The Final Report of the NSW Legislative Council's Nile Inquiry into the Gentrader (Electricity Power Stations) Transactions was tabled on 23 February.
The report recommends the transactions be rescinded and a Royal Commission – a judicial inquiry – be appointed to inquire into the matter.
Extracts from the Foreward by the Committee’s chairman, the Rev. Fred Nile MP follow.
This Inquiry almost did not proceed after the Premier, the Hon Kristina Keneally MP, prorogued the Parliament in what was widely believed to be an attempt to prevent this Inquiry from going ahead.
Following advice from the Clerk of the Parliaments that the Committee could still meet and transactbusiness during prorogation, the President of the Legislative Council announced that she would allow the Inquiry to proceed.
Unfortunately the Committee was stymied in its efforts to uncover the facts surrounding the Gentrader transactions.
Despite multiple efforts to hear evidence from the directors who resigned from Delta and Eraring, these directors declined to appear before the Committee due to concerns about the application of parliamentary privilege during prorogation.
While the Committee sought reassurances from the Premier that she would not bring legal action against the directors for giving evidence to the Inquiry, the Premier would not give such an undertaking.
[Relevant extracts relating to value, risk, competition, the second tranche,the committee's key recommendations and links to previous comments may be seen below].
One of the key issues raised during the Inquiry was the value obtained by the transactions. It is clear that the net proceeds of the sale of the State's electricity assets will be significantly less than the $5.3 billion sale price.
The Treasurer suggested that after repaying debts and other costs the net proceeds will be around $3.272 billion. However this fails to take into account the $1.5 billion that the Government will be spending on developing the Cobbora coalmine to provide low cost coal to the electricity generators, nor does it take into account forgone revenue from the coal, which is estimated to be at least $1 billion.
It is also clear that the sale of assets under the Gentrader model has still left the State with risks relating to the electricity market, coal supply and the costs of operating and maintaining generators.
In the event that the NSW Government has failed to properly assess the future costs of operating and maintainingthe generators, then the NSW taxpayer will be required to meet these as yet unquantified costs.
Concerns were also raised regarding the impact of the transactions on competition in the NSW retail electricity market. The Government argued that the reforms will lead to increased competition and lower electricity charges for consumers, however the Committee was not convinced by these arguments.
Hence the Committee recommended that the structure of the NSW retail electricity industry be subject to an Independent Pricing and Regulatory Tribunal inquiry.
….second tranche abandoned…
On 1 February 2011, more than halfway through the Inquiry, the Premier announced that the NSW Government would not proceed with any further privatisation of the State's energy sector.
The result of this decision is that the second tranche of the Government's energy reform process will not proceed, leaving the Macquarie Generation and Delta Coastal Gentrader contract bundles in public ownership.
The reality of a half-privatised electricity industry raises an entirely new set of issues, which the Committee had limited time to explore.
Due to the significant concerns about the transactions, the Committee has recommended that the Gentrader contracts be immediately rescinded to allow the incoming government to reassess the future of the electricity industry in New South Wales, and that the full financial details of the transactions be made publicly available.
Acknowledging that a state election is only a matter of weeks away, the Committee recommended that the incoming government establish a full Judicial Inquiry into the energy reform transactions.
In the event that the current Government does not rescind the Gentrader contracts, the Judicial Inquiry should examine the amount of damages that the State may be liable for if the Gentrader contracts were to be reversed.
….. further privatisation….
Importantly, the Committee also recommended that legislation be enacted to prohibit any privatisation, leasing or other form of disposal of a principal undertaking of a State-owned electricity company without the approval of both Houses of Parliament.
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