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Government Trading Enterprises Performance Indicators 1991-92

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Government Trading Enterprises Performance Indicators 1991-92 ISSN 1327 - 1822 This work is not copyright. It may be reproduced in whole or in part provided suitable acknowledgment is included. The Industry Commission acts as the Secretariat for the Steering Committee on National Performance Monitoring of Government Trading Enterprises. The Industry Commission is amalgamating with the Bureau of Industry Economics and the Economic Planning Advisory Commission to form the Productivity Commission, which will continue the role of Secretariat for the Committee. Secretariat Steering Committee on National Performance Monitoring of GTEs c/- Industry Commission LB 2 Collins Street East Post Office Melbourne VIC 8003 Level 28 35 Collins Street Melbourne VIC 3000 Telephone: (03) 9653 2100 or Freecall: 1800 02 0083 Fax: (03) 9653 2199 E-mail: [email protected] http://www.incom.gov.au Steering Committee on National Performance Monitoring of Government Trading Enterprises This is the fifth annual report of the Steering Committee for National Performance Monitoring on Government Trading Enterprises (GTEs). It covers the period 1991–92 to 1995–96. As Chairman of the Steering Committee, I am pleased to report that the reform of GTEs is continuing to deliver benefits both to customers and to governments. Real prices of services continued to fall across most GTEs last year — real prices have now been falling since 1991–92. Assessing the quality of service provided by GTEs is as important as measuring financial performance. I am concerned that many GTEs do not provide adequate information about service quality. However, the limited information available suggests that service quality within most sectors is improving, but very slowly. At the same time, GTEs increased their real payments to government substantially — since 1991–92 the total amount payable to government has more than doubled. Profitability, as measured by the operating sales margin, increased slightly during the year and is now almost at the same level as in 1991–92. Although the GTEs discussed in this report have generally improved their performance, not all have shown the same rate of improvement. Notably, the financial performance of urban transport authorities is cause for concern. During the year most urban transport authorities reported significant declines in returns on assets and falls in overall cost recovery. There is a need for improvements in reporting by GTEs to continue. Collectively GTEs comprise a large segment of the economy and deliver key services both to households and the business sector. In particular there is scope to improve the use of consistent asset valuation methods and the treatment of community service obligations (CSOs). Reporting on the financial performance of GTEs is affected by the methods used for asset valuation. Whilst most monitored GTEs now report in some form of current value terms, the methods adopted vary. Moreover, a number of GTEs continue to use an historical cost basis for asset valuation. Inconsistencies in asset valuation make performance comparisons across GTEs and over time difficult. Many GTEs are required by their owner governments to provide CSOs, and in some cases these are not explicitly identified or costed. There is still a variety of funding mechanisms in place; some of these militate against transparency. In many cases there is no basis for determining whether CSOs have been costed appropriately, or if they have been costed at all. Some GTEs have decided not to provide the Steering Committee with non- financial performance indicators such as electricity generation emissions and interruptions to supply. They claim that disclosure is inconsistent with competitive neutrality because it would advantage potential private sector competitors by providing them with commercially sensitive information. The public as both consumers and shareholders have the right to be assured that they receive the best value possible from the use of public assets. GTEs should be required by owner governments to publicly justify why it is not in the public interest to disclose important non-financial information. Now is an appropriate time to take stock and review the project’s initial objectives. When national performance monitoring commenced, most monitored GTEs were under direct Ministerial control, and some operated as government departments. Now, central agencies have monitoring systems in place and some GTEs are subject to independent price reviews by regulators. Accordingly, the Steering Committee is currently examining the objectives of national performance monitoring and assessing the effectiveness of the current monitoring process. This publication was compiled by the Secretariat under the direction of the Steering Committee on National Performance Monitoring of Government Trading Enterprises. The Steering Committee, with members from the Commonwealth, State and Territory Governments, thanks all those involved in its preparation. In particular, it thanks the various working groups and the participating GTEs without whose co-operation this report would not have been possible. Bill Scales AO Chairman CONTENTS VOLUME 1 OVERVIEW 1 BACKGROUND 1 2 ELECTRICITY 15 3GAS 39 4 WATER, SEWERAGE, DRAINAGE AND IRRIGATION 51 5 URBAN TRANSPORT 77 6 RAILWAYS 99 7 PORT AUTHORITIES 121 8 OTHER COMMONWEALTH GTEs 143 9 PERFORMANCE AT THE NATIONAL AND 167 JURISDICTIONAL LEVEL ATTACHMENTS A ENTERPRISE LISTINGS 187 B MONITORED GTEs 195 REFERENCES 207 v OVERVIEW The process of reforming When national performance monitoring government trading commenced in 1992, most monitored GTEs were enterprises is now well still under direct Ministerial control, and some established. operated as Government Departments. Their objectives — commercial, social and regulatory — were frequently in conflict, making it difficult to assess performance. Five years on, most GTEs have been corporatised. Independent boards have been given responsibility for managing these enterprises at arm’s-length from their owner-governments. At the same time other reforms — such as the removal of statutory monopolies and the introduction of access arrangements — have increased the competitive pressures faced by GTEs. Restructuring is Jurisdictions have subjected their GTEs to continuing in response to extensive restructuring. Single government the Hilmer Reforms. trading enterprises have been divided into separate — and frequently, competing — businesses, either according to their activities or on regional lines. Substantial privatisation has occurred within the Victorian electricity and ports sectors. Shareholder interest is Governments have increasingly adopted the now an important driver perspective of a shareholder representative. of monitoring. Consistent with their shareholder interests, they are now developing value added and value management systems. v STEERING COMMITEE ON NATIONAL PERFORMANCE MONITORING OF GTEs Tensions are emerging Some corporatised GTEs are reluctant to provide between commercial information to the Steering Committee on the independence and grounds that this requirement conflicts with their transparency. commercial independence. Moreover, they argue that some of the data requested are commercially sensitive and therefore should not be publicly disclosed. Financial performance There was a modest Profitability showed a modest increase to improvement in 21.2 per cent in 1995–96. Over the monitoring profitability. period, profitability has remained relatively stable with the falls in the profitability of the electricity and urban transport industries being more than offset by increases in all other industries. Real payments to Since 1991-92, dividends, tax and tax equivalent government are expense increased by over 40 per cent to almost increasing rapidly. $ 5 billion (1989–90 dollars). This result was largely due to an increase in total real payments to government by Telstra, rising over 50 per cent. In 1995–96 Queensland rail became the first rail GTE to make a dividend payment ($166 million in current dollars). Since 1991–92, the total amount payable to government has more than doubled. This reflects the emphasis now placed on competitive neutrality, where GTEs make the same dividend payments to their owners as they would in private hands, and pay all taxes and charges that private companies pay, including sales tax equivalents. vi OVERVIEW The return on assets in The overall return on assets increased slightly, 1995–96 rose slightly. with marked increases recorded by the two main Commonwealth GTEs, Telstra and Australia Post. On the whole the return on assets has remained relatively stable since 1991–92. The financial This overall stability in the return on assets does performance of some not apply to urban transport GTEs. With the GTEs — notably urban exception of Brisbane Transport, urban transport transport authorities — is authorities reported a significant decline in their not improving. return on assets in 1995–96. To some extent this reflected a fall in earnings (which includes payments from governments), but also the revaluation of assets. Within urban transport, cost recovery from customer revenue remained fairly stable at just under 38 per cent. A small increase in customer revenue was offset by an increase in operating expenses. Increases in operating expenses were experienced by almost all urban transport authorities. The provision of Community Service Obligations (CSOs) is a significant part of the core activities of industries such as urban transport. Unless CSOs are explicitly accounted for through direct payments
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