Planned Coalition energy savings will cost taxpayers, says Labor

Sydney Morning Herald

Tuesday February 22, 2011

Brian Robins

THE state government has challenged the opposition's claims that reorganising the power industry will allow cost savings to fund big energy rebates. It has made pubic Treasury advice indicating that any savings would be limited and take several years to be achieved.In fact, there would be costs to taxpayers, due to lower dividends received, which would limit any gains, Treasury noted.A report by the NSW Auditor-General into the $5.3 billion sale of the state's electricity assets will be made public today, and a parliamentary committee will publish its report tomorrow.Treasury said $280 million in savings could be achieved by merging the head offices of two of the distribution companies, although these gains would take time. "It is likely that in the short term there would be cost increases in implementing the merger as opposed to savings," Treasury said in the paper. "These costs would most likely be borne by the taxpayer through a reduction in dividends."Over five years savings could be achieved in head office activities, information technology and by reducing network control centres, it said, but job guarantees given to employees of the retail arms of the distributors would make it difficult to achieve savings."Employment guarantee commitments made by the NSW government to employees in the current energy reform project are likely to eclipse any potential labour savings from a merger," Treasury said.Planned cost savings from merging three rural energy distribution companies to form Country Energy in 2001 were not achieved, Treasury said, referring to commitments to cut $90 million out of its costs.Under existing agreements, the electricity distributors must continue cutting their costs, which some of the companies are finding difficult, Treasury said, referring in particularto EnergyAustralia, which is "forecasting a 4 per cent overrun rather than any saving potential".At the weekend the opposition outlined plans to merge two of the three electricity companies to achieve $400 million in savings over a four-year period. A merger would be aimed at axing head office jobs. At present there are more than 1500 head office staff.Last year the Electrical Trades Union called for a similar reorganisation, which it said would achieve $100 million a year in savings over four years.The shadow treasurer, Mike Baird, said yesterday that the assessment backed the Coalition's analysis."It's clear Treasury has identified significant savings, which, when you take into account joint procurement, confirms our view that savings are achievable."

© 2011 Sydney Morning Herald

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