will have to be serviced.

I am naive enough to believe that if someone drops $1 billion into the ACT they are going to want a return on it. In fact, the current electricity pricing regulation legislation includes a requirement for the regulator to take into account a return on investment. And, just to stay modern, so does the Government's draft regulatory framework. It includes in the principles of regulation that there shall be a fair return on investment.

The utility users of the ACT have a public utility which owes very little through, if I might say so, the good financial management of years gone by. It will not owe very little come privatisation and the returns that are required to service a $1 billion purchase must, in some way or other, be passed on to the clients. We will forfeit ACTEW dividends, and the table in the ABN AMRO report suggests that the future of ACTEW, despite competition, despite market risks, still offers a considerable flow of profits and a considerable flow of dividends. Add to that the tax equivalents which remain with ACTEW in the main. I think the sales tax flows in cash, a couple of million dollars a year. Those tax equivalents remain with ACTEW. They obviate borrowing by ACTEW. Therefore, they reduce the overall debt of the ACT government sector as a whole and they preserve our AAA rating, that rating then contributing to the interest rate at which we might borrow for other works.

What else do we lose? We lose jobs. They will be exported. This will become, if sold, a branch office of somewhere else. As is freely used in the ABN AMRO report, there will be economies of scale. What does "economies of scale" mean? It means fewer jobs; it means that the head office will be elsewhere. It means the absolute minimum of a footprint in the ACT and an absolute minimum for the flow-on effects of that employment. The Government itself uses a factor of 1.8 whenever it is blowing up jobs. Some initiative that promises 10 jobs immediately turns into 18 jobs with the second-level service jobs that are supposed to flow from job creation. So, I presume that they are happy to accept that for every job lost in ACTEW as a result of privatisation, the Territory will lose 1.8 jobs.

The level of tariff in the ACT will be at risk. There is, under the overall privatisation and the opening of the electricity supply industry to rampant market forces, the elimination of cross-subsidies from the commercial market to the domestic market. Let me say that I still harbour considerable disquiet as to the probability that the pencil will be very sharp at the commercial end and a little bit blunt at the domestic end, even when it comes to putting forward the sums on cross-subsidies, because the big competition is obviously at the big end of town. The temptation will be there and it is going to take a damn good auditor to sort out the actual price allocation. A lot of these numbers are the function of arbitrary cost allocation.

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