What does the Ausgrid sale mean for power prices?

Posted: 21 October 2016 8:49 am

The NSW government gets $16 billion, but that won't lead to lower electricity bills.

So yesterday the NSW government finally managed to sell off a healthy chunk of state-owned electricity generator Ausgrid. It had previously sealed a deal with a Chinese consortium, but that was blocked by the Foreign Investment Review Board.

Now it will lease 50.4% of the business for 99 years to a consortium of two superannuation funds, IFM Investors and AustralianSuper. Because the buyers are Australian, no approval by the FIRB is needed.

It's a good outcome for the super funds, who need the kind of steady earnings that kind of infrastructure business can provide, especially in a low-interest world. And it will put a big chunk money into government coffers, with NSW premier Mike Baird promising to spend the money on "roads, rails, schools and hospitals".

What it won't do is make any real difference to power pricing in NSW. As an electricity wholesaler, Ausgrid's pricing strategy is tightly regulated: it can't just suddenly decide to jack up prices massively. The sale merely represents the latest step in an ongoing move to privatise electricity provision and introduce competition, a pattern that we've seen in many states in Australia.

It's nice to have choice, though it would also be nice not to have a steady stream of door-to-door salespeople trying to convince you to switch. A recent assessment of the NSW market by the Independent Pricing and Regulatory Tribunal suggests that competition has substantially improved since the market was fully deregulated in 2014.

It's also clear that many people haven't taken advantage of choice; for instance, the vast majority of customers get electricity and gas from the same supplier. That can make sense if you get a discount, but it won't necessarily score you the best deal. Comparing what's on offer can definitely be worthwhile, and that's as true now as it will be when the Ausgrid sale is finalised in December.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.

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