Wednesday, September 13, 2006

How the British public is helping US power companies make bigger profits from the poor

OH! The joys of privatisation! Some while back I wrote indignantly about the poor old pensioners who were getting letters on what looked like water company-headed paper suggesting they better insure against underground water pipes bursting on the way to their homes. The letter spoke about the costs of special digging equipment and difficulty of finding engineers and plumbers, and warned the water company might not accept responsibility. Fortunately the pensioners told me they had binned the letters, but the companies keep trying it on.

My electricity supplier has come up with a new one. After all this rivalry competing to offer lower prices, seems reality - particularly the Middle East crisis - is making itself felt. Wholesale power prices are likely to go up this Winter, they warn, and the company is reviewing its prices, so why not take the opportunity to pay a premium up front and be protected against price increases?

Somehow these ever-so-reasonable suggestions make me think of a heavy barging into my hall. "Nice little place you've got...wouldn't like to see your lecky or your water stopped."

But irritating as the ways of sales managers may be, they are but a small part of the privatisation game, and maybe not really to blame. Whereas when we look at government ministers.. . and international financial institutions...

The aid charity War on Want this week published a report on the power company Globeleq, which is wholly owned by the British government's Department for International Development (DFID) through CDC, its private sector promotion arm. It says Globeleq has paid hundreds of millions of pounds to US power firms that wanted to withdraw from the "developing world". Two such companies, AES and El Paso, have benefited by over US$1 billion.

One in four of the world’s population, or 1.6 billion people, lack access to electricity – two-thirds of them in Asia, with most of the rest in sub-Saharan Africa. The International Energy Agency estimates that electricity services must extended to a further 600 million people by 2015 in order to meet the UN Millennium Development Goal of halving the proportion of people living on less than a dollar a day.

Globeleq operates in 16 countries in Africa, Asia and Latin America, and is pursuing further acquisitions in a bid to be “the fastest growing power company in the emerging markets”. But, according to War on Want, rather than helping bring electricity coverage to poor communities, privatisation has brought sharp tariff increases which many people cannot afford. Since Globeleq took over the national grid in Uganda last year, domestic customers have faced price rises of 70 per cent for their electricity.

The arrival of companies like AES, Enron and EDF in developing countries during the 1990s saw dramatic price rises in electricity. When the Indian state of Maharashtra opened its power sector to Enron, this forced the state electricity board to extend farmers’ tariffs by a crippling 400 per cent to meet extra costs. Electricity privatisation led to higher tariffs in the Dominican Republic and left the government with more than US$135 million in debts to private firms.

Britain's international development secretary Hilary Benn said last year that Britain would no longer make privatisation a condition of its assistance to developing countries. "Yet 40 per cent of UK aid goes through multilateral institutions such as the International Monetary Fund (IMF) and the World Bank, which continue to impose harmful conditions such as privatisation", War on Want's report points out. "

War on Want Chief Executive Louise Richards said: “DFID’s mandate is to reduce poverty. But the promotion of privatisation through initiatives like Globeleq hurts poor people. We call on the government to stop advancing the privatisation of public services and to help developing countries build genuine solutions to poverty.

“The British government last year promised to drop conditions such as privatisation on its overseas aid. Yet DFID has announced that it will channel a record £1.3 billion of UK assistance through the World Bank in the next three years. We urge the government to withhold its contributions to the World Bank and IMF until these institutions stop imposing harmful conditions such as privatisation on the poor.”

Thanks to Paul Collins of War on Want for drawing my attention to this report, and call. "New Labour" is so far gone and sold on capitalism its hard to believe it will change. Still, no harm in trying, I suppose. And it is only right the British taxpayers should be told where our money is going.



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