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Legislative Assembly for the ACT: 1998 Week 8 Hansard (27 October) . . Page.. 2305 ..

MR QUINLAN (continuing):

Privatisation implies operation based on the profit motive. The profit motive implies market growth, an increase in market share, which is not too bad if you go outside the Territory for at least electricity, and just pure growth in the market, and that is undesirable within the ACT. It is undesirable in terms of consumption of energy and it is undesirable in terms of water consumption. I will not refer to trying to increase the market in the provision of sewerage services.

Growth of consumption in the energy and water markets is contrary to sound environmental management. If we want to see past our nose in this particular debate, that is our future. Our future is with a privatised ACTEW trying to sell as much water as it can and trying to sell as much energy as it can; promoting energy use by pricing at the margin - the more you use the less it costs - and correcting the so-called cross-subsidies in the market; sharpening the pencil in the commercial market and using the blunter pencil in the domestic market where most of us happen to sit.

Privatisation and a profit motive also imply cost minimisation - minimisation in customer service, and minimisation in maintenance. I will use the family sedan analogy. If you cut back on servicing your motor car the impact will not be felt immediately. It might not be felt for a few years, but you will feel it sooner or later. It will happen. Somewhere down the track you are going to pay for that lack of service. I have this vision of a bevy of consultants analysing optimum risk profiles and giving authority to a rationalisation of maintenance. We have seen plenty of examples and they have been quoted before, so I will not dwell on them. I might cut my contribution to the debate a little bit short here.

The profit motive also involves price maximisation, the maximisation of overall gross returns. We have heard in this place, and we have seen in the press, assurances that we will get a tight regulatory framework. Those assurances give me no comfort whatsoever. I quote from the Independent Pricing and Regulatory Commission Act:

In making a decision under subsection (1), -

which relates to deciding prices -

the Commission shall have regard to -

... ... ...

(d) an appropriate rate of return on any investment in the regulated industry;

(e) the cost of providing the regulated services; ...

What does that tell you? What we have is the prospect of some entrepreneur coming into Canberra and injecting $1.2 billion - probably, almost certainly, a mixture of debt and equity requiring a return of something up to about 10 per cent, or 8 per cent or 9 per cent these days. We are living in a time of low inflation and low interest rates. That will not continue indefinitely. Both that debt and equity are going to have to be served and,

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