Changes in the law to lower barriers to entry in electricity distribution are being reviewed by a parliamentary committee. The Electricity (Amendment) Bill, which proposes to allow new licensees to use the distribution networks of incumbent players, has run into opposition from groups that have become accustomed to subsidised or free power. Private capital is withdrawing from power generation and transmission because of the distribution choke point. Bringing private capital into distribution is key to the growth of the power industry. This requires improvements in enforcing contracts, provision of payment security mechanisms and ensuring timely payment. Greater consumer choice in selecting discoms would serve these needs while shoring up the financial position of the sector.
The electricity industry is awaiting a second generation of reforms two decades after the first wave drew private capital into generation. Over this period, transmission has also made progress with the creation of a national grid. Introducing competition in power distribution could arrest the retreat of investment in generation. Repeated taxpayer-funded lifelines to state-owned power utilities have delivered poor reform outcomes. Greater market orientation would certainly be more productive.
