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PSIRU UWUA Power for America April 2009 www.psiru.org Electricity, multinationals and development By David Hall [email protected] Public Services International Research Unit (PSIRU) University of Greenwich, UK, www.psiru.org On behalf of Public Services International April 2009 PSIRU UWUA Power for America April 2009 www.psiru.org • Multinationals • De-regulation, liberalisation and privatisation • Electricity and development • Other issues • PSI strategy PSIRU UWUA Power for America April 2009 www.psiru.org Multinationals • USA and EU electricity companies expand 1990s – USA companies expand into UK, rest of Europe, Latin America, Asia • Most active are Enron & AES, but also TXU, PPL, etc – EU companies expand into USA, Latin America, Asia • Most active:EDF & Spanish companies: Endesa, Iberdrola, Union Fenosa • Most withdraw after 2000 – 1. inadequate profits 2. public and political resistance, uncertainty – USA companies exit UK and Europe, USA and EU try to exit Latin America, but few buyers • Remaining multinational activity in 2009 – EU companies in N. America – mixed picture in developing countries: • some remaining MNCs, some private equity, some renationalised • EU companies have European Works Councils with union representation – Can leverage this for international benefit e.g. EdF PSIRU UWUA Power for America April 2009 www.psiru.org EU electricity companies operating in USA 2009 European group Home country USA subsidiaries EDF France Constellation nuclear plants (49.99%) E.On Germany LG&E, Kentucky Util Electric/gas generation, distribution, supply:Kentucky GDF-Suez France Suez Energy, SEGNA Elec generation, commercial retail, gas distribution Iberdrola Spain Energy East Electric/gas generation, distribution, supply:N-E USA National Grid UK National Grid, LIPA Electric/gas transmission in N-E USA (+Long Island supply Nuclear plants PSIRU UWUA Power for America April 2009 www.psiru.org EU: problems with liberalisation and privatisation • EU directive liberalises electricity/gas since 1998 – wholesale/retail deregulation, unbundling of public monopolies – Compulsory in all countries and cities • “It is highly questionable that gas and electricity prices are the result of a truly competitive process rather than being the direct result of decision of companies with market power. … London Economics study states that these prices "are significantly higher than would be expected on perfectly competitive markets" ...” (EU Commission 2007) • No evidence of benefits from privatisation or liberalisation – no consumer gains, consumer satisfaction higher under public ownership, similar for gas and telecoms (Florio et al, Univ Milan) – Retail consumers reluctant to switch – Vertical integration of generation and retail continues PSIRU UWUA Power for America April 2009 www.psiru.org USA: deregulation and price of electricity 1991-2007 •Deregulated state prices were 35% higher, now 56% higher •Consumers do not switch from utilities •26 states do not deregulate •7 defer deregulation •8/17 deregulated states debate changes e.g. end retail choice, allow vertical reintegration •also bad experience with wholesale deregulation: California 2000 cartel, price spikes, bankrupt distributors, blackouts (except Los Angeles with vertically integrated municipal utility) • Marilyn Showalter: Price Trends For Industrial Electricity. 2007 www.ppinet.org . PSIRU UWUA Power for America April 2009 www.psiru.org Electricity and development - the need for electric light and power PSIRU UWUA Power for America April 2009 www.psiru.org Problems with multinationals in developing countries • Multinationals: – – – – – Corruption e.g. IPP power plants in Indonesia, Pakistan, India Casualisation of workers e.g. Argentina evidence shows that private sector is not more efficient than public sector no investments because not profitable, withdraw and/or claim compensation Note problems of prices, exits e.g. AES • Uganda – – – distributor privatised to Eskom (South Africa) + Globeleq (UK govt) price increases, underinvestment, only 10% connected generation relies on IPPs (Eskom+), & diesel generators (Aggreko) • Nicaragua – – Distributors privatised to Union Fenosa (Spain) blackouts, arbitrary bills, partial renationalisation • Thailand – Strong union campaign against power privatisation, part of movement against corrupt president Thaksin PSIRU UWUA Power for America April 2009 www.psiru.org Public finance for investment in systems • Electricity (and roads) key for development – Economic, social and markets (for electrical goods) – 50% of all efficiency gains in USA economy 1920s-1970s due to (mainly public) investment in electricity & roads • Government investment needed for extension of system – Private sector funds little – Brazil: central government funding: ‘Luz para todos’ (Light for All) – South Africa funds rural electrification through tax and cross-subsidy • Aid: – IMF, World Bank, USA, EU donors: lend on condition of privatisation and liberalisation – China is now alternative source of aid, without policy conditions PSIRU UWUA Power for America April 2009 www.psiru.org PSI strategic approach LEVEL STRATEGY ACTION Local and national Support affiliates Support for Thai union campaigns against privatisation, Nigerian union alternative plans, evidence to Indonesia constitutional court, links with NGOs eg Prayas (India) Regional Coordinate Pressure on development banks; regional meetings Africa 2006/07, Latin America 2007, Asia-Pacific research support Global Representation, campaigns and research PSI representation on Global Reporting Initiative (GRI) electricity working group, research on multinational companies PSIRU UWUA Power for America April 2009 www.psiru.org Other issues • Energy sources – Renewables: greater concerns re global warming – energy security: EU concerns re Russia, – nuclear power: expansion and promotion • Economic crisis – Lower demand for electricity – Difficulty of refinancing debts – Infrastructure spending to counter recession e.g. on transmission lines, new green energy sources – General problem:wages share falling, profits share rising • Reversal key to boost demand PSIRU UWUA Power for America April 2009 www.psiru.org Wage shares in GDP, in EU15, USA and Japan, 1975-2006 82 80 78 Percent of GDP 76 74 72 70 68 66 64 Quellen: European Economy , 6/2002 und 6/2006, jew eils Statistical annex, table 32 05 03 USA 20 EU-15 20 01 20 99 97 95 19 93 91 89 87 83 81 79 77 85 19 19 75 62 Japan PSIRU UWUA Power for America April 2009 www.psiru.org Public confidence in free market and unions: September 2007 Financial Times survey PSIRU UWUA Power for America April 2009 www.psiru.org More about PSI and PSIRU • Information about PSI affiliates and campaigns are published on the website at www.world-psi.org • PSIRU reports are published on the unit’s website www.psiru.org Thank you