Once upon a time people remembered to buy electricity even though there were no ads to remind them. But thanks to the “efficiency of the market”, these days electricity companies spend hundreds of millions of dollars on marketing to remind us to turn on our lights. Needless to say the costs of all this marketing are passed on to you and me in the form of higher electricity bills. That’s how efficient markets work.

Renewables forecast to halve wholesale energy prices over four years Read more

It’s not renewable power that is hurting Australian consumers. It’s market power. Like the big banks, the big electricity retailers are making big profits off the back of charging high prices. But rather than admit that “competition policy” in Australia has failed to deliver the benefits, or even the competition that was promised, the Abbott, Turnbull and now Morrison governments are trying to blame renewable energy for the cost of electricity, rather than the failed reform agenda of privatisation and deregulation.

Take AGL for example. AGL is the biggest electricity retailer in Australia and 24% of the average AGL residential customer’s electricity bill goes to AGL shareholders in the form of profit. Put another way, of the $1,855 average bill for an AGL retail customer, $450 is pure profit. And according to the AGL annual report, they spend about $101 per customer each year on “customer retention”.

Before we advertised electricity on television, the industry was largely owned by state governments who owned both electricity generation assets (mainly coal fired power stations) and electricity distribution (mainly poles, wires and transformers). All of the electrons from all of the power stations got mixed up in the wires and no one really thought about what brand of electricity they should buy or, more weirdly, what their electricity brand said about them.

The electricity sector is not the only one where privatisation is pushing up prices

But that was before the bankers, economists and marketers took control of our electricity industry away from the engineers. These days, customers have access to a baffling range of electricity products and plans. We get to open junk mail, receive marketing calls, chat to friendly people at our door, watch TV ads and – if we are really keen – go to websites to compare the prices we can pay for our identical electrons. And, thanks to the efficiency of the market, we the consumers have to pick up the tab for all of this marketing nonsense.

The neoliberal architects of this new electricity industry decided that it would be most efficient to chop the formerly state government-owned electricity companies up into multiple generator businesses, distribution businesses and retail business. Today there are 36 different electricity retailers selling to NSW households, with a family in central Sydney required to choose between over 250 plans – all in order to receive the exact same electrons. What could go wrong?

In order to help customers “choose” between the bewildering array of plans, the electricity retailers employ an army of salespeople to knock and ring and email us with ideas, suggestions and friendly advice about how to simplify our billing.

Since we started privatising and chopping up our electricity industry, the number of people employed in sales and marketing in the industry has grown by 400% to almost 5,000 in 2016.

The number of managers grew by 217%, 10 times faster than those who actually make the electricity.

Again, all of the advertising and marketing costs are passed on to customers. Well, some customers at least. The average price charged to AGL residential electricity users is $301 per MWh, while their businesses customers pay an average of $165. For the exact same electrons you get to pay almost double.

Electricity bills can strain household budgets, especially when wages growth is at record lows and workers reliant on penalty rates are seeing their incomes fall. But the electricity sector is not the only one where privatisation is pushing up prices. Indeed, between 2010 and 2016 the price of both health insurance and child care rose even more rapidly than electricity prices.

Tony Abbott spent the three years leading up to his 2013 election victory telling anyone who would listen that rising electricity prices caused by the carbon tax were the main reason they felt poor.

The big con: how neoliberals convinced us there wasn't enough to go around | Richard Denniss Read more

Never mind the fact that electricity prices rose rapidly for years before the carbon price came in because of the profits of the electricity retailers and distributors. Never mind that rising housing costs combined with flat wages were making middle class people feel poor and that removing the carbon price did almost nothing to improve the lot of the “working families” the Coalition spends so much time feigning concern for.

If Scott Morrison was actually worried about working families struggling with the cost of living he would encourage highly profitable firms to boost their workers’ wages and he wouldn’t just pick a fight with the electricity industry, he would inquire into the abject failure of privatisation to lower the cost of health insurance and childcare.

But if the last 10 years have taught us anything it’s that the purpose of energy policy isn’t to fix problems in the energy market, it’s to cause problems for your political opponents.

• Richard Denniss is the chief economist for the Australia Institute. His Quarterly Essay, Dead Right: How Neoliberalism ate itself and what comes next, is available now.