If New South Wales Premier Mike Baird wins the upcoming election, he has committed to sell half of the state’s electricity network.

In making this commitment, Mr Baird is taking a risk, as the majority of the electorate opposes the sale, on the grounds that prices will go up, standards will drop, and jobs will be lost.

In a recent poll by the ABC, 69 per cent of respondents said they would rather the government raise taxes to pay for new infrastructure than sell the network.

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Mike Baird with Opposition Leader Luke Foley, who opposes the sale of the poles and wires. Photo: AAP

Nevertheless, the most recent polls suggest Mr Baird’s personal popularity will carry him through in spite of this unpopular signature policy. Unless there is a major swing between now and March 28, the poles and wires will be privatised.

So what does this mean for consumers?

Consumers trying to figure out what on earth the sale means for them are faced with a barrage of conflicting claims. Passionate supporters of the sale promise cheaper prices and superior service.

Passionate opponents, meanwhile, promise skyrocketing electricity bills, massive job losses and an increase in blackouts. And both have enlisted experts to back up their position.

Who’s right? We decided to cut through the spin and find out the answer to one simple question: will prices go up under privatisation?

Our answer – probably not. And if they do, it won’t be by much as long as the regulator does its job.

What the past tells us

On its website, the ‘Stop the Sell Off’ campaign puts electricity price increases as the number one argument against privatisation. It claims that since the Victorian poles and wires were privatised between 1995 and 1998, electricity prices have risen by 60-70 per cent.

While this is true, it ignores one very important fact: electricity prices in NSW and Queensland, where the poles and wires are publicly owned, also went up by a very similar amount.

This is compelling evidence that the sharp increase in energy prices over this period had nothing to do with privatisation.

Using figures from the ABS, the Grattan Institute’s Tony Wood illustrates this fact in the graph below. Of the four cities reviewed, electricity prices are lowest in Melbourne and highest in Adelaide, both of which have privatised electricity networks. The other two are publicly-owned.

Source: ABS/Grattan Institute

Why this shouldn’t surprise us

It seems natural to assume that private companies, motivated by nothing but profit, would charge as much they possibly can.

But this misses two things. Firstly, the Australian Energy Regulator (AER) sets a cap on how much a company, public or private, is allowed to charge consumers.

And secondly, publicly-owned companies are run in much the same way as privately-owned companies, and consistently request to charge more than the regulator allows.

In Mr Wood’s words: “These businesses are monopolies, but they can’t just go off and charge whatever they like. It is the regulator’s job to control that, and if the regulator does a bad job, they’ll do a bad job whether it is private or public.”

Why the stats may be deceiving

But before supporters of privatisation dust off their hands and say “I told you so”, there is more to the story.

As Treasurer, Mike Baird orchestrated the sale of Ports Kembla and Botany, which were bought by Australian super funds. Photo: Shutterstock

According to economist and former NSW Treasury official Dr Betty Con Walker, the privately-owned Victorian network has failed in one area where NSW has succeeded: investment.

“The buyers of the Victorian agencies have not kept up with spending that’s required,” she says. When asked why that is, she replies: “Because they’re corporations. They’re motivated by profit.”

The implication of this is that the short-termism of listed companies, which must appease dividend-hungry shareholders, leads to corner-cutting, which in turn leads to shoddy maintenance and failure to invest properly. This is one of the central fears of the ‘Stop the Sell Off’ campaign.

So is the sell-off a good idea?

None of the experts The New Daily spoke to put price at the centre of their arguments for or against the sale. Mr Wood, who supports the sale, said private companies are more efficient, and this saves the government from wasting money maintaining the network itself.

“Why would managers employed by a government-owned business be less efficient than managers employed by a privately-owned business? I used to think that as well. But when you actually look at the data, the answer is, they are,” he says. He explored this question in depth in a 2012 study.

Meanwhile, Dr Walker, who opposes the sale, argues that by selling the network for what she says are “ideological reasons”, the NSW government will be giving away a massive source of income – $1.7 billion last year.

Whether this argument has any economic validity is a big question, and one that Mr Baird has largely steered clear of.