Friday , January 27 2023

Households pay $ 200 for marketing


Privatization of the electricity industry has not complied with what it has promised and, in turn, has led to costs for consumers, a report found.

The Australian Institute today released the report Cost of market experiments, which estimates that each customer of electricity now pays $ 100-100 a year to cover the costs of things like advertising, sales and marketing.

"The benefits of competition have clearly survived," the report said. "In the meantime, I have overthrown a cheap electricity country in a country with expensive electricity."

The report analyzes electricity prices before the privatization of companies in the 1990s and found that electricity prices grew faster than almost any other major consumer item.

In 1998/99, approximately 23% of the cost of electricity was due to the cost of fossil fuels, but by 2014/15 it fell to 7%. This is not due to the fall in fossil fuel prices, they have actually increased, but it is due to the fact that other costs have increased dramatically.

Industry now spends more on financial and banking costs than fossil fuels. Over the same period, these costs increased from 3% to 10% of total production.

"The financial sector … has won huge rewards from energy privatization," said economist David Richardson, Australian Institute.

Due to privatization, companies also spend more money to publish their products and try to get new customers.

The report found that sales staff increased by almost 400%.

Productivity was also weak. Between 2000 and 2018, the actual production per employee declined by 37.8% due to the loss of labor to sales and other activities associated with privatization.

The report estimates that in 2015/16 the total cost of all "wasteful activities" was between 1030 million and 1940 million dollars.

"Privatization of the electricity industry has led to an enormous increase in wasteful spending, including high-pressure sales tactics, excessive managers, dizzying publicity, and" chase "costs," said Richardson.

He said that these costs were passed to customers in their electricity bills, leaving households larger than $ 200 less than a year.

"Further fragmentation of the electricity sector will increase these costs as more players will be set up with their own advertising departments, duplicate management structures, and so on," he said.

"Productivity of electricity production has fallen below privatization, contrary to the promise of architects of the competition model."

The report suggests that political leaders have focused on "specific villains and scapegoats" to accuse the problem and this includes blaming renewable energy sources for higher prices and electricity losses, despite growing evidence that renewable sources are now cheaper and more reliable than the generation of conventional fossil fuels.

Mr. Richardson said the Morrison Government's "big-stick" approach to reducing electricity prices was aimed at managing the "political op- cetic" of problems in the system and disregarding its real causes.

Prime Minister Scott Morrison has threatened to destroy large electricity companies if it destroys consumers.

But Mr Richardson said that this is not enough to solve the problem.

"Reining in rising electricity prices requires addressing the huge inefficiencies and waste associated with privatization – not just tough symbolic discussions with a handful of executive directors," he said.

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