Victorian Government blowing up taxpayers money in cost-of-living crisis

Following on my previous article about the Victorian Government’s chaotic and wasteful attempt to become a startup funder, I outline yet more ‘government picks’ by the former Victorian Premier, Daniel Andrews . . . sadly continuing under the new Victorian Premier, Jacinta Allen.

In 2022 in another rush of blood to the head Daniel Andrews announced that he was going to established a new state-owned electricity company cutely called the State Electricity Commission (SEC) because that’s what the old one was called. Clearly the announcement had nothing to do with the impending election in 2022 of that year.

The reason for this Dictator Dan said was that

‘it would cut household and business energy bills and shore up supply in the country’s most stretched energy grid.’

In February 2023, Dan committed an initial $1 billion to the SEC to help deliver 4.5 gigawatts of power through renewable energy projects, in which the Victorian government would take a majority stake.

As part of SEC 2.0 a six-person ‘expert advisory panel’ was then established. This consisted of former Chief Scientist Dr Lan Finkel (who left in September 2023 for that ubiquitous excuse ‘personal reasons’), Andy Penn (the underwhelming ex Telstra boss), former Australian Energy Market Operator chief executive Audrey Zibelman, Clean Energy Finance Corporation founding member Anna Skarbeck, and Jo Benvenuti former Executive Officer of the Consumer Utilities Advocacy Centre.

Then there was Labor’s state election win in November with Jacinta Allen as the Miniser for the 2026 Commonweath Games — until the pin was pulled on this.

Dictator Dan was the Premier who banned gas being piped to new homes from 2024, prevented onshore conventional and unconventional gas exploration since 2012 (conventional gas exploration recently restarted in 2011) and couldn’t even get any offshore wind farm going at Port Hastings in 2024, instead relying on other states to keep the lights on.

In October 2023 Jacinta Allen (now Premier), tasked the commission with grabbing a chunk of the Victorian energy market worth up to $500 million a year from existing retailers by selling direct to manufacturers, schools and hospitals sent shockwaves through the industry.

Jacinta’s 10-year strategic plan for the SEC makes it responsible for marketing electricity from contracted solar, wind and battery projects to service all state government energy needs with 100% clean energy by 2025. Jacinta wants to ‘lead by example’…good for her. We’ll wait and see how that’s going in a couple of months.

This plan was announced the very same month the six person advisory panel to the SEC was canned, just one month AFTER her election win.

One of the smartest people in the electricity/generation space Tony Wood from the Grattan Institute had this to say about Dan and Jacinta’s SEC Plan.

the SEC was supposed to be a commercial organisation committed to “competitive neutrality”, so “why on earth would they do something the private sector wouldn’t do? I just don’t see the point and I don’t think there’s any logic that I have seen that supports the argument — they are going to sell electricity to themselves.”

As of November 2023 the SEC hadn’t made any investments in any major energy projects (except for $245 million on a “super battery” on Melbourne’s outskirts) or a meaningful difference to Victoria’s energy security.

This should come as no surprise.

If the under-planned, badly executed SEC $1 billion investment sounds familiar, well, it is.

In a previous article I shared the story of Daniel Andrews’ $2 billion investment in startups via the Breakthrough Victoria Fund. This is the fund that has just one shareholder, the Victorian State Treasurer; is totally unaccountable and has spent $22 million in staff and consultants while only investing $73.2 million — a ratio of expenses of 30% whereas the standard VC average is 2–10%.

The Suburban Rail Loop project

But hey, what’s a billion here or two billion there when you’ve committed to a piece of infrastructure, The Suburban Rail Loop (SRL) for a whopping $220 billion, although the Victorian Government’s own Parliamentary Budget Office said the first two stages will cost $216.7 billion to build and operate.

This was the project that was originally budgeted to cost $50 billion in 2018, then up to $200 billion in 2022.

And how was this mind-boggling project developed? By the Victorian Government’s own Department of Transport or its Secretary, under the then Minister for Transports the same Jacinta Allen. No?

Project Halo

It was done in secret by yet another, but different group of experts, in three weeks. Initially known as Project Halo (perhaps what Daniel Andrews thought he had hovering above his head), the Suburban Rail Loop project was announced — oh get this — three months ahead of the 2018 state election campaign. See a trend here by any chance?

And who were these ‘experts’?

James MacKenzie, the former chairman of Development Victoria; former Labor staffer Tom Considine, the initial CEO of the Suburban Rail Loop Authority, (now a partner at PwC’s former chief executive Luke Sayers’ consulting outfit Sayers). Considine, also happened to be the former senior executive at Development Victoria, and a former top adviser to Daniel Andrews, and co-ordinated the party’s policies for the 2014 election. After that poll he worked as a chief of staff to Mr Pallas (now the Victorian Treasurer).

And yes, Luke Sayers of Sayers Group is the same Luke Sayers who was the CEO of PwC when the firm stole information from the ATO and shared it with clients to help them minimise their tax. (See my numerous articles about this on LinkedIn)

And just where did Project Halo start and actually get going?

The Victorian Ombudsman’s (Deborah Glass), report at the end of 2023 said the project was the brainchild of an unnamed senior executive who had previously worked for Mr Andrews and Mr Pallas, and remained a Labor Party member.

The executive told Ms Glass that the SRL was partially conceived during a March 2017 PwC conference (them again!) they attended about “Value Capture in Infrastructure”, which included a session about setting up “entrepreneur-based rail projects”. Value capture is Luke Sayers speak for large consulting fees in case you’re wondering.

The Victorian government briefed PwC in early April 2017 to undertake a “high level” preliminary assessment of the SRL concept, which by this stage was known by the codename Project Halo. PwC’s initial 74-page report, submitted three weeks later on April 29, concluded the project had the potential to be a “significant city-shaping project for Melbourne” and estimated it could cost between $41 billion and $93 billion.

The firm also noted the SRL concept required “further definition” and laid out a “future program of work”. PwC’s initial strategic assessment of the project and a later KPMG business case have all been condemned by an earlier Victorian Auditor-General’s report.

The ombudsman’s report found that the SRL “blindsided” Infrastructure Victoria, an independent advisory agency established to take politics out of infrastructure planning, and left then top transport bureaucrat, Richard Bolt, in the dark.

So, along with the Suburban Rail Loop project, the Breakthrough Victoria fund and revived State Electricity Commission and other bondogles and brain explosions, Victoria’s state debt has blown out to $126 billion in 2024 (up $11.7 billion from the previous years’ estimate) and is projected to hit $169.5 billion in 2026.

But wait, there’s a shining light?

The Federal Governments redistribution of GST funds. Under the formula applied (a whole discussion in itself) Victoria will get an additional $3.8 billion in GST payments — oddly enough just about enough to cover the Breakthrough Victoria and SEC initial investments.

Victorians must be praying to anything that their Premier and members of parliament don’t come up with any more ideas or hire more experts to advise them.

View from the Fast Lane

This commentary forms part of my observations ‘View from the Fast Lane’ where I explore politics (Australian and Russian), business (Australian and international) and the art of writing, reading and learning.

All information is sourced from publicly available, published sources.

No AI has been used in the writing of this article.