Shedding light on the PN’s electricity liberalisation policy

International studies confirm that the latest policy expounded by the PN, that the electricity sector should be liberalised fully and that Government should not seek to extend the derogations from EU rules that our country presently benefits from, would lead to high prices and negative impacts on workers.

The Labour Party has, in recent years, clearly affirmed its pro-market policies. Yet, it never abandoned its social commitment to ensure that all families, but particularly those in the most vulnerable groups, do not have to carry unnecessary burdens. In contrast, the Nationalist Party’s default policy has been that the market is always right and that market forces should be allowed to prevail.

This was clearly evidenced in the latest policy expounded by the PN, that the electricity sector should be liberalised fully, and that Government should not seek to extend the derogations from European Union rules that our country presently benefits from. When faced by the argument that energy liberalisation would lead to high prices and negative impacts on workers in the sector, the PN accused the Government’s spokespersons of scaremongering.

The Journal has identified several international studies that confirm what the Government is saying.

OECD study

In 2001 the Organisation for Economic Co-operation and Development (OECD) published a detailed study entitled ‘Regulation, industry structure, and performance in the electricity supply industry’. This study was prepared by Professor Faye Steiner of the renowned American university of Stanford. Professor Steiner started her study by saying that “most policy makers and economists agree that liberalisation of the electricity sector should enhance consumer welfare by reducing prices”. However, in her analysis, she concluded that, in the countries where a distinction had been made between energy generation and distribution (as advocated by the PN) there was no price decrease, even though the number of operators increased.

Looking at what happened in the British market, the American academic noted that “private companies with market power replaced a public company with market power, so prices did not respond immediately to privatisation”. This also happened in other countries, so much so that Professor Steiner concluded that “a high degree of private ownership and imminence of both privatisation and liberalisation tend to increase industrial end-user prices”. Furthermore, it was only where the Government continued to intervene with energy price regulations that households did not end up being discriminated against in price.

European Commission study

This analysis was confirmed by an article published in 2019 in the authoritative journal Review of Industrial Organisation written by Professor Michael Pollitt, assistant director of the Energy Policy Research Group of Cambridge University in the UK. This article summarised results from several studies of the impact of energy market liberalisation across the European Union. 

Among others, it mentions how a European Commission study in 2014 entitled ‘Progress towards completing the Internal Energy Market’ found that, while “wholesale electricity prices fell 35% between 2008 and 2012 … households and industrial customers did not see lower bills because, over this period, network charges went up 18.5% and 30% for households and industry, respectively, while taxes and levies rose by 36% and 127% for households and industry, respectively”. This means that, in practice, liberalisation did not have positive price impacts for households and businesses across the Union. In fact, energy prices for both households and businesses today are higher than they were 15 years ago.

Professor Pollitt’s study concludes that “overall, the impression one gets from the Commission’s own evidence is that of limited gains so far in terms of proven price and productivity effects”. Besides, Professor Pollitt, who is also an adviser to the World Bank and the European Commission, notes the results of other international studies indicating that “what is more clear is that public dissatisfaction with liberalised energy markets in Europe remains strong”. Indeed, in many cases energy privatisation, which typically accompanies a liberalisation process, leads to an increase in public complaints, resulting in Governments having to introduce strong regulators to supervise the sector.

Studies by the UK government, the European Commission, and the European Parliament

A UK Government study issued in 2000 under the title ‘The social effects of energy liberalisation’ points out that, between 1990 and 1997, there was a reduction of around 60,000 workers in the electricity sector because of liberalisation. This means that almost two in three workers in the sector were fired. Another report published by the European Commission in 2015 entitled ‘The effects of liberalisation of the electricity and gas sectors on employment’, indicates that, between 1990 and 1998, 250,000 jobs were lost in the electricity and gas sector.

Most of these workers were over the age of 45 and many of them ended up having to retire early. In Germany, after energy liberalisation, those working with electricity companies fell by a third, with a loss of 70,000 jobs over eight years. Even in Ireland, there was a drop of almost 30% in the number of employees, while in Sweden the same rate of employment reduction was observed.

A more recent study, published in 2017 by the European Parliament, titled ‘Employment in privatised utilities: A higher risk of precariousness?’, notes that “cutting labour costs by reducing headcount and reducing spending on pay and conditions appears to be the logical consequence of this, and this is borne out by the majority of our literature findings”.

Most of the redundancies occurred among technical and maintenance staff. In contrast, managerial and legal posts increased.

Worse employment conditions

New jobs were in the form of part-time contracts and outsourcing, with many workers ending up self-employed on a contract with the company that previously employed them. As a result, “young workers and technical graduates have suffered as new employment opportunities in the sector have declined”. Furthermore, the study concludes that “the incidence of temporary working in energy and water increased” and that “there is evidence that, for new workers, inferior terms and conditions can be put in place”. This while “there is some evidence of increases in the measures of stress-related ill health among employees”.

About one in eight employees in the energy sector is now on a temporary contract. One in five employees is on a part-time contract. The European Parliament’s study indicates “a shortening of breaks and rest periods”, “a reduction of collectively-agreed additional off-duty time”, and “a lengthening of the maximum working day”.  This while “senior management benefited from stock options and profit-related bonuses” and other workers saw a reduction in working conditions, including less sick pay and the elimination of bonuses when one works on weekends or during atypical times.

Many energy companies removed workers who had been with the company for many years and instead brought in new workers but with much worse conditions. This has created a “two-tiered workforce” situation where those employed before liberalisation have much better conditions than those who were employed afterwards.

Opposition policy goes against workers’ interests

Instead of announcing a common front with Government to do its outmost so that our country can extend its derogation regarding electricity liberalisation, the Opposition once more has made it amply clear that it will not shy away from a policy that would place all burdens possible on families and businesses, and hurt the interests of workers.

Photo credit: Viktor Vella

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