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Monday, 26 June 1995
Page: 1768

Senator CHAMARETTE (5.40 p.m.) —Senator Margetts has raised some of the fundamental issues relating to this Competition Policy Reform Bill 1995. I rise to speak to some of the environmental and social justice aspects, particularly in relation to water and power.

  My colleagues here must recognise and admit that the Greens and the environment movement generally have been pushing for years to take environmental concerns out of the box represented by the Department of the Environment, Sport and Territories and to see their wider integration into the policies of other departments. As long as Primary Industries and Energy, Industry, Housing, and Transport see themselves as concerned with non-environmental issues and environmental measures relating to them as interference, we will continue to have worsening environmental problems. Yet here we see another even more powerful body being set up which not only does not consider environmental implications but will probably view environmental regulation as an interference to competition to be avoided or eliminated.

  The privatisation of water is a good case in point. For years, public sector water authorities operated on a good manager basis, trying both to provide needed water and to manage the water resources. Over the last few decades, the management function has increased because of public pressure focused through environment groups and also because of rising population, increasing pollution and increasing expense and difficulty of developing new water resources. This management function has really blossomed in the last decade, with water authorities actively promoting water conservation and looking into a range of innovative options to reduce water use. There has also been a rising awareness of the inseparability of areas such as farming; forestry; control of industrial and domestic pollution; and the maintenance of clean, high quality water resources.

  The fact that all of these issues were handled to some degree by government meant that round tables and integrated policies were possible, although initially it may have required a lot of pressure to get various departments to a common table. It has paid off, and now land and water care, control of inputs into ground water, control of nutrient levels, making sure there is fringing vegetation to reduce salinity and other problems, reducing land clearing and management of forestry around watersheds have all assured that the degradation of water resources has slowed.

  However, degradation is still occurring. Coordination within government and between levels of government has borne fruit and improved the situation, but the state of the rivers and dams; the increase of salinity and eutrophication; the algal blooms, particularly the toxic blooms such as the blue-green bacterial blooms; and the recent massive fish deaths in some rivers are all evidence that congratulations should not go too far.

  The problem is that all this coordinated effort, all the years of trying to get some action and recognition and commitment to dealing with the problem, is likely to be lost. When we privatise water, we put in a new manager—one who is working to increase company profit. We do so because of the argument that it may be more efficient and so decrease cost. But there is no history with a new company. All the past experience is lost. They will come in with a new broom and get rid of senior staff, especially in any area seen as non-essential, such as water conservation. Not only that; it is far more difficult to get them around a negotiating table.

  A fundamental problem is that the purpose and focus of such a private operator must be different. Their business is not to manage or conserve water; it is to sell it. The more they sell, the better. In such a case, spending money to get people to conserve water is a waste of money—in their terms—inefficient and commercially counterproductive.

  The private sector knows that in a market if water becomes scarce, that just makes it more expensive. Consumer choice will determine if people want water and how much they want at the new price. That is what efficient allocation of resources means, according to economists. What it does not recognise is that people may need water. Somehow necessity was left out of Adam Smith's model of the market. What else is unrecognised is that human beings are not the centre of the universe or the only users of water. Trees and plants depend on the water table at a certain height. Fish, including oceanic fish stocks, may depend on the quantity and quality of riverine water. They cannot dig wells and they cannot pay and we need them.

  But private sector water operators do not need to know about this; they only need to know the bottom line economic figures. Are they selling all the water they can? Is there any activity that is non-productive that they can cut? Activities such as water conservation, water quality monitoring, monitoring inputs into streams, dams and ground water are the business of the EPA, landcare groups or DEST and no concern of theirs.

  Remember, these are issues that arise from simple privatisation. What we are actually seeing is that water will not just be privatised; it will be broken up into several companies. This will mean that all the negative consequences of privatisation will be amplified, while no company will have a need or rationale for an overview of what is happening to water in the region. All the environmental issues are exacerbated since water flows and becomes the problem of some other utility downstream.

  Then there is the equity question. In commercial and strict engineering terms, the more water a customer uses, the cheaper it is to provide. Big business should get bulk discount rates—the bigger the cheaper. Then cheap prices can encourage more water hungry industries and we can substantially draw down the water table and put those unused resources to work. For domestic users, all this base rate excess water stuff should go. It is just cross-subsidy. The business is selling water and those who use more require less maintenance per litre provided.

  On economic grounds, people who do not use much water should pay more—like small accounts in banks pay more. This is a disastrous equity position. Of course, any rural water provision will cost more to provide, so should cost more for the user. The rich will get cheaper water and be encouraged to use more for their big lawns, nice gardens and fountains. The average householder should pay more. Why should there be a base rate? Should the poor be subsidised? Actually, they should pay penalty rates because of high maintenance costs. If we are going to subsidise people who do not use much water, it should be done through a social security rebate and properly means tested, which will increase the social security outlays and provoke more calls for cuts to that portfolio. Isn't this what competition policy is all about?

  Water, sadly, is not a unique case. Similar considerations apply to electricity. While electricity is not a natural resource, air, coal and weather are. Currently, efforts to reduce greenhouse emissions and promote energy conservation could and should be handled in an integrated way between departments of housing, local government through building codes and zoning, through urban planning, transport, public transport, departments of industry and development industry and the EPAs. The fact that currently little or nothing is being done does not mean that it is acceptable to make the option of action much more difficult.

  One of major difficulties has always been that energy utilities see themselves as sellers of power in the way I decried as attitudes likely for private water utilities. Their agenda has always been to sell as much power as they can and to expand. It is only recently that calls for energy management have seen any response. This incipient response is likely to disappear with privatisation. The result will be increasing greenhouse emissions, acid rain, photochemical smog events and total failure to meet greenhouse targets. The kind of integrated approach between various sectors and departments and the use of economic and tax incentives and disincentives, regulation and other policy mechanisms in a concerted way will become much more difficult even if it is not directly opposed as a barrier to competition. Any cost can no longer easily come from energy revenue.

  As we move to cost recovery, we will see the same discounts for energy intensive industries, some reduction for businesses in central business districts, higher rates for households, penalty rates for low power users who consequently have higher relative servicing costs and super penalties to rural and remote users. There may be some scope, if governments are committed, to providing programs such as Illawarra Power's subsidy for replacing remote grid connection with stand-alone power systems using renewable energy. But since it will cost money, there is not likely to be a lot of motive for a private utility to go to the trouble if they can simply charge a lot more and leave the choice to the consumer. If companies do take this on, they will probably want money from government while public utilities could see it as part of energy management for the public good.

  Privatisation of power will create other problems, especially with the suggestion of an integrated south-eastern grid. Please do not call it a national grid when you talk to someone from Western Australia. If privatised power utilities compete to provide power to the grid and money is distributed accordingly, there will be a big push in Victoria to provide more power at cut rates from brown coal. They will try to make up in volume what they do not have in quality. The state government is liable to aid this rather than see power money flow out of Victoria to other states. The consequences would be environmentally disastrous.

  On equity grounds, this legislation also creates problems with the push for increasing privatisation of public services opening a very big can of worms. What services are included and how a privatised system can be regulated to ensure the common good is met is a very complex issue. We have not really seen the full agenda of privatisation. We have certainly not seen proposals for any safeguards. Environmental safeguards, standards and performance criteria are particularly lacking.

  I support Senator Margetts in her claim that this legislation is not at all ready for consideration. We have almost no idea what we are considering, what the implications are or what it will cost. The government owes it to the Senate and to the people of Australia, who in most polls oppose privatisation of public utilities, to go away and come back when it has something more specific to offer and some evidence that it will improve the situation for ordinary people, the poor and the environment. I say `improve' and not `work without imposing hardship'. If we are to make this major change without any real assurance it will work, it is not enough to say that things will not be worse. There must be and should be a promise that they will be positively better. We have seen no evidence of this so far.

  The Greens are indicating that they do not support this legislation. We regret that we are rushing into it because of the political monoculture in which we live where the major parties have indicated support for it. We urge people to be aware of the dangers that it will impose in environmental and equity terms on the Australian community.