The Guardian February 7, 2001

High cost of privatisation

by Anna Pha

Remember all those promises of efficiency and savings that privatisation 
was going to bring? The South Australian Olsen Liberal Government embarked 
on a massive program of privatisation, in the past seven years selling off 
around 40 major public assets. What it couldn't sell, it contracted out. 
Even the Government's own data processing and computer systems were 
contracted out in a secret contract to the US corporation EDS.

The biggest privatisation was the state's electricity supplier ETSA and its 
associated power utilities which were broken up and sold or leased to the 
private sector for a total of more than $5.3 billion.

South Australia's power system is now controlled by companies from Hong 
Kong, Malaysia, the UK and the USA and several interstate companies.

For example, Cheung Kong Infrastructure Holdings Ltd and Hong Kong Electric 
International have a 200-year lease! This included the retail side of the 
business, which it immediately sold to the Australian Gas Light Company in 
Sydney. One assumes for a handsome profit.

Utilities Management Pty Ltd are responsible for company employees.

US companies have 100-year leases for the Torrens Island Power Station and 
the power stations at Port Augusta and Leigh Creek.

Other companies have contracts for generators, transmission, and so on.

Consultants pocketed $90 million of taxpayers' money for giving advice on 
the privatisation of the State's electricity.

And what did the taxpayers get for it?

The cost of electricity to domestic consumers will rise, and services will 
deteriorate. Privatisation means that ETSA's main goal of electricity 
generation and supply as the provision of a service has been replaced as a 
priority by the generation of profits.

Already the people of South Australia have been threatened with blackouts 
if they do not turn off appliances.

It appears ETSA would rather have blackouts than draw extra electricity 
from the national grid during summer peaks because the extra electricity 
would cost more and eat into profits as they cannot pass the additional 
cost onto domestic users.

The economic cost to the public of privatised electricity will add up to 
billions over the coming years.

Consultants hit jackpot

"Our hospital system is collapsing through a lack of funding, yet the 
Government has spent more on private consultants in three years than the 
entire capital works budget for hospitals over nine years", said Jan 
McMahon, General Secretary of the Public Service Association of SA.

The SA Government handed out more than $100 million to private consultants 
in the last financial year alone. In the past three years, taxpayer 
handouts to private consultants came to almost a quarter of a billion 

The Premier hired 79 consultants in a single year!

The lease of ETSA cost $55 million, distributed among 40 consultants.

Two US firms, in particular, have made a killing. Morgan Stanley Dean 
Witter and Pacific Road Finance received more than $13 million in payments.

One of the most controversial handouts is the $420,000 paid to a media 
consultancy which is part-owned by a close friend of Liberal Premier Olsen 
and who was a key adviser to the Premier during the last State election.

* * *
Acknowledgements to The Review (journal of the PSA of SA) for information used in this article.

Back to index page