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South Australia sold its state owned electricity grid to Chinese owners for 200 years. Every time people say our high power prices are due to renewables think c

by shirro 4y ago

South Australia sold its state owned electricity grid to Chinese owners for 200 years. Every time people say our high power prices are due to renewables think critically. A "conservative" government granted the right to tax our entire population and our businesses for multiple human lifetimes, longer than our state has existed for a short term windfall that disappeared in the blink of an eye. Call it corruption, or call it mismanagement, probably neither given Australia's harsh defamation laws but privatization should be viewed with extreme suspicion. Services can often be run more efficiently in private hands but the opportunities for corruption in the sale of public assets is massive and there is rarely any accountability.

Teever 4y ago
Wow, it honestly sounds like the best course of action there would be to just start a second electrical grid as crazy as it sounds.
- mikeyouse 4y ago
  Contracts are only as good as the enforcement mechanism and in this case, the fact that it’s critical infrastructure only works in their favor. Just nationalize it, pay the existing owners some “fair value” amount for their trouble and resign to fighting a WTO lawsuit.
  - dannyw 4y ago
    ISDS, lose arbitration, get fined.
- darzu 4y ago
  Just take it back, pay compensation. People r so scared to set a bad precedent for future business deals and yet businesses repeatedly don’t care about leveraging every advantage they have for profit over people.
- shirro 4y ago
  Over 40% of homes have rooftop solar PV as do many businesses. It is harder for renters and low income earners. Going off grid completely is difficult and generally impractical for most people as the return on investment with storage is still questionable and the costs are high. While they can offset some costs with their own generation they, their children and grandchildren are still going to be taxed for their grid connection. Overbuilding the electricity grid would be a ridiculously inefficient and expensive task and is unlikely to save anyone money. It is a natural monopoly. The grid was originally bought by the state from private operators to support the state's industrialization and economic growth as foreign investors didn't want to help grow our economy. That was decades ago under an old-school conservative leadership that was pro-business and the interests of all and not just looking after their mates and themselves. I think we need to rethink our conception of political parties and who they represent because I question how many truly represent me.
mellavora 4y ago
> Services can often be run more efficiently in private hands Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Services such as electricity benefit from long-term investment, and create much hard to capture value. In theory, a government will be efficient at allocating resources for that. We HAVE to stop thinking that business is always more efficient at everything. Business is great, I've started a few and see what they've done to lift people out of poverty-- but it is built on the back of responsible government.
- idrathernot 4y ago
  I think that business is most often more efficient, but efficiency doesn’t need to be the goal for everything and those are the areas where government is needed. This is assuming that the people running the government aren’t just as corrupt and greedy as their corporate brethren.
  - beowulfey 4y ago
    The problem is, the goal of a business is not efficiency—it is to make money. There are many ways to make money, and they don’t all come from effiency of service. (Of course, the goal of government is not efficiency either)
    - shirro 4y ago
      In a regulated industry there can be a perverse incentive for operators to be less efficient. The practice is called Gold Plating. The regulator allows the operator profits in part based on their network investment so an operator has an incentive to over invest in maintenance and upgrades and inflate the costs. That is one of the ways they can make super profits in what is supposed to be a regulated market. Consumers pay for the overspending and the profits on top for no benefit which is worse than just paying for higher profit margins.
- helsinkiandrew 4y ago
  > Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Not necessarily true, many power generation projects are built knowing that they won’t be profitable for many decades and are happily funded by pension companies that treat them like bonds. Many government projects don’t get done because their payoffs won’t be seen within the election cycle.
aintgonnatakeit 4y ago
Sounds like an excellent case for nationalization to me.
noizejoy 4y ago
In theory - and as has happened in history - governments can repatriate (nationalize) critical assets. So as long as a nationstate has meaningful independence, even the threat of that emergency lever can prevent the worst abuse. If such meaningful independence doesn’t exist, it arguably doesn’t make much of a difference who’s name plate is on the ownership?
- lategloriousgnu 4y ago
  39% all goods exported from Australia in 2019-20 were to China. Of that 39%, over half of that was iron ore. Australian iron ore production is valued at $136 billion a year to the economy. Unfortunately, Australia really doesn't have much leverage in this space, and forcibly re-nationalizing an asset like that, would cause major diplomatic problems, like the harsh trade sanctions imposed by China over the last few years due to Australia backing a COVID inquiry.
  - dzhiurgis 4y ago
    34% in 2022 and likely will keep dropping as that ship has sailed few years ago.
  - newsclues 4y ago
    Flipside, in the event of diplomatic breakdowns with China towards conflict, it becomes easy and profitable to re-nationalize for national security reasons.
  - worthless-trash 4y ago
    I wonder how much of that 36% gets turned into metals and then shipped right back to australia. Maybe its time that Australia start doing the ore processing in-country and cut out the middle man.
    - simonh 4y ago
      Good question and it’s an interesting rabbit hole to dive into. Chinese steel exports to Australia are a rounding error. Australia has a relatively small population. https://legacy.trade.gov/steel/countries/pdfs/exports-china.pdf https://legacy.trade.gov/steel/countries/pdfs/exports-china.... Australia doesn’t have much in the way of domestic manufacturing need for steel, so there’s little internal base demand to support production. Australian labour costs more, so as a steel producer it would have trouble competing with China on export markets. The US and Japan do have domestic steel production, but they both have steel hungry manufacturing sectors, and anyway they specialise in high quality specialist steel products. Those take expensive specialist facilities and highly skilled workers, but there’s no real way for Australia to develop such specialist facilities and skills from scratch.
kurthr 4y ago
Pass a law and fix it. Australia is a sovereign state. I know it sounds simple and it is, but the politicians might not actually represent their voters. Set a maximum power rate, service level agreement, and mandatory renewable generation. Drive them into bankruptcy and have the court offer it to a new operator when they can't comply. Eminent domain to prevent power outages, before they can even shut things down. If Sri Lanka (or Africa) didn't need more money from China (eg US, India, etc.) they could take back their port tomorrow by passing a law.
- Reason077 4y ago
  Trade agreements (eg: ChAFTA in this case) typically contain clauses which restrict the ability to pass laws that directly harm the interests of one countries investments in the other. But in any case, transmission grid operators are natural monopolies that are usually heavily regulated and can’t simply charge whatever they want. I’m sure South Australia’s grid is no different.
  - kurthr 4y ago
    Well, based on that every utility should be sold off to a foreign country since only then are you prevented global trade laws and treaties from passing laws (or even failing to enforce civil fines?) that harm their interests. Frankly, I'm doubtful this is a case of actual enforcement of global trade rules, it's pure economic power. That works until it doesn't, and even the purchasers of these profitable "rights" know this. That's why they want to get their money out quickly, but once the local government has turned against you it's rarely worth fighting even for the largest funds.
  - pas 4y ago
    Trade agreements usually contain provisions for dispute resolution. Back before 2016 the big boogeyman was ISDS (investor-state dispute settlement). If a state made a bad deal they can either renegotiate it (eg. negotiate in a fee to cancel the whole contract) or try for arbitration (and the tribunal might set a fee for cancellation), or assert their sovereignty. Of course with China everything that reaches political circles becomes a power-play, but at least in the first two cases they are less motivated to respond in kind (ie. levy tariffs or fuck with the business of Australian companies in China).
robotnikman 4y ago
That is... definitely unsettling.
makeitdouble 4y ago
> Services can often be run more efficiently in private hands I’m not sure I’ve ever seen an example where “efficiency” wasn’t just giving up on social obligations (either by screwing employees, or screwing customers, often both). I’m looking around and see postal services (it still breaks me that “going postal” means what it means), roads, railways, energy production. I don’t see any of them having gotten meaningfully cheaper or providing better service or handling their employees better through privatization. As an hybrid, splitting into nationalized infra management and privatized customer facing service potentially worked for ISPs. That’s the only mildly positive example I can come up with.
- JohnFen 4y ago
  This. I literally can't think of a single time where something public was privatized and it got better. Usually, it just gets more expensive and a bit worse.
  - refurb 4y ago
    I can. They privatize the registry services (driving, business, birth certificates) in Alberta, Canada. It went from a US DMV experience - shitty attitudes, bankers hours, two locations in the city To… Dozens of small businesses around the city, hours that cater to people that work, lower prices (they all competed with each other) and good attitudes (because you could always go somewhere else). A massive jump in quality of services that took it from time wasting drudgery to a simple, easy process that was cheaper.
    - JohnFen 4y ago
      Nice! Yes, once again I forgot to add "in the US" to my comment.
- missedthecue 4y ago
  One example is the privatization of telecommunication sector in India. They now have some of the cheapest data in the world and have brought on tens of millions of new users in recent years. Competition has been a force for good. An additional one that comes to mind is following the privatization of airlines in many countries, air travel got much cheaper. India is also a glaring example, there are instances in Europe as well. (The US was never a monopoly but it was highly regulated up until the Carter admin in the 1970s. Deregulation produced a similar positive result) Going further back there are numerous academic examples. The classic figure is that private farms in the soviet union worked only 3% of the total sown land, but produced 66% of the eggs, 64% of the potatoes, 40% of the meat, and 39% of the milk. China had similar figures. In general I think privatization works best where that force of competition can influence things. I'm not sure exactly how Chicago parking meters companies could compete with each other or improve 'service', but for industries prone to competition, privatization makes a lot of sense to me over government monopoly.
analyst74 4y ago
Why would Chinese owners want to buy that? It seems unlikely that Australia will hold its bargain for the whole 200 years given current political climate.
- selcuka 4y ago
  They bought it for $3.5B, but the annual revenue of SA Power Networks is around $600M. I don't know the profit margin, but they won't have to wait for 200 years to get their investment back.
  - analyst74 4y ago
    Typical utility company margin is ~10%, so $60M profit for the buyer, it will take 58.3 years before they break even, or 1.7% return on their capital. This just seems like a really bad deal for whoever buys it.
    - selcuka 4y ago
      Obviously this is assuming that the energy prices will be stable in the next decades. The AER decided that SA Power Networks can have a total of $3914.2 million from its customers from 1 July 2020 to 30 June 2025, which is already higher than the $600M/year figure above. Regarding your 10% assumption: In June 2014, the Adelaide Advertiser reported that SA Power Networks made after-tax profits of $420 a year from each customer compared with $92 for another Li Ka-shing-owned utility in Britain. I don't believe the average customer paid $4,200 for energy in 2014, so their profit margin must be much higher than 10%.
- rasz 4y ago
  Are you asking why Chinese would want to fully own and control _critical safety infrastructure_ of another nation?
missedthecue 4y ago
The opportunity for corruption in the sale of state assets is always there. You are right. But it's also an ever constant presence when the assets are state run. In my (LatAm) country, privatization has generally been a great success where it's happened because when the companies are run by the government, there's constant grift going on. The privatization of the mines in particular was wildly successful. Production went up, costs went down, and the state still collects profits in the form of mineral taxes. The mines were a black hole of public money when the government was in charge of them.
- markdown 4y ago
  > The privatization of the mines in particular was wildly successful. We're talking about government services here. Of course a mine will be more profitable in private hands.
  - missedthecue 4y ago
    my point is about corruption, not the mine. Keeping things in the governments control doesn't stop or prevent corruption from occurring, so it's odd to me that a criticism of privatization is the chance for corruption to take place.
deleted 4y ago
[deleted]
O__________O 4y ago
> probably neither given Australia's harsh defamation laws Not to mention if you rub the wrong people your house might get fire bombed: https://www.google.com/search?q=australia+house+firebombed https://www.google.com/search?q=australia+house+firebombed
numbers_guy 4y ago
How could it not be corruption? If it weren't corruption it would almost make the situation worse. That somebody who got elected thinks that would be a good idea, genuinely...
walrus01 4y ago
> South Australia sold its state owned electricity grid to Chinese owners for 200 years. Every time people say our high power prices are due to renewables think critically. With electrical rates above $0.35/kWh, that's the point where I would get a loan to install a massive off grid solar system with LiFePo4 batteries and probably have a ROI period of under 7 years. And then leave a basic meter and panel connected to the grid with nothing on it.
Zaheer 4y ago
I generally agree but just a thought exercise: Public government is what got us in this mess in the first place and isn't 'run efficiently'. What if all government functions were privatized?
vondur 4y ago
This is insane, selling out something as crucial as the electricity grid to a CCP business.
ojbyrne 4y ago
A comment further down says the sale price was 3.5 billion dollars, revenue of the company is $600 million. If the profit margin is 10% (not unreasonable for a regulated utility) that works out to an interest rate of 1.7%. So basically a $3.5 billion loan at a 1.7% rate locked in for 200 years. Sweet deal.
bogomipz 4y ago
>"South Australia sold its state owned electricity grid to Chinese owners for 200 years." That's something of a stretch. State Grid Corp of China bought a 41% stake in South Australia's transmission network owner ElectraNet. See: https://archive.is/0yXEH https://archive.is/0yXEH
- shirro 4y ago
  That was 14 years later. The initial privatisation was in 1999 and retail went to AGL and power distribution was sold to Cheung Kong Infrastructure from Hong Kong. They retain majority ownership. State Grid of China is a much more recent investment in transmission and not as controversial as the original privatization of the entire public utility. Australia isn't against foreign investment or Chinese investment in particular. I added China more or less as clickbait but the real problem was the lack of public interest and the impact it has had on livability and the economy. I believe the SA grid operator has the highest profit per customer in the country which probably means they are some of the highest per customer in the world. The 200 year lease was mentioned as it is unusually long and there was some misrepresentation over the length of the lease to people who voted for it and the public. The question of sovereign interests is real. The original nationalisation in the 50s or 60s was I think due to issues the state government had with the British owners interests not aligning with the state's ambitions. But at the time of sale tensions with China were not the same and the problem was that it was a terrible deal for the state that led to a subsequent explosion in power prices.
  - bogomipz 4y ago
    The "electricity grid" is composed of many parts both in South Australia and elsewhere. The components are generation, transmission, distribution and retail suppliers. Cheung Kong Infrastructure aka CKI's current position is only 23% of the distribution network.[1] So no, they did not "sell the grid" to China. [1] https://www.cki.com.hk/english/ourBusiness/home/inv_au.htm https://www.cki.com.hk/english/ourBusiness/home/inv_au.htm
    - shirro 4y ago
gonzo41 4y ago
Neoliberal economic policy is an ideology that only needs to work out for the first generations of neoliberals. After that they've 'got their's' and everyone else gets' to deal with the consequences. Example: See the state of the world at the moment.
jltsiren 4y ago
There are many similar stories around the world. A government, usually a center-right one, sells some critical public infrastructure for relatively little money. The new owners then raise prices as much as they can and make major profits. I believe the reason is more likely ideology than corruption. Certain kinds of pro-business politicians tend to think that privately run services are morally superior to government services. Because this is an ideological argument, they are unwilling to listen to empirical counterpoints. As politicians they are also prone to teleological thinking: because the purpose of privatization is to benefit the public, it will benefit the public. Hence they care less about the details of the privatization deal than they should.
- gotoeleven 4y ago
  Ahh yes that famously center-right chicago government.
  - katbyte 4y ago
    They did say usually.
  - tptacek 4y ago
    The government that signed this deal was in fact a centrist government (the Richard M. Daley administration), if not a center-right one. Chicago is a Democratic stronghold, but that history dates back to the old 4-party system when we had liberal Republicans and conservative Democrats. Daley was one of the last vestiges of that system.
    - dragonwriter 4y ago
      > the old 4-party system when we had liberal Republicans and conservative Democrats. A two-party system with misalignment between the axis between the parties and the main axis of political variation (as often happens for a short time during realignment periods, and happened for an unusually extended time in the US from about 1932 to about 1994) is not a four party system, its just a two-party system with ideologically incoherent parties.
schneems 4y ago
I live in Texas where we have an “efficient” system. It efficiently transfers wealth from the many to the few while providing unlimited anxiety. When my power was off for multiple days in subzero temps and i seriously considered one morning we might just not wake up I had a realization. Another way to look at “inefficiency” is: “redundancy”. And I sure as heck wish our grid had a little more redundancy.
taf2 4y ago
When we give a monopoly to a private company that is really bad… when we allow private companies to fight for every little bit of market share that is usually pretty good… subtle differences and agreed corruption tends to lead to monopolies that is bad
tmnvix 4y ago
There are a lot of responses to this comment along the lines of 'privatisation leads to more/less efficiency'. I'd like to point out that although 'efficiency' is usually the stated reason for privatisation, in reality it is often simply a distraction from the more significant (and fundamentally more ideological) consideration - providing those with capital with more investment opportunities. Edit: Unfortunately, because of the nature of much of what is privatised, these investment opportunities are often rent-seeking opportunities.
scotty79 4y ago
> Services can often be run more efficiently in private hands but ... It's not because it's private. It's because it's forced to compete. You can't just transfer ownership of a monopoly into private hands and call it privatisation. You need to split it first, sell parts to adversarial entities and prevent them from buying each other.
AtlasBarfed 4y ago
Well, time to put rooftop solar everywhere and bankrupt the Chinese owners of the grid.
emmelaich 4y ago
South Australia is a bit special isn't it. Their new hospital is (from wikipedia) > the most expensive building[1] ever built in Australia, and the most expensive hospital[2] ever built anywhere in the world, at US$2.44 billion in construction and equipment costs.

by shirro 4y ago

Teever 4y ago

Wow, it honestly sounds like the best course of action there would be to just start a second electrical grid as crazy as it sounds.

mikeyouse 4y ago
Contracts are only as good as the enforcement mechanism and in this case, the fact that it’s critical infrastructure only works in their favor. Just nationalize it, pay the existing owners some “fair value” amount for their trouble and resign to fighting a WTO lawsuit.
- dannyw 4y ago
  ISDS, lose arbitration, get fined.
darzu 4y ago
Just take it back, pay compensation. People r so scared to set a bad precedent for future business deals and yet businesses repeatedly don’t care about leveraging every advantage they have for profit over people.
shirro 4y ago
Over 40% of homes have rooftop solar PV as do many businesses. It is harder for renters and low income earners. Going off grid completely is difficult and generally impractical for most people as the return on investment with storage is still questionable and the costs are high. While they can offset some costs with their own generation they, their children and grandchildren are still going to be taxed for their grid connection. Overbuilding the electricity grid would be a ridiculously inefficient and expensive task and is unlikely to save anyone money. It is a natural monopoly. The grid was originally bought by the state from private operators to support the state's industrialization and economic growth as foreign investors didn't want to help grow our economy. That was decades ago under an old-school conservative leadership that was pro-business and the interests of all and not just looking after their mates and themselves. I think we need to rethink our conception of political parties and who they represent because I question how many truly represent me.

mellavora 4y ago

> Services can often be run more efficiently in private hands Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Services such as electricity benefit from long-term investment, and create much hard to capture value. In theory, a government will be efficient at allocating resources for that. We HAVE to stop thinking that business is always more efficient at everything. Business is great, I've started a few and see what they've done to lift people out of poverty-- but it is built on the back of responsible government.

idrathernot 4y ago
I think that business is most often more efficient, but efficiency doesn’t need to be the goal for everything and those are the areas where government is needed. This is assuming that the people running the government aren’t just as corrupt and greedy as their corporate brethren.
- beowulfey 4y ago
  The problem is, the goal of a business is not efficiency—it is to make money. There are many ways to make money, and they don’t all come from effiency of service. (Of course, the goal of government is not efficiency either)
  - shirro 4y ago
    In a regulated industry there can be a perverse incentive for operators to be less efficient. The practice is called Gold Plating. The regulator allows the operator profits in part based on their network investment so an operator has an incentive to over invest in maintenance and upgrades and inflate the costs. That is one of the ways they can make super profits in what is supposed to be a regulated market. Consumers pay for the overspending and the profits on top for no benefit which is worse than just paying for higher profit margins.
helsinkiandrew 4y ago
> Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Not necessarily true, many power generation projects are built knowing that they won’t be profitable for many decades and are happily funded by pension companies that treat them like bonds. Many government projects don’t get done because their payoffs won’t be seen within the election cycle.

aintgonnatakeit 4y ago

Sounds like an excellent case for nationalization to me.

noizejoy 4y ago

In theory - and as has happened in history - governments can repatriate (nationalize) critical assets. So as long as a nationstate has meaningful independence, even the threat of that emergency lever can prevent the worst abuse. If such meaningful independence doesn’t exist, it arguably doesn’t make much of a difference who’s name plate is on the ownership?

lategloriousgnu 4y ago
39% all goods exported from Australia in 2019-20 were to China. Of that 39%, over half of that was iron ore. Australian iron ore production is valued at $136 billion a year to the economy. Unfortunately, Australia really doesn't have much leverage in this space, and forcibly re-nationalizing an asset like that, would cause major diplomatic problems, like the harsh trade sanctions imposed by China over the last few years due to Australia backing a COVID inquiry.
- dzhiurgis 4y ago
  34% in 2022 and likely will keep dropping as that ship has sailed few years ago.
- newsclues 4y ago
  Flipside, in the event of diplomatic breakdowns with China towards conflict, it becomes easy and profitable to re-nationalize for national security reasons.
- worthless-trash 4y ago
  I wonder how much of that 36% gets turned into metals and then shipped right back to australia. Maybe its time that Australia start doing the ore processing in-country and cut out the middle man.
  - simonh 4y ago
    Good question and it’s an interesting rabbit hole to dive into. Chinese steel exports to Australia are a rounding error. Australia has a relatively small population. https://legacy.trade.gov/steel/countries/pdfs/exports-china.pdf https://legacy.trade.gov/steel/countries/pdfs/exports-china.... Australia doesn’t have much in the way of domestic manufacturing need for steel, so there’s little internal base demand to support production. Australian labour costs more, so as a steel producer it would have trouble competing with China on export markets. The US and Japan do have domestic steel production, but they both have steel hungry manufacturing sectors, and anyway they specialise in high quality specialist steel products. Those take expensive specialist facilities and highly skilled workers, but there’s no real way for Australia to develop such specialist facilities and skills from scratch.

kurthr 4y ago

Pass a law and fix it. Australia is a sovereign state. I know it sounds simple and it is, but the politicians might not actually represent their voters. Set a maximum power rate, service level agreement, and mandatory renewable generation. Drive them into bankruptcy and have the court offer it to a new operator when they can't comply. Eminent domain to prevent power outages, before they can even shut things down. If Sri Lanka (or Africa) didn't need more money from China (eg US, India, etc.) they could take back their port tomorrow by passing a law.

Reason077 4y ago
Trade agreements (eg: ChAFTA in this case) typically contain clauses which restrict the ability to pass laws that directly harm the interests of one countries investments in the other. But in any case, transmission grid operators are natural monopolies that are usually heavily regulated and can’t simply charge whatever they want. I’m sure South Australia’s grid is no different.
- kurthr 4y ago
  Well, based on that every utility should be sold off to a foreign country since only then are you prevented global trade laws and treaties from passing laws (or even failing to enforce civil fines?) that harm their interests. Frankly, I'm doubtful this is a case of actual enforcement of global trade rules, it's pure economic power. That works until it doesn't, and even the purchasers of these profitable "rights" know this. That's why they want to get their money out quickly, but once the local government has turned against you it's rarely worth fighting even for the largest funds.
- pas 4y ago
  Trade agreements usually contain provisions for dispute resolution. Back before 2016 the big boogeyman was ISDS (investor-state dispute settlement). If a state made a bad deal they can either renegotiate it (eg. negotiate in a fee to cancel the whole contract) or try for arbitration (and the tribunal might set a fee for cancellation), or assert their sovereignty. Of course with China everything that reaches political circles becomes a power-play, but at least in the first two cases they are less motivated to respond in kind (ie. levy tariffs or fuck with the business of Australian companies in China).

robotnikman 4y ago

That is... definitely unsettling.

makeitdouble 4y ago

> Services can often be run more efficiently in private hands I’m not sure I’ve ever seen an example where “efficiency” wasn’t just giving up on social obligations (either by screwing employees, or screwing customers, often both). I’m looking around and see postal services (it still breaks me that “going postal” means what it means), roads, railways, energy production. I don’t see any of them having gotten meaningfully cheaper or providing better service or handling their employees better through privatization. As an hybrid, splitting into nationalized infra management and privatized customer facing service potentially worked for ISPs. That’s the only mildly positive example I can come up with.

JohnFen 4y ago
This. I literally can't think of a single time where something public was privatized and it got better. Usually, it just gets more expensive and a bit worse.
- refurb 4y ago
  I can. They privatize the registry services (driving, business, birth certificates) in Alberta, Canada. It went from a US DMV experience - shitty attitudes, bankers hours, two locations in the city To… Dozens of small businesses around the city, hours that cater to people that work, lower prices (they all competed with each other) and good attitudes (because you could always go somewhere else). A massive jump in quality of services that took it from time wasting drudgery to a simple, easy process that was cheaper.
  - JohnFen 4y ago
    Nice! Yes, once again I forgot to add "in the US" to my comment.
missedthecue 4y ago
One example is the privatization of telecommunication sector in India. They now have some of the cheapest data in the world and have brought on tens of millions of new users in recent years. Competition has been a force for good. An additional one that comes to mind is following the privatization of airlines in many countries, air travel got much cheaper. India is also a glaring example, there are instances in Europe as well. (The US was never a monopoly but it was highly regulated up until the Carter admin in the 1970s. Deregulation produced a similar positive result) Going further back there are numerous academic examples. The classic figure is that private farms in the soviet union worked only 3% of the total sown land, but produced 66% of the eggs, 64% of the potatoes, 40% of the meat, and 39% of the milk. China had similar figures. In general I think privatization works best where that force of competition can influence things. I'm not sure exactly how Chicago parking meters companies could compete with each other or improve 'service', but for industries prone to competition, privatization makes a lot of sense to me over government monopoly.

analyst74 4y ago

Why would Chinese owners want to buy that? It seems unlikely that Australia will hold its bargain for the whole 200 years given current political climate.

selcuka 4y ago
They bought it for $3.5B, but the annual revenue of SA Power Networks is around $600M. I don't know the profit margin, but they won't have to wait for 200 years to get their investment back.
- analyst74 4y ago
  Typical utility company margin is ~10%, so $60M profit for the buyer, it will take 58.3 years before they break even, or 1.7% return on their capital. This just seems like a really bad deal for whoever buys it.
  - selcuka 4y ago
    Obviously this is assuming that the energy prices will be stable in the next decades. The AER decided that SA Power Networks can have a total of $3914.2 million from its customers from 1 July 2020 to 30 June 2025, which is already higher than the $600M/year figure above. Regarding your 10% assumption: In June 2014, the Adelaide Advertiser reported that SA Power Networks made after-tax profits of $420 a year from each customer compared with $92 for another Li Ka-shing-owned utility in Britain. I don't believe the average customer paid $4,200 for energy in 2014, so their profit margin must be much higher than 10%.
rasz 4y ago
Are you asking why Chinese would want to fully own and control _critical safety infrastructure_ of another nation?

missedthecue 4y ago

The opportunity for corruption in the sale of state assets is always there. You are right. But it's also an ever constant presence when the assets are state run. In my (LatAm) country, privatization has generally been a great success where it's happened because when the companies are run by the government, there's constant grift going on. The privatization of the mines in particular was wildly successful. Production went up, costs went down, and the state still collects profits in the form of mineral taxes. The mines were a black hole of public money when the government was in charge of them.

markdown 4y ago
> The privatization of the mines in particular was wildly successful. We're talking about government services here. Of course a mine will be more profitable in private hands.
- missedthecue 4y ago
  my point is about corruption, not the mine. Keeping things in the governments control doesn't stop or prevent corruption from occurring, so it's odd to me that a criticism of privatization is the chance for corruption to take place.

deleted 4y ago

[deleted]

O__________O 4y ago

> probably neither given Australia's harsh defamation laws Not to mention if you rub the wrong people your house might get fire bombed: https://www.google.com/search?q=australia+house+firebombed https://www.google.com/search?q=australia+house+firebombed

numbers_guy 4y ago

How could it not be corruption? If it weren't corruption it would almost make the situation worse. That somebody who got elected thinks that would be a good idea, genuinely...

walrus01 4y ago

> South Australia sold its state owned electricity grid to Chinese owners for 200 years. Every time people say our high power prices are due to renewables think critically. With electrical rates above $0.35/kWh, that's the point where I would get a loan to install a massive off grid solar system with LiFePo4 batteries and probably have a ROI period of under 7 years. And then leave a basic meter and panel connected to the grid with nothing on it.

Zaheer 4y ago

I generally agree but just a thought exercise: Public government is what got us in this mess in the first place and isn't 'run efficiently'. What if all government functions were privatized?

vondur 4y ago

This is insane, selling out something as crucial as the electricity grid to a CCP business.

ojbyrne 4y ago

A comment further down says the sale price was 3.5 billion dollars, revenue of the company is $600 million. If the profit margin is 10% (not unreasonable for a regulated utility) that works out to an interest rate of 1.7%. So basically a $3.5 billion loan at a 1.7% rate locked in for 200 years. Sweet deal.

bogomipz 4y ago

>"South Australia sold its state owned electricity grid to Chinese owners for 200 years." That's something of a stretch. State Grid Corp of China bought a 41% stake in South Australia's transmission network owner ElectraNet. See: https://archive.is/0yXEH https://archive.is/0yXEH

shirro 4y ago
That was 14 years later. The initial privatisation was in 1999 and retail went to AGL and power distribution was sold to Cheung Kong Infrastructure from Hong Kong. They retain majority ownership. State Grid of China is a much more recent investment in transmission and not as controversial as the original privatization of the entire public utility. Australia isn't against foreign investment or Chinese investment in particular. I added China more or less as clickbait but the real problem was the lack of public interest and the impact it has had on livability and the economy. I believe the SA grid operator has the highest profit per customer in the country which probably means they are some of the highest per customer in the world. The 200 year lease was mentioned as it is unusually long and there was some misrepresentation over the length of the lease to people who voted for it and the public. The question of sovereign interests is real. The original nationalisation in the 50s or 60s was I think due to issues the state government had with the British owners interests not aligning with the state's ambitions. But at the time of sale tensions with China were not the same and the problem was that it was a terrible deal for the state that led to a subsequent explosion in power prices.
- bogomipz 4y ago
  The "electricity grid" is composed of many parts both in South Australia and elsewhere. The components are generation, transmission, distribution and retail suppliers. Cheung Kong Infrastructure aka CKI's current position is only 23% of the distribution network.[1] So no, they did not "sell the grid" to China. [1] https://www.cki.com.hk/english/ourBusiness/home/inv_au.htm https://www.cki.com.hk/english/ourBusiness/home/inv_au.htm
  - shirro 4y ago

gonzo41 4y ago

Neoliberal economic policy is an ideology that only needs to work out for the first generations of neoliberals. After that they've 'got their's' and everyone else gets' to deal with the consequences. Example: See the state of the world at the moment.

jltsiren 4y ago

There are many similar stories around the world. A government, usually a center-right one, sells some critical public infrastructure for relatively little money. The new owners then raise prices as much as they can and make major profits. I believe the reason is more likely ideology than corruption. Certain kinds of pro-business politicians tend to think that privately run services are morally superior to government services. Because this is an ideological argument, they are unwilling to listen to empirical counterpoints. As politicians they are also prone to teleological thinking: because the purpose of privatization is to benefit the public, it will benefit the public. Hence they care less about the details of the privatization deal than they should.

gotoeleven 4y ago
Ahh yes that famously center-right chicago government.
- katbyte 4y ago
  They did say usually.
- tptacek 4y ago
  The government that signed this deal was in fact a centrist government (the Richard M. Daley administration), if not a center-right one. Chicago is a Democratic stronghold, but that history dates back to the old 4-party system when we had liberal Republicans and conservative Democrats. Daley was one of the last vestiges of that system.
  - dragonwriter 4y ago
    > the old 4-party system when we had liberal Republicans and conservative Democrats. A two-party system with misalignment between the axis between the parties and the main axis of political variation (as often happens for a short time during realignment periods, and happened for an unusually extended time in the US from about 1932 to about 1994) is not a four party system, its just a two-party system with ideologically incoherent parties.

schneems 4y ago

I live in Texas where we have an “efficient” system. It efficiently transfers wealth from the many to the few while providing unlimited anxiety. When my power was off for multiple days in subzero temps and i seriously considered one morning we might just not wake up I had a realization. Another way to look at “inefficiency” is: “redundancy”. And I sure as heck wish our grid had a little more redundancy.

taf2 4y ago

When we give a monopoly to a private company that is really bad… when we allow private companies to fight for every little bit of market share that is usually pretty good… subtle differences and agreed corruption tends to lead to monopolies that is bad

tmnvix 4y ago

There are a lot of responses to this comment along the lines of 'privatisation leads to more/less efficiency'. I'd like to point out that although 'efficiency' is usually the stated reason for privatisation, in reality it is often simply a distraction from the more significant (and fundamentally more ideological) consideration - providing those with capital with more investment opportunities. Edit: Unfortunately, because of the nature of much of what is privatised, these investment opportunities are often rent-seeking opportunities.

scotty79 4y ago

> Services can often be run more efficiently in private hands but ... It's not because it's private. It's because it's forced to compete. You can't just transfer ownership of a monopoly into private hands and call it privatisation. You need to split it first, sell parts to adversarial entities and prevent them from buying each other.

AtlasBarfed 4y ago

Well, time to put rooftop solar everywhere and bankrupt the Chinese owners of the grid.

emmelaich 4y ago

South Australia is a bit special isn't it. Their new hospital is (from wikipedia) > the most expensive building[1] ever built in Australia, and the most expensive hospital[2] ever built anywhere in the world, at US$2.44 billion in construction and equipment costs.