Public–private partnerships have turned out to be an expensive way of plugging infrastructure gaps, writes Nicholas Gruen in an article published in Inside Story, 23 November 2010 (see here). He says, inter alia:
... the glories of unburdened balance sheets have been purchased at the cost of growing deficits in precisely the thing that higher government debt might have funded – infrastructure. Partly filling the gap has been private investment in some kinds of infrastructure, funded by tolls on roads and/or rent payments by government to investors. While superficially attractive, and almost certainly better than no investment at all, most of these public-private partnerships, or PPPs – in all manner of infrastructure assets, from roads and railway stations to hospitals and desalination plants – have been built at a higher cost to the public than would have been the case if they had been built the way they used to be, as government-owned assets built with debt finance.
and concludes:
As Kristina Keneally prepares for political oblivion, and John Brumby sweats it out wondering if he’ll get back in, it’s possible that the penny might drop. They should ponder this fact. Had New South Wales or Victoria funded the tollways that now thread their way through Melbourne and Sydney, those governments’ net worth would be billions higher with millions rolling into their budgets each year and debt attributable to the roads steadily falling.
To me Gruen’s article clearly demonstrates that governments need to get back into the investment business. The full article well repays a careful read. Access it here).
One of the more interesting assignments of my public service career was to chair from 1988-91 the tri-national Australian-Thai-Lao steering committee which negotiated the agreements for the construction of the first bridge over the Mekong River, from Nong Khai to Vientiane, and which oversighted the construction.
Some recollections from that assignment will be the subject of a later post, but one aspect deserves a mention now.
One of the strong wishes expressed by the Lao authorities when we got down to detailed discussion of the project was that the bridge should be wide enough and strong enough to carry a standard Thai railway locomotive, so that in the fullness of time an extension to the Thai railway system could be built through to Vientiane.
The sceptics in Canberra laughed; the bridge itself was going to be a failure, and there was no possibility that it would ever carry trains. Laos would never have a railway line.
The Lao request seemed reasonable enough to me, and we did build the bridge to the appropriate specificiation.
So it was with considerable satisfaction that I learned in March last year that the new service was to be inaugurated on 5 March 2009 (see They said it would never happen ...)
Against that background of scepticism it was with considerable interest that I read the article High-speed rail between Yunnan and Myanmar on the agenda in China Business News, 22 November 2010 (access the full report here). It begins:
Construction of a high-speed rail link between Yunnan province and neighboring Myanmar, part of a project to upgrade transport connections with Southeast Asian nations, will start in about two months, a top rail expert said.
The line, from Kunming, capital of Yunnan province, to Yangon, Myanmar’s largest city, will be 1,920 kilometers long, said Wang Mengshu, an academic of the Chinese Academy of Engineering. Trains will run at about 170-200 km/h once it is completed, he added.
Wang, who is also a professor at Beijing Jiaotong University, has been involved in Chinese high-speed rail projects from the outset.
Wang told China Daily that a high-speed rail connection between southwestern China and Cambodia is also under discussion. And an exploratory survey for another route that would link Yunnan and Vientiane, the capital of Laos, is under way.
The three new rail connections being developed, along with another linking China and Vietnam, will form a network that is likely to be completed within 10 years, Wang said.
“The project, which aims to boost cooperation between China and Southeast Asian nations, will greatly enhance the economic development of China’s western regions,” said Wang.
On this basis I would be prepared to wager a good bottle of red that Laos, one of the poorest countries in the world, and characterised by rugged terrain, will have high speed rail before Australia does. We have been talking about it for twenty five years and will still be talking about it in twenty five years’ time.
There seems to me to be a non-sequitur in Treasury’s advice regarding infrastructure in its incoming government brief as reported by John Kehoe in the 28 September 2010 edition of the Australian Financial Review (see Treasury laments infrastructure mess on page 3).
I am fully in tune with the first couple of propositions:
- Treasury criticises the lack of a rigorous, coordinated and long-term infrastructure plan by governments, especially the states
- Infrastructure Australia has found it difficult to identify ready-to-deliver nationally significant projects for the government’s fiscal stimulus packages.
Indeed, I think the Opposition got off far too lightly in relation to the Howard Government’s abject failure to do anything about the nation’s infrastructure – yet another example of the Rudd-Gillard Government’s inability to communicate a simple story when it had a good story to tell. It allowed the Opposition to berate it from one end of the country to the other with tales of waste and mismanagement relating to school buildings and pink batts, but where were all the infrastructure projects that the immensely capable Howard Government had ready and raring to go, just waiting for funds to be available?
Where I part company from the Treasury is when it goes on to say:
- The government’s capacity to finance infrastructure will be limited given its budget circumstances
- ...investing in the right kind of infrastructure and using infrastructure more efficiently...requires appropriate regulation and pricing, private investment, and contestable and competitive infrastructure markets.
- [A] proposed overhaul of Infrastructure Australia includes ensuring rigorous cost-benefit analysis of all proposed projects...
- [The Government should] enhance the national infrastructure pipeline, to provide a portfolio of potential investments for the private sector including superannuation funds.
My problems with this part of the brief are:
- I have no sympathy whatever with the notion that the government’s “budget circumstances” place significant constraints on its capacity to finance infrastructure. This is a function of the current bipartisan political obsession with budget surpluses, which makes no sense when we speak of national infrastructure, which ought to be financed by borrowings and repaid by the successive generations that use it (generational equity, anyone?). The Australian Government has an immense capacity to borrow.
- Many infrastructure markets are not, and cannot be, competitive in any meaningful sense. If I am dissatisfied with the train service from my suburb to the CBD (I am), what do I do? Catch a different train to somewhere else?
- Cost-benefit analyses are all good clean fun, but in order to qualify for the term “rigorous” they would have to take account of external, as well as internal, costs and benefits. In other words, we are interested in social costs and benefits, not just whether the revenue stream that can be captured by the operator provides a hurdle rate of return on the operator’s investment.
- This is where the non-sequitur comes in. If we want infrastructure to be financed by superannuation funds, the cost-benefit analysis they will do can only take account of internal costs and benefits, even though many of the benefits (and costs) will be external, often manifesting themselves via impacts on the value of land.
There are other problems. Cost-benefit analysis of any major infrastructure involves non-linear mathematics and is acutely sensitive to the initial assumptions. To take a simple example, Westgate Bridge reached its design traffic flows years ahead of projections because its existence changed the pattern of settlement and land use to an extent that it induced a lot more traffic.
Transformational infrastructure like fast rail or the National Broadband Network will have so many unanticipated impacts on behaviour that anyone who talks about “rigorous cost-benefit analysis” is simply talking nonsense.
Then there are the bureaucratic tricks. The Speedrail project (fast rail between Canberra and Sydney) of the late 1990s was set up to fail. In undertaking its cost-benefit analysis, the private consortium was required by the forces of darkness to take account of all external costs, but not to claim the value of any external benefits. This meant that, like the consortium before it that looked at fast rail between Sydney and Melbourne, it could not take account of the enhanced value of land in proximity to the track, and it could not bring to account the benefit of deferring or eliminating the need for a second Sydney airport.
I always thought that that one had more to do with the Howard Government getting a good price for Sydney Airport than anything to do with a rational approach to national infrastructure.
The bottom line is that if the Government wants private investment in infrastructure then “rigorous” cost-benefit analysis has nothing to do with it, unless we try to take account of social benefits through messy community service obligation payments and confusing allocation of responsibilities between the public and private sectors of the kind that has made Melbourne public transport the nightmare that it is today.
The choice that faces the Australian electorate tomorrow is a dire one: neither of the major parties deserves to win government. We are offered a choice between
(1) A man who thinks of himself as prepared to take tough decisions but runs away from most of them and is a classic political weathervane, who has a short attention span and lacks the basic general knowledge about economics, critical technologies, foreign affairs and defence to even know what questions to ask, and
(2) A woman who has a touching faith in the redemptive power of her own personal narrative and thinks that running for the highest political office in the land is a matter of running 150 local government elections at the same time.
The best outcome that we can hope for is a hung House of Representatives controlled by the Independents and a Senate in which the Greens have the balance of power. The more people that whoever forms government is obliged to negotiate with the better off we will all be, and we cannot afford to have either party emerge from the low-rent campaign of the last five weeks feeling vindicated.
Look in more detail at the offering:
- The main points of agreement are that we should treat asylum seekers harshly, that we should give reflexive obedience to the wishes of Israel, and that we should all share in the cost of redeveloping the AFL stadium in Geelong.
- Julia Gillard mischievously conflated the asylum seeker question with the propositions that the Western suburbs of Sydney are overcrowded and that therefore the whole country should suffer a reduced migration intake. Tony Abbott matched this squalid line of argument, so we have a commitment to reduce immigration without any thought for the long-term consequences.
- Julia Gillard has dotted the landscape (or at least the marginal electorates thereof) with nice little bribes about sports and other community facilities – promises which the outcome of the case which University of New England academic Bryan Pape took to the High Court suggests might be unconstitutional in the absence of a head of Commonwealth power.
- Tony Abbott is not much better.
- Tony Abbott confects huge alarm about the nation, in response to the GFC, running up the lowest net public debt in the OECD.
- With the exception of the National Broadband Network – one of the few clear reasons to back Labor – neither party has anything to say about productivity improving microeconomic reform.
- Neither party will take effective or timely action on climate change. What action they do take will give minimal results at high cost.
- Ditto for the Murray Darling Basin.
- Both parties would maintain the nation’s longstanding chronic under-investment in tertiary education, research and development and infrastructure, all of which they regard as a cost rather than an investment.
- Both are utterly committed to middle-class welfare, neither has anything to offer the genuinely poor.
- Neither side has anything sensible to say about what we are doing in Afghanistan or what we should do about it in the future. As far as one can tell Labor might withdraw without giving the matter much thought, Tony Abbott might put more troops in at American request without giving the matter much thought.
- Both are so domestically focused one would hardly know that there is a great big world out there, and a not particularly reassuring one.
These people insult our intelligence. Neither of them deserves to be taken seriously.
Julia Gillard says that we must slow up the rate of immigration because the western suburbs of Sydney are too crowded. “Let’s pause”, she says, “Let’s take a break”.
My questions are: how long is this pause going to be, and what are you going to do with the time? How much are you going to invest to ease the congestion, and when?
To judge by the fact that funds will not begin to flow for the Parramatta-Epping line until 2014, it sounds as though the answers to those last two questions are “Not much”, and “Not soon”.
So explain to me the reasons for taking this break?
Tony Abbott’s abysmal performance concerning the Coalition’s broadband policy in his interview with Kerry O’Brien on the ABC’s The 7.30 Report last Monday 9 August demonstrated that, for an aspirant to be the political leader of one of the world’s larger and more modern economies, he is intellectually ill-equipped and lazy in his policy thinking and preparation.
It is possible to be an effective Leader of the Opposition by developing three or four attack lines on a range of subjects and repeating them at every available opportunity, but when it comes to presenting oneself as an alternative Prime Minister, much more is required. It requires a capacity to argue for new or alternative policy, and in order to do that it is necessary to be sufficiently familiar with the subject matter to be able to make the case for the policy and weather a probing interview on prime time television. On Monday evening Tony Abbott demonstrated, and acknowledged with refreshing candour, that he was not on top of it, that it was all beyond his ken.
The episode betrayed a remarkable lack of political judgement. Why would anyone want to choose as a key political battleground in an election campaign a subject matter domain in which he has not even the most basic competence to engage in discussion or debate? This was supposed to be one of the key issues that distinguished the Coalition from Labor, and Mr Abbott simply had not done the homework – nor could he, one cannot get up to speed on issues like this in a couple of days.
Tony Abbott protests that it is not necessary to know in precise detail how a car works in order to drive one. The analogy is a false one. We can all agree that it is not necessary to know how the information and communications infrastructure works in order to send emails or access the internet. But in order to make the case that one technical solution is better than another, it is necessary to have at least an intelligent layman’s knowledge and understanding, and perhaps some sign of having taken expert advice. To go back to his analogy, he is not just driving the car, he is telling us why a Holden would be better than a Lamborghini, and to be credible making that case would require some technical knowledge.
The episode told us something deeper about Tony Abbott. He protested several times that he was not “a tech-head”, for which read “geek” or “nerd”. My take on that is a sub-text that real men don’t have time for these quaint matters, they are far too busy riding bikes, battling the waves and filleting barramundi.
Everyone employed on the Melbourne metropolitan train system has done the course it seems.
Last night we went to the Bledisloe Cup rugby match at Etihad (Docklands) Stadium.
When we finally made our way to Southern Cross railway station afterwards the indicator board told us that all trains bound for the south-eastern suburbs (Frankston, Pakenham, Cranbourne), any one of which would suit us, would depart from Platform 13.
We descended to the platform, where a train was just departing for Sandringham, and the indicator on the platform showed a succession of trains heading for Frankston etc. We were told by station staff, however, and there was an announcement over the public address system, that the train which had just departed would be the last train from that platform for the evening, and all passengers for Frankston etc should make their way to Platform 12.
As I was riding down the escalator to Platform 12 I was a little bit disturbed to see that the indicator for Platform 13 was now showing a train departing for Frankston in 11 minutes. I was reassured, however, to see that the indicator on Platform 12 showed a train for Pakenham departing in 3 minutes. That counted down to train departing for Pakenham in 1 minute, and then went blank at just about the time that the Pakenham train pulled into Platform 13, the platform from which we had all been hurried off to Platform 12.
We were told to board the train on Platform 11 and change at Flinders Street, but of course we had no more chance of catching the train at Flinders Street than at Southern Cross – arrived on the platform just in time for the doors to close in our faces. Fifteen minutes until the next train, so we left the station and caught a tram home.
Good one Metro – I’ll bet stuff-ups like that don’t make it into your on-time running statistics. The train was on time, but the passengers didn’t make it because they were assembled on the wrong platform.
When an event like that occurs, I always have one little question in my mind – did the operator actually know which line the train was on and fail to communicate with us correctly, or did the sudden chops and changes represent confusion as to which line the train was on? Are we safe?
“We are a confident, optimistic and forward-looking people”, Julia Gillard told Kerry O’Brien on the ABC’s 7.30 Report last Monday 26 July.
That is not the way we strike me these days. We have done some confident, optimistic and forward-looking things, but most of them were a long time ago: establishing universities in Sydney and Melbourne in the 1850s, building the Sydney-Melbourne railway line, universal suffrage, female suffrage, the secret ballot, the Flying Doctor Service and more recently the Snowy Mountains Scheme. None of them was ever tested with a focus group.
A contemporary example of a forward-looking project is the National Broadband Network.
But consider the following:
- Would a confident, optimistic and forward-looking people ever tolerate an election campaign of the irredeemable irrelevance of the one we are enduring at present, with both leaders evading the issues of substance and drowning us in trivia?
- Would a confident, optimistic and forward-looking people get itself into such a state about a tiny trickle of asylum seekers? The prevailing attitude hardly has the heroic ring of Emma Lazarus’s poem at the Statue of Liberty:
...”Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore....
Rather, we are the huddled masses, cringing (most of us) on the southeast corner of one of the richest and most sparsely populated countries in the world, waiting with Prime Ministerially understood anxiety for the next boat to appear over the horizon 5,000 km to the northwest.
- Would a confident, optimistic and forward-looking people require to be reminded constantly by its political leadership that they are “doing it tough” but that the nanny state will ease their “cost of living pressures”? Of course there are people experiencing hardship in every country but these remarks are not addressed to them – we do very little for the genuinely poor, there are not enough votes in it. These remarks are addressed to the employed Australian middle class, the ones with houses, cars, kids and an array of consumer durables.
The notion that the employed Australian middle class is “doing it tough” is just plain laughable. Peer over the wall into the outdoor prison that is Gaza and you will see people who are doing it tough. Go to a variety of working class neighbourhoods in the big cities of the United States, or visit a camp for Afghan refugees in Pakistan or Iran. Take a look around Calcutta or Bombay, or the slums of Manila.
- Would a confident, optimistic and forward-looking people be incapable of responding to climate change, even when opinion poll after opinion poll indicates that the public regards it as an important issue that needs to be addressed?
- Would a confident, optimistic and forward-looking people be as chronically incapable of investing in the nation’s infrastructure as we seem to be? We snivel and whine about the urban sprawl and about congestion in our major cities, but when forward-looking people proposed construction of high speed rail between Sydney and Melbourne, or even just from Sydney to Canberra in the repechage event, the forces of darkness were hell-bent on killing the idea stone dead. The French were forward-looking when they began the development of their high speed rail network, an investment that over time has transformed the way the country lives and works. To borrow a phrase from Nike, they just did it, rather than spend 25 years talking about it.
High speed rail could have a similar transformative effect in this country, opening up realistic options for providing for the inevitable growth of the nation’s population, and killing off short-haul aviation like the busy Canberra-Sydney route.
- Would a confident, optimistic and forward-looking people sustain over decades one of the lowest national research and development spends in the industrialised world, and ruthlessly suppress curiosity-driven research? We regard R&D as a regrettable cost. Forward-looking people regard it as an investment. They know that not every research project will produce a patentable widget within the next twelve months, and they know that a proportion of it will not bear fruit at all. But they know that the modern world was built upon a foundation of research, and much of the most important of it had no clear commercial return in view, just the notion that there are some things we should find out more about.
- Would a confident, optimistic and forward-looking people achieve less than the OECD average expenditure on education (between the former Soviet republics of Latvia and Lithuania on the 2005 data published in a recent OECD report) and a mediocre performance on tertiary education?
- Would a confident, optimistic and forward-looking people regard the expectations of its major alliance relationship as being unexaminable, beyond discussion, even as trillion dollar budget deficits and the rise of other military and economic powers indicate that the military role of our ally must decline?
As a society I think we are looking pretty pathetic at the present time. I will begin to think we take ourselves seriously when we start to get serious about investing in education, research and development and transformative infrastructure (not just palliative care like too little too late tollways), and when we start to get serious about our changing strategic environment.
And we should remember that cannot expect others to take us more seriously than we take ourselves.
I attended a meeting at Melbourne University today and rather than take my car I decided, as I usually do, to catch a train to Melbourne Central and a tram to the University.
At a little after 8.00 am the train pulled into the station, the doors opened, and I was confronted by a wall of bodies. How, I wondered, am I going to get in here? No doubt the woman standing alongside me was wondering the same thing. Miraculously, while we were wondering, a couple of people managed to haul themselves through the crush and emerge from the train, so we were able to board.
At Armadale a couple got off and a couple got on. At Toorak, a couple got off and about six got on, don’t ask me how. By this stage there was a large number of people standing on the train without any possibility of holding on to anything, so if the train stopped suddenly they would all be thrown to the floor.
When the train stopped at a very crowded Hawksburn station, there were about eight people standing where our double doors opened. They didn’t even attempt to board the train. Nor did they look surprised, they all wore a look of dull resignation. This is their daily lot, clearly.
At South Yarra there was a major one for one exchange of passengers. A lot of people get off at South Yarra, but a lot of people get on. Some of them didn’t make it.
The same story at Richmond. The woman with the child in a stroller didn’t make it of course, how would she fit the stroller into that crush?
The unlamented former Minister for Public Transport, Lynne Kosky, was wont to say cheerfully that this crowding was a sign that the Government’s public transport policies were working (“everybody wants to catch the train”, presumably). I would take it as yet another sign that the public transport system is a shambles. And the Government has the hide to bash up the new operator, Metro, for poor performance with on-time running. The process of loading and unloading such crowded trains is so desperately slow that trains cannot hope to run on time.
Two more comments:
- Either the level of crowding is dangerous or the signs that say “Do not lean on the doors” are not required. We regularly see people forced by the crush against the doors which are not supposed to be leant on, with a considerable weight of bodies behind them.
- If we were really serious about the threat of terrorism we would not present such juicy soft targets as railway carriages packed with people. In Berlin, where the U-Bahn runs every couple of minutes, the carriages are lightly loaded, with a consequent reduction of the risk of a major casualty incident.
The front page of today’s edition of The Age carries a picture of an irate motorist – a St Kilda Road cafe proprietor – remonstrating with a VicRoads officer who is in the process of having his car and 22 others towed to a yard at Abbotsford. To recover their cars each must pay Nationwide Towing $322, and VicRoads $117.
The background to this is that the State Government has been trying to introduce extended clearway times across inner Melbourne since 2008. In some areas now the affected streets are clearways from 6.30 - 10 a.m. (previously 7.00 - 9.00 a.m.) and from 3.00 - 7.00 pm (previously 4.30-6.30 p.m.) – more than 50 per cent of the day, and a very substantial slice of normal shopping hours.
The extended clearway times have met strong resistance from local councils, who are justifiably sensitive both to the interests of the small businesses in the shopping strips that are affected, and their voters who would like to have access to their local shops. Most of the 13 councils affected by the changes initially resisted the extended hours; now all but Yarra and Stonnington have given up.
VicRoads started changing clearway signs on Saturday, and the resisting councils promptly covered them up. VicRoads rolled out 300 more signs late on Tuesday night, and began enforcing the new hours on Wednesday. We have a conflict between two levels of government, and the State Government decides that the way to resolve this is to punish individual motorists. That is about as bad as public administration gets.
There are some larger issues at stake here:
- The fact that we need clearways at all is a sign of policy failure. It is a sign that the city’s public transport system is so dysfunctional that most people have no alternative to use of their own car as a means of getting to and from work with reasonable convenience – even though the State Government punishes us all by levying a burdensome tax on all parking spaces in the CBD and surrounding areas. “Reasonable convenience” is strictly a relative term – journey times are outrageous but at least in one’s own car one does not have the feeling of participating in an extended rugby scrum.
- The dysfunctionality is the result of governments of every persuasion failing over many decades to invest in the public transport system. We get the politics of gesture – “We’ll introduce a smart ticketing system” – but the smartest ticketing system in the world cannot compensate for sheer lack of capacity. People straphanging from Springvale to the city for 45 minutes every morning were not demanding smarter tickets, they were demanding more trains.
- What we have ended up with is a ticketing system that does not work, and could hardly be described as smart if it did (see Reflections on the myki debacle). It has achieved one notable benchmark – it is the most expensive “smart” ticketing project in the world.
- Given that we have massive traffic congestion, it is not self-evident to me that the interests of the people who actually live in the inner city areas should be sacrificed to the interests of those who choose to live further out – why should it be the sole function of High Street Prahran/Armidale for most of the day to provide a pavement for people passing through? What about the amenity of the local ratepayers?
Yarra and Stonnington Councils say they will now launch a court action against the Roads Minister, alleging that he failed to consult them as required by law before introducing the clearways plan. For his part the Roads Minister is demanding that the councils agree to the extended clearway times. If he needs their agreement, what is he doing enforcing his view of the law against individual motorists? This matter should be resolved by due process, not by heavy-handed unilateral action.
The Victorian Government has finally performed a pseudo-launch of its dreadful “smart” public transport ticketing system. Pseudo-launch because, almost three years after it was scheduled to go into service on 1 March 2007, covering all transport modes, Public Transport Minister Lynne Kosky has launched it for use on trains only.
The project is $350 million (70%) over its initial budget estimate of $500 million. Even at $500 million the project sounds very expensive to me as the cost of reinventing something that has been done before and better many times in major cities all over the world.
As a former Secretary to the Department of Defence I cannot help comparing this performance to the Collins Class submarine project, which has received such a bad press over the years that it is often cited as an example of cost overruns in major Defence projects. In fact, the total cost “overrun” (additional money that had to be spent to meet contractual requirements) was $143 million in a $5 billion project – not bad by any standard, certainly a lot better than a $350 million overrun on a project a tenth of the cost. And it would have to be said that developing a new generation submarine (rather like developing an underwater aeroplane) is more of a challenge than developing yet another public transport ticketing system.
On the subject of defence projects more generally, Defence Minister Senator Faulkner told the Australia and New Zealand School of Government on 13 August that 83% of the 200 defence projects closed out in the last decade were on or below budget, so Defence is not in fact the principal generator of failed public sector projects.
Another thing I cannot help noticing about myki, 45 years after first laying my hands to a computer, is that the developers (or writers of the specifications?) seem to have fallen for the classic error of computerising the old way of doing things rather than asking the fundamental question of how one would design the system from the bottom up given the capacity to access and process mountains of data in real time.
I refer in particular to the fact that the zone system (and the two-hour ticket system) seems to have been faithfully translated into this expensive white elephant. Given that the division of the city into zones is a proxy for pricing by distance in the absence of a satisfactory way of measuring distance, I would have hoped that after spending $850 million we could have a genuine user pays system in which people are charged by the kilometre on the basis of where we swipe our cards on and off. Rather, it seems that we will persist with a system in which I can travel seven stops to the city and ride around the city loop for two hours for a zone one ticket price, but if I want to make a single journey six stops in the opposite direction to pick up my car after a service, I have to pay a great deal more because I cross a zonal boundary. Why did we want to enshrine that idea in the new “smart” system? What is smart about that?
Minister Kosky says that we will all learn to love myki. I doubt it.
This morning I had a series of conversations with my local electricity retailer, AGL, which left me wondering whether to find a stray cat to kick or a tall building to jump off.
The background is that yesterday I received an electricity bill for the three months ending 30 November which, nothwithstanding being for a smaller amount of electricity than the three months ended 31 August, was going to cost me more than twice as much. It was covered by a letter from AGL which advised me of a “rate structure adjustment”:
Previously you were charged two different rates, one rate for your peak consumption and one rate for your off-peak consumption. The off-peak rate is only applicable to dedicated off-peak appliances such as off-peak hot water or slab floor heating. As our records indicate that you do not have a dedicated off-peak appliance, you are not eligible for the off-peak rate, therefore we have removed this. The setup has now been amended so that all of your consumption is being billed at the single rate and this was reflected in your previous bill. If you think that you are eligible to receive the off-peak rate as you have a dedicated off-peak appliance, please call us and we will facilitate the change with your Distributor.
The letter acknowledges that “unfortunately you were not notified before the change occurred”.
This letter led to the following five telephone conversations over the course of two hours, a great deal of which was spent on hold:
(1) I rang AGL customer service and told the customer service officer that I did indeed have a dedicated appliance (slab floor heating) and that if she consulted my previous bills she would see that most of my electricity usage was off-peak. She looked up my file and told me that the real problem was that our home did not have the right kind of meter to measure off-peak. I protested that it did and that they had been charging me an off-peak tariff ever since they became the supplier. She said that I had a “two peak meter”, not an off-peak meter, and accordingly AGL had really been undercharging me all this time. If I wanted to be eligible for an off-peak rate I would need to contact the distributor and have an additional meter fitted.
(2) I rang the distributor, United Energy, and was promptly assured by the person I spoke to that our home had the correct meter installed for off-peak pricing and that there was no need for an additional meter. He went on to say that United Energy provides bulk electricity to the retailers at a single price; the structure of their pricing and who is eligible for what is between them and the customer.
(3) I rang AGL customer service again and after several long consultations between the customer service officer and his supervisor, was told that I really did need to have a different kind of meter installed and accordingly he was going to switch me through to the connections department who could advise me on the next steps. I protested that I did not need to speak to the connections department because the distributor had assured me that I had the right equipment installed. He insisted that I really should speak to “Connections” and after a conversation with them, switched me through.
(4) I had a long conversation with a woman in the connections department, who consulted her supervisor and someone else, and finally came back to me to say that I could tear up that bill and they would be sending me a new bill based on the peak/off peak pricing that had applied previously. Problem solved.
(5) Well, not quite. About ten minutes later the woman rang me back to say that everything she had told me was completely wrong and the fact is that AGL is not giving anyone an off-peak rate pending roll-out of the new smart meters – everyone is being charged the peak rate for all electricity use.
Some observations and questions:
(1) Between the letter and the telephone conversations AGL gave me three different reasons for not giving me an off-peak rate: I did not have the right kind of dedicated appliance; I did not have the right kind of meter; well, actually, we don’t give anyone an off-peak rate.
(2) In public policy terms, why would we want to abandon the longstanding practice of encouraging households to shift their electricity demand to the period of lowest demand on the system. I actually asked one of the AGL people to confirm that it would be alright by them for me to reset the clock on my floor heating so that it comes on during the daily peak. “Yes”, she said brightly, “you can have it come on at any time you like”.
(3) There must be something offensive under the Trade Practices Act about changing the published price after the service has been provided. In the new environment of deregulated electricity prices I cannot do anything about the price of future services, but the retrospective hit is pretty rich.
(4) Clearly no-one at AGL customer services has any idea what they are talking about. So much for the wonderful new world of privatised utilities.
The article Tracking the Cost by Mary-Anne Toy in The Age’s Insight section, Saturday 13 June, deals with the question of why it might cost $562.3 million to build a 3.5 km rail extension from Epping to South Morang.That is an interesting question in its own right, but the sentence which caught my eye is one which tells you all you need to know about State Governments and their provision of infrastructure for a growing city:
It will be the first extension of Melbourne’s suburban rail network since the 1930s, when the Glen Waverley line was built.
In 1930 Melbourne's population had just topped the 1 million mark. By the end of this year the estimated population of the Melbourne metropolitan area will be 4 million.
