I guess it depends on if people are willing to pay the price for security of supply. Presumably energy companies could/would offer guaranteed supply contracts with suitable liquidated damages clauses for a premium, if the demand was there.

In NZ we have a bit of this playing out with Genesis and Huntly. Huntly doesn’t make a good return for Genesis as a lot of the time prices are too low to make money burning relatively expensive coal or gas. But Huntly is important in NZ’s overall security of supply. So Genesis has been trying to sell “insurance” in the market to get others to pay for this security. (I am not sure of the details of this insurance, whether it is a futures contract or something else). But in order for it to be worth the other companies buying this insurance, Genesis needs to charge very high spot prices when it is the supplier of last resort. But as we know when it tried to do this, the regulator wrote down the spot prices! So if we end up with a security of supply problem in NZ it may be because of not enough free market, rather than too much.

“Some “limited support” perhaps? ”
The important bit “Most of these studies offer strong support for this proposition,” There are always cases where things are done badly, eg privatisation in Chile mid-70s. But overall I would argue that the empirical evidence shows gains from privatisation.

You’d have to provide me with some data/literature. I haven’t seen anything conclusive so far. 
 

Hi Paul,

Fair question. That creates an incentive for private companies to jack up prices, knowing the government will subsidize low income people. A domestic quota for energy provided as part of a universal income might be more interesting for me. Company contracts to provide x kwh of energy per person at agreed price (people can trade or sell back their quotas) and then operate open market above that. 
 

Thanks Paul.

Some “limited support” perhaps?  I’m not sure I have time for a literature review but here’s a few alternate views to consider:

Serbia’s experience with privatization (2011). “Results have been devastating despite netting 2.6 billion euro”.

World Bank paper from 2009 “Most important policy implication of our survey is that privatization per se does not guarantee improved performance” 

2007 Paper on performance of electricity and water privatization   “The theoretical and empirical validity of the assertion that privatization enhances competition and hence efficiency remains dubious” 

And so on.

I don’t think the case is proven to the extent that it provides a strong argument for privatization. Now, at the same time, that doesn’t mean a case by case analysis will not show some assets that may improve performance and some that clearly won’t. 

I would also reiterate that I am, regardless of syntatic issues, concerned with energy and water (defined as public goods within the Millennium Development Goals framework – we could debate this forever). If you want to sell the airport (no doubt Christchurch airport will be on the block soon!), I wouldn’t specifically be opposed on these grounds. 

I am not a fan of ad hoc transfers (dealing with low income people) but I am a fan of a universal basic income and the potential delivery of domestic quotas for basic goods (is that a better term?). That might open up a different conversation.

Raf, have a look at the performance – the actual performance, not the popular perception – of the UK energy supply industry post-privatisation.

“How many of our elderly suffer ill health and worse from being unable to afford energy?”

But is government ownership of the energy sector the answer to this? Why not just increase transfers to the elderly to cover energy costs? 

“Paul will probably have more to say on the efficiency of privatisation, […]”

A short response on the efficiency of privatisation is William L Megginson “The Financial Economics of Privatization” , Oxford: Oxford University Press, 2005.

“The 87 studies from nontransition economies discussed in this chapter offer at least limited support for the proposition that privatization is associated with improvements in the operating and financial performance of divested firms. Most of these studies offer strong support for this proposition, and only a handful document outright performance declines after privatization. Almost all studies that examine post-privatization changes in output, efficiency, profitability, capital investment spending, and leverage document significant increases in the first four measures and significant declines in leverage.” 

This is a statement of fact 😀

You’re just incorrigibly argumentative, really 😉