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.
> 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.
> 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.
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.
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.
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.
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.
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?
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
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.
> 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.
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.
> 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.
> 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.
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...
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.
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.
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?
So much to unpack.
City selling things cheaply to sovereign funds.
Price hikes when bought by VC for no reason (other than profit)
Capture of car-centric infrastructure, which makes it less likely to turn towards zero-carbon or multi-modal space - you can park 20 bikes in 1 car space.
and more....
I really wonder if there is any way to change the structure of government so that politicians are forced to reckon with some of the longer term impacts of their decisions, as opposed to "I'll be out in a couple years, that'll be future mayor's problem".
Right now Austin is trying some very dubious eminent domain measures (which were pretty drastically clobbered in court) to get out of a long term lease they signed just a few years ago to have a private operator run a small separate terminal at the airport. I think it was especially braindead for Austin to ever sign that lease - we were (and still are) growing like crazy, it didn't take much foresight to think Austin would eventually need to seriously expand the airport.
Of course, hardly anyone involved with the original bad decision is still on city council, so it became someone else's problem.
> The City Of Chicago retains control over pay station parking rates. CPM does not – and never has – set pay station parking rates. The City retains exclusive authority to determine and establish rates, set hours of operation, and place, add or remove metered spaces. The initial five‐year rate schedule, which ended in 2013, was approved by the City Council to align with rates comparable with other large U.S. cities. Prior to the agreement, parking rates in Chicago were much lower than the national average. Seventy percent of meters had not seen an increase in 20 years.
This should be the opposite: Sell the rights. Then abolish most of the parking and replace it with bike paths. No drop in city revenue. Sorry "investors", you SOL.
What I don't understand: If the city really needed short-term money, why couldn't they take out a loan against the parking-meter-system? It's extremely low-risk and in the long run the city could have keept it. This has to be corruption, doesn't it?
Do you still have to pay it? If it’s a private meter my first thought is that non-payment becomes a civil matter and in that case you likely can get away without paying.
I get “civil speeding tickets” (traffic cameras) all the time in my state. I simply throw them away without repercussion because the cost of suing to collect from every individual who hasn’t paid just isn’t worth it. Not sure if it applies in this case but in my state these also cannot legally be reported to credit agencies or insurance companies.
If this is not the case and the city is criminally prosecuting people (with taxpayer resources) to enforce private debts owed to the meter company, there’s a good chance a court would find the practice to be illegal. At least I hope that’s how it would turn out…
Yeah. And the system that's used to track the parking tickets by the city, CANVAS (IBM), cost the city over 100 million dollars alone. Currently suing for the system's database schema and our oral arguments are being brought to the IL supreme court later this month.
Selling something with long-term value for a short-term lump sum is the kind of thing a politician would do. He or she isn't going to be around later, so why not get reelected now?
On the other side, Richie Daley didn't have the acumen of David Bowie, who did the same thing:
Just think: who knew that parking meters would continue to throw off money? what happens when self-driving cars are cruising around and no one needs to park anymore?
Well they generated a lot less before price hikes. Ideally the city would have kept it and hiked prices, but unfortunately, high prices for street parking is politically unfavorable, even if socially optimal.
This kind of thing is basically looting: public officials making sweetheart deals, often to companies that have made generous campaign contributions, and selling public assets for far less than they're worth, allowing private companies to collect rent forever. And then the residents are stuck with some unaccountable company.
Pretty dumb move. They got screwed on the terms. They should have said "$3.6 billion or 75 years, whichever comes first." A 200% return should be enough to get investors on board.
What does it mean to buy the rights to parking meters? Are they buying the physical meters along with the right to collect and enforce fees on them? If the city passes a law that says "no more parking meters, we use drone enforcement now", what happens? What happens if parts of Chicago become car free zones, do the investors get to sue the city? This seems so dumb. So, so dumb.
It’s kind of amazing in a sick way.. cities are allowed to make such an uneducated and horrific decision without the input of their citizens in the name of short term cash, and VCs are able to basically purchase a money printing machine that relies on the city to enforce :)
Who employs the parking enforcement officials?
Does this company have a say in zoning and permitting changes and decisions?
Do they have easement rights on both preexisting meters and future meters?
Wow only 6 YEARS of revenue for the total sale price?
How much does it cost to upkeep the network?
Do they expect demand for parking in Chicago to somehow decrease over time…?
If this was a sale of music royalties (a “security” that loses value over time as songs get played less) the multiple for the sales price would still be much higher.
Either the Chicago government is stupid or deliberately lowballing the sale in a brazen act of corruption
[+] [-] shirro|3 years ago|reply
[+] [-] mellavora|3 years ago|reply
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.
[+] [-] makeitdouble|3 years ago|reply
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.
[+] [-] kurthr|3 years ago|reply
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.
[+] [-] missedthecue|3 years ago|reply
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.
[+] [-] jltsiren|3 years ago|reply
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.
[+] [-] ojbyrne|3 years ago|reply
[+] [-] noizejoy|3 years ago|reply
If such meaningful independence doesn’t exist, it arguably doesn’t make much of a difference who’s name plate is on the ownership?
[+] [-] vondur|3 years ago|reply
[+] [-] O__________O|3 years ago|reply
Not to mention if you rub the wrong people your house might get fire bombed:
https://www.google.com/search?q=australia+house+firebombed
[+] [-] taf2|3 years ago|reply
[+] [-] aintgonnatakeit|3 years ago|reply
[+] [-] robotnikman|3 years ago|reply
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] tmnvix|3 years ago|reply
Edit:
Unfortunately, because of the nature of much of what is privatised, these investment opportunities are often rent-seeking opportunities.
[+] [-] walrus01|3 years ago|reply
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.
[+] [-] schneems|3 years ago|reply
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.
[+] [-] Teever|3 years ago|reply
[+] [-] scotty79|3 years ago|reply
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.
[+] [-] emmelaich|3 years ago|reply
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.
[+] [-] numbers_guy|3 years ago|reply
[+] [-] analyst74|3 years ago|reply
[+] [-] AtlasBarfed|3 years ago|reply
[+] [-] bogomipz|3 years ago|reply
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
[+] [-] gonzo41|3 years ago|reply
[+] [-] Zaheer|3 years ago|reply
[+] [-] time4tea|3 years ago|reply
[+] [-] hn_throwaway_99|3 years ago|reply
Right now Austin is trying some very dubious eminent domain measures (which were pretty drastically clobbered in court) to get out of a long term lease they signed just a few years ago to have a private operator run a small separate terminal at the airport. I think it was especially braindead for Austin to ever sign that lease - we were (and still are) growing like crazy, it didn't take much foresight to think Austin would eventually need to seriously expand the airport.
Of course, hardly anyone involved with the original bad decision is still on city council, so it became someone else's problem.
[+] [-] krashidov|3 years ago|reply
[+] [-] a_puppy|3 years ago|reply
The company doesn't actually control the prices. See https://parkchicago.com/about/
> The City Of Chicago retains control over pay station parking rates. CPM does not – and never has – set pay station parking rates. The City retains exclusive authority to determine and establish rates, set hours of operation, and place, add or remove metered spaces. The initial five‐year rate schedule, which ended in 2013, was approved by the City Council to align with rates comparable with other large U.S. cities. Prior to the agreement, parking rates in Chicago were much lower than the national average. Seventy percent of meters had not seen an increase in 20 years.
[+] [-] LatteLazy|3 years ago|reply
[+] [-] throwaway5959|3 years ago|reply
[+] [-] V__|3 years ago|reply
[+] [-] idrathernot|3 years ago|reply
I get “civil speeding tickets” (traffic cameras) all the time in my state. I simply throw them away without repercussion because the cost of suing to collect from every individual who hasn’t paid just isn’t worth it. Not sure if it applies in this case but in my state these also cannot legally be reported to credit agencies or insurance companies.
If this is not the case and the city is criminally prosecuting people (with taxpayer resources) to enforce private debts owed to the meter company, there’s a good chance a court would find the practice to be illegal. At least I hope that’s how it would turn out…
[+] [-] TaylorGood|3 years ago|reply
Ridiculously advantageous to the partners of the LLC, and good on them for securing this. Easily one of the best rev deals in history..
Can't knock it
[+] [-] chaps|3 years ago|reply
[+] [-] AlbertCory|3 years ago|reply
Selling something with long-term value for a short-term lump sum is the kind of thing a politician would do. He or she isn't going to be around later, so why not get reelected now?
On the other side, Richie Daley didn't have the acumen of David Bowie, who did the same thing:
https://www.investopedia.com/terms/b/bowie-bond.asp
https://www.billboard.com/music/music-news/david-bowies-bowi...!
Just think: who knew that parking meters would continue to throw off money? what happens when self-driving cars are cruising around and no one needs to park anymore?
[+] [-] tiffanyh|3 years ago|reply
It’s weird to think that the state Highway you drive on is owned by some private equity company.
https://www.npr.org/templates/story/story.php?storyId=569539...
[+] [-] cozzyd|3 years ago|reply
[+] [-] diordiderot|3 years ago|reply
[+] [-] not2b|3 years ago|reply
[+] [-] karaterobot|3 years ago|reply
What does it mean to buy the rights to parking meters? Are they buying the physical meters along with the right to collect and enforce fees on them? If the city passes a law that says "no more parking meters, we use drone enforcement now", what happens? What happens if parts of Chicago become car free zones, do the investors get to sue the city? This seems so dumb. So, so dumb.
[+] [-] digianarchist|3 years ago|reply
https://www.thespec.com/news/canada/2019/09/03/birth-of-a-fi...
[+] [-] paganel|3 years ago|reply
Reminds me of how princes of old used to sell the right to collect taxes on all sorts of things to the highest bidder.
[+] [-] jsnell|3 years ago|reply
[+] [-] ValentineC|3 years ago|reply
https://news.ycombinator.com/item?id=33712685
Also:
https://www.youtube.com/watch?v=vLfghLQE3F4
[+] [-] willio58|3 years ago|reply
[+] [-] tcbawo|3 years ago|reply
[+] [-] cgb223|3 years ago|reply
How much does it cost to upkeep the network?
Do they expect demand for parking in Chicago to somehow decrease over time…?
If this was a sale of music royalties (a “security” that loses value over time as songs get played less) the multiple for the sales price would still be much higher.
Either the Chicago government is stupid or deliberately lowballing the sale in a brazen act of corruption
[+] [-] swader999|3 years ago|reply