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8208.0 - Electricity, Gas, Water and Sewerage Industries, Australia, 1999-2000  
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ELECTRICITY INDUSTRY


INTRODUCTION

This section of the publication presents statistics about the electricity industry. Micro-economic reform measures have led to restructuring of this industry over recent years and this has affected the comparability of electricity industry statistics over time. In general, gross performance measures such as sales, turnover and total expenses have been affected much more than net performance measures such as value added or profits. Further information on the effects of restructuring follows.


INDUSTRY RESTRUCTURING AND THE EFFECTS ON THE STATISTICS

The Australian electricity industry has been undergoing structural change over the past decade. The 1991 decision by the Council of Australian Governments (COAG) to introduce a National Electricity Market (NEM) had a dramatic impact upon the industry. The effects of that decision and the subsequent shift to market competition are still continuing. The shift resulted in the replacement of the traditional State-owned vertically integrated monopolies that previously were completely responsible for generation, transmission, distribution and retailing activities with business units that compete within the same marketplace.

The effects of this industry restructuring have been well documented. The 1997-98 issue of Electricity, Gas, Water and Sewerage Industries, Australia (Cat. no. 8208.0) contained a special article that outlined the background to the reforms that have occurred within the industry.

Since that 1991 COAG decision, the Commonwealth and various State Governments have been working cooperatively to introduce structural reforms resulting in the disaggregation of these monopolies into separate businesses. Horizontal disaggregation within the industry has also occurred and market forces are now playing a significant part in determining the face of the electricity industry today.

In 1994 the introduction of competitive wholesale and retail electricity markets through the National Electricity Market resulted in trading across State borders. This began with trading between New South Wales and Victoria but is now more widespread. Western Australia has also experienced the effects of privatisation but is not part of the National Electricity Market for reasons of geography. The concept of consumers being able to choose their electricity supplier, though restricted to businesses at this stage, is becoming more widespread.

The concept of State bounded entities also continues to lose relevance. Another continuing trend has been the diversification of energy businesses with the aim of providing their customers with a wider range of energy services. This has seen electricity businesses enter the gas supply market and conversely, gas businesses enter the electricity market as opportunities arise within these markets. The effects of this diversification have been greater for management unit statistics than for establishment statistics. Deregulation has also allowed new entities to come into the market and compete for customers. It has also resulted in a number of entities being dismantled or sold off. This has been reflected in the variation of the number of management units over the past few years.

The process of structural reform has generally seen the number of management units increase. During the late 1990s much of this occurred in Victoria, New South Wales and Queensland. Continued restructuring has since resulted in a decrease in the number of management units in Queensland as several business units have merged their activities and integrated with other operations.

Disaggregation has tended to involve the creation of new entities specialising in electricity generation, transmission, distribution wholesaling or retailing to replace single entities which previously undertook all or most of these functions. The effect on industry structure has been to change single entities wholly classified to the electricity industry into a number of smaller entities, most of which are classified to the electricity supply industry but some of which are classified to other industries. Those classified to other industries do not contribute to the statistics for the electricity industry. Examples of activities which were formerly carried out by businesses classified to the electricity industry but now largely carried out by specialist businesses which are classified to other industries are network construction, repair and maintenance of electricity transmission towers and power pole inspection.

Changes to business structures have a direct impact on the data presented in this publication and not all impacts are in the same direction. In some cases, creation of several smaller specialist businesses wholly classified to the electricity industry from one vertically integrated business means that after restructuring, transactions between businesses are recorded in the statistics (such as sales from the generating business to the distributing business) when previously, such transactions were internal to a single business and generally were not recorded in the statistics. This situation tends to increase sales and purchases values for the industry, has little direct effect on statistics for value added, operating profits or capital expenditure and has mixed effects on the statistics for employment and wages and salaries.

On the other hand, the values for several variables (employment, wages and salaries and capital expenditure in particular) will be less as a result of activities such as those mentioned in the previous paragraph being carried out by businesses which are classified to other industries and therefore being recorded in the statistics for those other industries.

Selected Indicators - Graph



Restructuring of the electricity industry has been proceeding for some time with varied effects on the statistics as illustrated by the graph of selected indicators. Most notably, turnover has increased significantly over the past year as restructuring continues. Turnover in Queensland has dropped slightly due to the merging of several business units. This represents a reversal of the trend mentioned previously with transactions between these units now being considered internal to a single business and hence not being recorded or contributing to turnover. This is highlighted by a decrease in the value of both sales of goods and services and purchases for Queensland.

The variables relating to profit remain relatively unaffected however, as an increase in income through the growth in sales of electricity, transmission or distribution income, is offset by increases in expense items such as purchases of electricity, transmission and distribution expenses, and payments for contract, subcontract and commission work.


MANAGEMENT UNIT PERFORMANCE MEASURES

Nationally, the number of management units classified to the electricity industry grew from 86 in 1998-99 to 88 in 1999-2000. Small increases in numbers in most States were partly offset by a fall in Queensland from 29 management units to 24.


SUMMARY DETAILS


1997-98
1998-99
1999-00
Management Units at 30 June (no.)
67
68
88
Employment at 30 June (no.)
34,747
33,022
33,086
Wages and Salaries ($m)
2,080.3
2,025.9
2,071.9
Turnover ($m)
21,793.0
24,426.9
26,122.3
Industry Value Added ($m)
9,356.8
9,764.6
10,119.9
Net Capital Expenditure ($m)
2,176.0
2,508.1
3,389.2



Employment, wages and salaries

Employment and wages and salaries continue to be affected by the changes caused by industry restructuring. Employment increased slightly by 64 persons (less than 1%) to 33,086 persons in 1999-2000. Wages and salaries paid increased by $46m (2%) to $2.1b in 1999-2000.

Only Queensland and South Australia experienced employment growth between 30 June 1999 and 30 June 2000. Queensland reported the largest rise, up 805 persons (11%) to 8,205 persons. This was partly attributable to company restructuring which resulted in a significant number of employees (who were previously outside the scope of the collection) being included. The remaining States reported a decrease in employment. Restructuring continues to be the main factor affecting employment. This was the case in Western Australia where privatisation has resulted in greater levels of technological change and increased use of automation. This has contributed to a decrease in employment of 604 persons (18%), down to 2,742 persons.

At 30 June 2000, New South Wales employed the largest share of the electricity industry's workforce accounting for 11,359 persons (34%). Queensland had the second largest number of persons employed accounting for 25% of the national total.

Income and expenditure

Sales of goods and services increased nationally by 7% rising from $23.0b to $24.6b in 1999-2000, although much of the increase was due to the statistical effects of restructuring rather than being due to real growth. Victoria accounted for more than half of the national increase, recording a rise in the value of sales of goods and services of $921m (18%) to $5.9b in 1999-2000. Much of this increase is attributable to restructuring and the inclusion of units that have only reported for the first time in 1999-2000 due to the timing of their creation and entry into the electricity market.

In New South Wales the value of sales of goods and services increased by $512m (8%) to $7.1b in 1999-2000. This was mainly due to an increase in the value of sales of electricity. Queensland recorded a decrease of $305m (5%) to $5.8b mainly due to restructuring and the previously mentioned business unit mergers. In 1999-2000 South Australia recorded an increase in the value of sales of goods and services of $301m (14%), rising to $2.5b.

Purchases and selected expenses increased nationally by $1.4b (9%) to $16.3b in 1999-2000. The major contributors to this increase were rises in the value of purchases of goods and materials, up $1.1b (12%) to $10.4b, and payment for contract, subcontract and commission work, up $216m (6%) to $4.0b. The latter item includes transmission and distribution expenses. The increases in both of these items is partially attributable to industry restructuring and the recording of transactions that were previously internal to companies.

Both purchases and contract expenses increased in Victoria due to the inclusion of business units that had not previously been included in the electricity industry. In addition data that was previously included in the gas industry is now appearing in electricity because of merger activity that has seen electricity business units takeover the operations of gas business units and subsume the operations into the reporting arrangements of the electricity business unit.

In 1999-2000 trading profit increased by $510m (6%) to $9.3b. However, operating profit before tax (OPBT) increased by $82m (3%) to $3.1b, with the level of OPBT affected by increases in depreciation costs and interest expenses.

Turnover in the electricity supply industry increased nationally by $1.7b (7%) to $26.1b. The majority of this increase was accounted for by a growth in the value of sales of goods and services of $1.5b (7%) to $24.6b.

Industry value added increased by $355m (4%) to $10.1b.

Assets and liabilities

Restructuring continues to affect the level of industry assets and liabilities at both State and national levels. Over the past several years there have been variations in the way assets have been valued, changes to the level of business liability, company takeovers and restructuring, and the sales of a number of electricity assets. Furthermore, businesses who have recently entered the electricity supply industry have brought in their own assets and liabilities, contributing to an additional increase in both items, There has also been a movement of assets between the electricity and gas industries, as businesses diversify their energy interests through the acquisition of assets in both industries.

In 1999-2000 the total value of assets nationally increased by $8.0b (10%) to $84.9b, with non-current assets accounting for $7.2b of this increase. Some of the variation between current and non-current assets is attributable to industry restructuring, with a resultant reclassification of assets from current to non-current. Victoria recorded the largest increase in non-current assets, rising $3.4b (13%) to $30.0b in 1999-2000.

Total liabilities increased by $9.8b (22%) to $54.1b with current liabilities increasing by $1.8b (21%) to $10.2b and non-current liabilities rising by $8.1b (22%) to $43.9b. These changes have resulted in a decrease in net worth, which fell $1.8b (6%) to $30.8b.

Net capital expenditure

In 1999-2000, net capital expenditure for the electricity industry increased by $881m (35%) to $3.4b. Capital expenditure on plant, machinery and equipment increased by $673m (43%) to $2.2b. The majority of this increase was attributable to the construction of additional generating capacity in Queensland. Capital expenditure on dwellings, buildings and other structures also increased by $249m (20%) to $1.5b in 1999-2000.

Selected Indicators - Graph



Performance measures

A range of performance measures can be produced from the data available from profit and loss statements and balance sheets of businesses. This publication presents only a selection of these for the electricity industry. While these are a very useful way of presenting summaries of performance, users of these statistics should note the limitations referred to in paragraphs 18-23 of the Explanatory notes before making any judgements based on these results. In addition, the restructuring of the industry affects some comparisons.

Some of the main features for performance measures in the electricity industry in 1999-2000 were:
  • trading profit margin decreased from 38.0% to 37.7%;
  • return on funds decreased from 8.3% to 7.9%;
  • the liquidity ratio decreased from 0.8 times to 0.7 times;
  • debts to assets increased from 57.6% to 63.7%; and
  • acquisitions to disposals ratio remained steady at 9.6 times.

ESTABLISHMENT PERFORMANCE MEASURES

The changes in data discussed at the management unit level are generally mirrored in the data at establishment level. The number of units has increased from 95 to 108. This increase has been brought about by industry restructuring, particularly in New South Wales and Victoria, where the number of establishments rose from 18 to 22 and from 20 to 24 respectively. Mergers in Queensland resulted in the number of establishments in that State decreasing from 32 to 29.


SUMMARY DETAILS

1997-98
1998-99
1999-00
Establishments at 30 June (no.)
77
95
108
Employment at 30 June (no.)
33,038
31,166
31,252
Wages and Salaries ($m)
1,962.2
1,898.2
1,951.6
Turnover ($m)
21,728.0
24,180.5
25,777.0
Value Added ($m)
9,881.1
10,391.5
10,725.9



Employment, wages and salaries

In 1999-2000 national employment increased by 86 persons (less than 1%) to 31,252 persons. Employment increased in Queensland, by 922 persons (13%) as restructuring and the development of new generating capacity occurred. Western Australia reported the largest decrease in employment, falling 599 persons (18%) to 2,747 persons mainly from the introduction of new technologies and greater automation in a privatised environment.

Employment on new construction increased by 867 persons (22%) primarily in Queensland where new power stations are being developed. Wages and salaries increased nationally by $53m (3%) to $2.0b, while wages and salaries for employees engaged on new construction rose by $38m (18%) to $246m. It should be noted that the payments to contractors increased during the reference period.

New South Wales employs 38% of all employees involved in the electricity industry at establishment level. Queensland is the second largest employer with 25% of all employees.

Income and expenditure

Turnover in the electricity industry increased by $1.7b (7%) from $24.4b to $26.1b. Most of this increase was attributable to an increase in the sales of electricity which rose $941m (5%) to $18.9b. Service income also rose, increasing by $524m (11%) to $5.3b.

Value added increased nationally by $355m (4%) to $10.1b in 1999-2000. Purchases of electricity increased, rising $475m (8%) to $6.5b. Payments for contract, subcontract and commission work increased by $247m (7%) to $3.9b with payments to contractors rising in New South Wales as increases in production output were sought. In Victoria much of the increase is attributable to restructuring and the inclusion of units not previously within the population.


GAS INDUSTRY


INTRODUCTION

This section of the publication presents statistics about the gas industry. Micro-economicreform measures have led to restructuring of this industry over recent years and this has affected the comparability of gas industry statistics over time. In general, gross performance measures such as sales, turnover and total expenses have been affected much more than net performance measures such as value added or profits. Further information on the effects of restructuring follows.


INDUSTRY RESTRUCTURING AND THE EFFECT ON THE STATISTICS

The Australian gas supply industry continues to be transformed through processes of restructuring and privatisation. The industry is no longer the domain of State-based and State-regulated businesses, with the reform process resulting in the disaggregation of the majority of the State-owned utilities. This has provided opportunities for new gas suppliers to enter the market. In addition, the reforms have resulted in change in three key areas:
  • the development of a national access regime;
  • the removal of legislative and regulatory barriers to competition; and
  • the structural reform of gas facilities and utilities.

These reforms are documented in the Special Article which appeared in the 1997-98 issue of Electricity, Gas, Water and Sewerage Industries, Australia (Cat. no. 8208.0).

An interesting trend that has emerged from the restructuring and reform process has been the diversification of energy businesses to enable them to provide customers with their complete energy needs. This has resulted in gas businesses expanding their operations through involvement into the electricity market, as well as electricity companies entering the gas market. The concept of State-based businesses has also changed with businesses now extending their customer bases across State borders as opportunities in national gas and electricity markets open up.

During the last few years as reforms were implemented, new units have been created as the vertically integrated units were broken down, and in many cases these have been sold off to private businesses. More recently this has resulted in several businesses widening their networks through corporate takeovers, while a number of individual companies have restructured their operations to the point where activities not previously undertaken by gas businesses are now being included, as well as activities previously undertaken by gas businesses now being undertaken by non-gas businesses.

The current environment within the gas industry reflects the results of several years of restructuring beginning in the early 1990s. The formation of separate businesses to undertake transmission, distribution and other activities to replace vertically integrated businesses has resulted in the recording of transactions between transmitters, distributors and other specialist businesses. Such transactions were not recorded in the vertically integrated businesses. The effect on the statistics has been to substantially increase the value of ‘gross’ variables such as turnover and total expenses (and their component items) but to have a much lesser effect on ‘net’ variables such as industry value added (IVA) and operating profit before tax (OPBT). In general, changes to these net variables reflect improved efficiencies in the industry rather than changed industry structures. More recently, gas businesses have tended to widen their operations to include activities not generally undertaken by the industry prior to restructuring.

The following graph shows changes in selected variables over the period 1995-96 to 1999-2000 and in particular the substantial increases in turnover and to a lesser extent EBIT and OPBT.

Selected Indicators - Graph



Analysis of selected variables from 1995-96 to 1999-2000 highlights the effects of restructuring. Over the past few years as State-owned utilities have been sold off, and new gas suppliers have entered the market, the increased separation of distribution, transmission and retail sales activities has resulted in turnover increasing significantly. This is primarily because each of these units is now selling gas or earning service income or transmission income. Previously, the costs of transmission and distribution were internal costs borne by State-owned public utilities.

Profitability within the sector has risen slightly as the bottom line is still tempered by the offsetting effects of gas purchases or payments for transmission. The flattening out of the indicators in 1999-2000 is partially attributable to business units that were previously part of the gas industry now being included within the electricity industry as a result of company takeovers.

While the graph includes the effects of businesses incorporating non-gas activities into their operations, the primary changes are due to the disaggregation of functions across the industry. The dip in earnings before interest and tax and operating profit before tax in 1996-97 was because of a one-off payment by the then Gas and Fuel Corporation of Victoria, as a settlement of a dispute with Bass Strait producers Esso/BHPP over Petroleum Resource Rent Tax.


MANAGEMENT UNIT PERFORMANCE MEASURES

The number of management units in the gas supply industry and the activity levels exhibited by the industry were very similar in 1999-2000 to 1998-99.


SUMMARY DETAILS

1997-98
1998-99
1999-00
Management Units at 30 June (no.)
18
18
17
Employment at 30 June (no.)
2,738
3,073
2,887
Wages and Salaries ($m)
151.8
182.5
152.2
Turnover ($m)
4,190.3
5,105.5
5,204.2
Industry Value Added ($m)
1,209.1
1,404.1
1,449.7
Net Capital Expenditure ($m)
253.7
159.7
173.2



Employment, wages and salaries

Employment and wages and salaries in the gas supply industry continue to be affected by the changes caused by industry reforms. Employment decreased by 6% to 2,887 persons in 1999-2000 (down 186 persons on the 1998-99 figure). This decrease was principally caused by a number of businesses being lost to the industry as a result of takeover activity but offset to some extent by industry restructuring bringing in activity which was not previously undertaken by businesses in the industry. Wages and salaries subsequently decreased by $30m (17%) to $152m in 1999-2000.

Income and expenditure

In 1999-2000 sales of goods and services in the gas supply industry rose by $95m (2%) from $5.0b to $5.1b. The loss of some units to the electricity industry at the management unit level has resulted in a reduction in the level of many expense items including payment for contract, subcontract and commission expenses which decreased by $87m (13%) to $606m in 1999-2000. However, freight and cartage expenses increased by $166m (18%) to $1.1b while purchases rose slightly by $28m (2%) to $1.8b.

The effects of the structural changes, particularly as they relate to the movement of business units between sectors has had a dampening effect on several of the selected indicators. Trading profit rose by just $48m (3%) to $1.4b while earnings before interest and tax increased by $61m (6%) to $1.1b in 1999-2000. Operating profit before tax increased by just $13m (2%) to $832m.

Assets and liabilities

Restructuring continues to cause changes to the levels of industry assets and liabilities. Over the past two years there have been variations in the way assets have been valued, changes to the level of business liability and the sales of a number of assets. Furthermore, new businesses entering the Australian gas supply industry are including their own assets and liabilities which has contributed to fluctuations in both items. The inclusion of activity that was previously classified to wholesaling has also affected the level of assets and liabilities. In addition several business units have been taken over by businesses that are classified to other industries, notably electricity. This has resulted in the assets and liabilities for these gas businesses now being included within the management unit details for the electricity industry.

In 1999-2000 the value of current assets decreased by $101m (7%) to $1.3b and current liabilities increased by $350m (26%) to $1.7b, while non-current assets increased by just $10m (less than 1%) remaining steady at $7.0b. Non-current liabilities decreased by $690m (13%) to $4.8b in 1999-2000. Net worth increased by $248m (17%) to $1.7b during the reference period.

Net capital expenditure

In 1999-2000 net capital expenditure increased by $14m (8%) to $173m. The main reason for this was a decrease in the value of disposals of fixed tangible assets of $22m.

Capital expenditure on plant, machinery and equipment increased by $15m (23%) to $83m. Capital expenditure on dwellings, buildings and other structures fell by $24m (21%) to $91m in 1999-2000.

Selected Indicators - Graph



Performance measures

Selected performance measures are presented below. However, readers should note that restructuring would have affected these measures and that some caution is required when using them (see paragraphs 18-23 of the Explanatory notes).

Some of the main features for performance measures in the gas industry in 1999-2000 were:
  • trading profit margin increased only slightly from 27.4% to 27.8%;
  • return on funds increased from 15% to 17%;
  • liquidity ratio decreased from 1.0 to 0.7 times;
  • debts to assets decreased from 82% to 79%; and
  • acquisitions to disposals increased from 7.8 times to 124.7 times.


ESTABLISHMENT PERFORMANCE MEASURES

Many of the changes outlined for data at the management unit level are mirrored in the data at establishment level. The number of units has increased slightly from 25 to 28 mainly due to restructuring.


SUMMARY DETAILS

1997-98
1998-99
1999-00
Establishments at 30 June (no.)
23
25
28
Employment at 30 June (no.)
3,281
3,002
2,920
Wages and Salaries ($m)
171.0
175.4
161.9
Turnover ($m)
4,206.3
4,914.1
5,363.8
Value Added ($m)
1,413.4
1,552.3
1,764.4



Employment, wages and salaries

Employment in the gas supply industry at establishment level at 30 June 2000 was down 82 persons (3%) to 2,920 persons. Wages and salaries fell by $14m (8%) to $162m. The effects of inclusion of non-gas activities that was observed at management unit level (i.e. an increase in employment) did not occur at establishment level because these activities are generally carried out at other establishments (i.e. establishments which do not have gas transmission or distribution as their main activity and are therefore classified to other industries).

There were 75 employees engaged on new construction at the end of June 2000. Much of the activity associated with new construction remains classified to industries other than gas supply (e.g. construction industries) following industry restructuring over the past few years.

Income and expenditure

Turnover in the gas supply industry during 1999-2000 increased by $450m (9%) from $4.9b to $5.4b at establishment level. The continuing restructuring has resulted in increases to both the value of sales of gas and purchases of gas as a direct consequence of an increased number of entities within the chain of transmission, distribution and retail sale of gas, each buying and/or selling gas, or involved in transmission or distribution functions. In addition, freight and cartage expenses rose by $200m (22%) to $1.1b.

The increase in turnover and the marginal increase in purchases and selected expenses has resulted in value added rising by $212m (14%) from $1.6b to $1.8b during 1999-2000.


WATER AND SEWERAGE INDUSTRY


INTRODUCTION

The 1999-2000 data presented for the water supply and sewerage and drainage industry represent a different population of businesses compared with the 1998-99 data because additional businesses were included in the 1999-2000 survey. Typically, the additional businesses were water supply operations carried out by Local Government Authorities. Further information on this change is contained in paragraph 9 of the Explanatory notes.

In a manner similar to the electricity and gas industries, the water and sewerage industries continue to experience the effects of reform. A special article discussing issues associated with the reform process appeared in the 1997-98 issue of Electricity, Gas, Water and Sewerage Industries, Australia (Cat. no. 8208.0).


MANAGEMENT UNIT PERFORMANCE MEASURES

This publication presents management unit data only for the water supply and sewerage and drainage services industries. Readers should note that the statistics exclude operations by the major water supply businesses in the Northern Territory and the Australian Capital Territory because those businesses earn the majority of their income from electricity supply and therefore are classified to the electricity industry.

Employment, wages and salaries

At 30 June 2000 there were 430 management units in Australia in the water and sewerage industries. Employment in these industries was reported as 17,127 persons at 30 June 2000. Wages and salaries paid during 1999-2000 were $819m. Selected labour costs were $901m in this period.

Income and expenditure

Turnover in 1999-2000 was $6.8b, with sales of goods and services accounting for $6.0b. Trading profit was reported as $3.6b with the value of purchases and selected expenses being $2.6b. Earnings before interest and tax was $2.8b while operating profit before tax was reported as $2.0b for the water and sewerage industries. Industry value added was $4.3b for the reference period.

Assets and liabilities

The total value of assets in the water and sewerage industries was $60.6b while the total value of liabilities was $14.0b. This resulted in a total net worth of $46.6b.

Net capital expenditure

The value of acquisitions of fixed tangible assets in 1999-2000 was $2.0b while the value of disposals was $72m. This resulted in a net capital expenditure of $1.9b for the reference period.


EXPLANATORY NOTES


INTRODUCTION

1 The range of financial statistics appearing in this publication have been derived from the 1999-2000 Census of Electricity and Gas Operations and the 1999-2000 Water and Sewerage Survey. These collections aim to meet the demands of users who require annual financial statistics which can be related to other industry sectors in Australia on a consistent basis.

2 The collection of electricity, gas, water and sewerage data is conducted as a component of the ABS integrated economic statistics system. Data from each industry sector conform to the same basic conceptual standards, allowing comparative analysis between and across different industry sectors.

3 The findings for 1998-99 are now final and replace those previously issued in the 1998-99 issue of Electricity, Gas, Water and Sewerage Industries, Australia (Cat. no. 8208.0) released on 4 September 2000.

4 The 1993 edition of the Australian and New Zealand Standard Industrial Classification (ANZSIC) (Cat. no. 1292.0) has been used to classify management units (and establishments) included in the Census of Electricity and Gas Operations and the Water and Sewerage Survey.


SCOPE

5 The Census of Electricity and Gas Operations covers those management units and establishments mainly engaged in the generation, transmission or distribution of electricity (ANZSIC Class 3610); and the manufacture of town gas from coal and/or petroleum, or the mains distribution of town gas, natural gas or liquefied petroleum gas (ANZSIC Class 3620). Note that management units and establishments mainly engaged in the distribution of liquefied petroleum gas in bulk or in containers are classified to petroleum product wholesaling (ANZSIC Class 4521). The Water and Sewerage Survey covers those management units mainly engaged in the storage, purification or supply of water, or the operation of sewerage or drainage systems, including sewage treatment plants (ANZSIC Class 3701: Water Supply, and Class 3702: Sewerage and Drainage Services).

6 Electricity generation is sometimes undertaken within a location mainly engaged in other activities (e.g. a manufacturing establishment) solely, or in part, to provide power for those activities. Statistics relating to electricity generation in this situation are not treated as part of the electricity industry and therefore are not included in this publication, unless sales or transfers out of electricity exceed a specific value ($7.3m in 1998-99 and 1999-2000). The statistics do include details relating to separate locations of a management unit mainly engaged in producing electricity for use by other locations of the management unit (e.g. for use by a separately located manufacturing establishment).

7 Prior to recent industry reforms, the electricity industry was largely vertically integrated i.e. the activities of generation, transmission and distribution of electricity were conducted within a single management unit. With restructuring, these activities are more often conducted by separate management units. This has resulted in increases to some data items e.g. the sale of electricity may be recorded by both generator and distributor.

8 The gas industry has also recently undergone industry reforms leading to restructuring and privatisation. In a similar fashion to the electricity industry the activities of transmission, distribution and other activities (e.g. retailing) are now being carried out by separate management units. This has resulted in increases to some data items e.g. sale of gas may be recorded by both distributors and retailers.

9 Data for the Australian water and sewerage industries for 1998-99 was derived from the annual Economic Activity Survey. The scope of this collection differs from information collected via the Water and Sewerage Survey 1999-2000 which includes all businesses classified to the water and sewerage industries on the ABS Business Register. The annual Economic Activity Survey, however, excludes businesses classified to the General Government sector although Public Trading Enterprises are included. As a result of this variation in scope the data is not directly comparable with the data presented for 1998-99.


STATISTICAL UNITS

10 The basic units for which statistics are reported in ABS integrated industry collections are the management unit and the establishment.

11 The management unit is the highest-level unit within a business, having regard to industry homogeneity requirements, for which accounts are maintained; in nearly all cases it coincides with the legal entity owning the business (i.e. company, partnership, trust, sole operator etc.). In the case of large diversified businesses, however, there may be more than one management unit, each coinciding with a division or line of business. A management unit is recognised where separate and comprehensive accounts are compiled for it.

12 The establishment is the smallest accounting unit of a business, within a State or Territory, controlling its productive activities and maintaining a specified range of detailed data including data enabling value added to be calculated. In general an establishment covers all operations at a physical location, but may consist of a group of locations provided they are within the same State or Territory and classified to a single industry. The majority of establishments operate at one location only.

13 This publication presents industry statistics which are compiled differently from activity statistics. Each management unit or establishment is classified to a single industry irrespective of any diversity of activities undertaken. The industry allocated is the one which provides the main source of income. This means that a management unit which derives most of its income from electricity generation activities would have all operations included in the aggregates and ratios for the electricity industry group, even if significant secondary activities (e.g. water supply, coal mining, retailing) were undertaken. For example, the water and sewerage data collected for the Australian Capital Territory and the Northern Territory excludes their major water suppliers, since at the management unit level they are classified as part of the electricity industry.

14 The differences in definition of management unit and establishment often result in different values being obtained for certain data items. For example, employment at the establishment level only includes those employees that are involved in that industry whilst employment at the management unit level includes all employees of that business unit. This often includes employees who would be included in a different industry at the establishment level (e.g. retail sales staff, head office staff).

15 Separately located administrative offices and ancillary units such as storage premises, laboratories and producers' sales branches continue to have their activities included with electricity or gas activities unless these ancillaries constitute a separate accounting unit, in which case they are defined as a separate establishment.


REFERENCE PERIOD

16 The period covered by the collection is in general the 12 months ended 30 June. Where businesses are unable to supply information on this basis, the substitute accounting period is used for data other than that relating to employment.


COMPARABILITY WITH PREVIOUS STATISTICS

17 Commencing with estimates for 1997-98, under international standards, contribution to gross domestic product (GDP) by electricity, gas, water and sewerage industries has been measured by the variable 'industry value added' (IVA). Estimates for IVA measure the value added by an industry to the intermediate inputs used by that industry. Under the previous standards, the corresponding contribution to GDP was measured by the variable 'industry gross product' (IGP) at the management unit level. It should be noted that IVA is not the same variable as 'value added' which is published at the establishment level. The composition of 'value added' has not changed under the new standards.


INDUSTRY PERFORMANCE RATIOS

18 A range of performance measures, usually referred to as 'ratios', can be produced from the data available from profit and loss statements and balance sheets of businesses. This publication presents only a selection of these for the electricity and gas industries. While these are a very useful way of presenting summaries of performance, users of these statistics should note the limitations referred to below before making any judgments based on these results. Comment from analysts on the need for, and use of, these or other measures would be welcomed by the ABS.

19 Users should take particular note of the following limitations in respect of the ratios presented in this publication.

20 The usefulness of the ratios for analytical purposes depends on how they are calculated. Comparison between industries on a total industry basis may be best served by the estimates presented herein, i.e. based on industry estimates for numerators and denominators. Users should be aware that assessment of individual business performance based on comparisons with industry estimates may be misleading for other reasons. There may be circumstances peculiar to the business in question which should be taken into account. For example, whether it is undertaking a program of expansion, contraction, diversification or amalgamation during the period under review. Analysis of movements in performance indicators of the business and industry over a number of years would be more appropriate.

21 Differences in accounting policy and practices across businesses and industries and changes over time lead to some inconsistencies in the data input to these estimates. While much of the accounting process is subject to standards, there is still a great deal of flexibility left to managers in the accounting policy and practices they adopt. For example, acceptable methods of asset valuation include historical cost, replacement cost and current market value. The timing of asset revaluations also varies considerably across businesses. The way profit is measured is affected by management policy on such things as depreciation rates, bad debt provisions and write-off and goodwill write-off. The varying degree to which businesses decide to consolidate their accounts may affect the quality of the ratios calculated. In general, the effect of consolidation is to 'net out' some of the transactions between related business units and this may distort some ratios.

22 Finally, use of a single ratio in any analysis is to be avoided because it could be misleading. Often the interpretation of one ratio is influenced by the value of others. The above limitations are not meant to imply that analysis based on ratios should be avoided. However, they should be borne in mind when making any commentary or decisions based on these types of statistics.

23 The ratios presented in this publication are categorised as follows:
  • turnover ratios indicate the efficiency of selling activities (including the sale of services as well as goods);
  • profitability ratios measure rates of profit on sales, funds and assets;
  • liquidity ratios measure the ability of businesses to meet short-term financial obligations, i.e. how quickly can it convert selected assets into cash;
  • debt ratios indicate the extent to which debt is used as an alternative to financing through equity and the ability of businesses to meet the cost of such financing;
  • labour ratios measure the relative profitability and costs of labour; and
  • capital expenditure ratios indicate the ability and extent to which businesses invest in capital assets.

24 A further explanation of each ratio can be found in the Glossary.


RELIABILITY OF ESTIMATES

25 Data presented in this publication for ANZSIC Division D, Subdivision 37 (Water Supply, Sewerage and Drainage Services) are based on information collected from a sample of businesses and are, therefore, subject to sampling variability; that is, they may differ from the figures that would have been produced if the data had been obtained from all businesses in the population. One measure of the likely difference is given by the standard error (SE), which indicates the extent to which an estimate might have varied by chance because the data were obtained from only a sample of units. There are about 2 chances in 3 that a sample estimate will differ by less than one SE from the figure that would have been obtained if the data had been obtained from all units, and about 19 chances in 20 that the difference will be less than two SEs.

26 The imprecision due to sampling variability, which is measured by the SE, should not be confused with inaccuracies that may occur because of inadequacies in available sources from which the population frame was compiled, imperfections in reporting from providers, errors made in collection such as recording and coding data, and errors made in processing data. Inaccuracies of this kind are referred to collectively as non-sampling error and they may occur in any enumeration, whether it be a census or a sample survey. Every effort is made to reduce non-sampling error to a minimum by careful design of questionnaires, editing processes, and efficient operating procedures.


GENERAL ACKNOWLEDGMENT

27 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.


EXTERNAL ORGANISATIONS

28 There are a number of external organisations that collect and present data about their respective industries. Should users require further details about these industries, it is recommended that the organisations be contacted directly. Users may contact them at the following addresses:
  • Electricity Supply Association of Australia
    Level 11, 74 Castlereagh Street, Sydney, NSW 2000
    telephone 02 9233 7222
    facsimile 02 9233 7244
  • Australian Gas Association
    Level 3, 7-9 Moore Street, Canberra, ACT 2601
    telephone 02 6247 3955
    facsimile 02 6249 7402
    email canberra@gas.asn.au
  • Australian Water and Wastewater Association
    PO Box 388, Artarmon, NSW 1570
    telephone 02 9413 1288
  • Water Services Association of Australia
    Level 7, 469 Latrobe Street, Melbourne, Vic. 3000
    telephone 03 9606 0678
    facsimile 03 9606 0376
    email info@wsaa.asn.au
  • Productivity Commission
    PO Box 80, Belconnen, ACT 2616
    telephone 02 6240 3251
    facsimile 02 6240 3399

29 The following publications provide key data for the electricity, gas and urban water supply industries in Australia:

Electricity Supply Association of Australia, 2001, Electricity Australia (annual), ESAA, Sydney
Australian Gas Association, Gas Statistics, Australia (annual), AGA, Canberra
Water Services Association of Australia, Australia's Urban Water Industry: WSAA Facts, WSAA, Melbourne


RELATED PUBLICATIONS AND ABS DATA AVAILABLE ON REQUEST

Related publications

30 Users may also wish to refer to the following publications:

Australians and the Environment (Cat. no. 4601.0) contains information on renewable energy, stormwater and sewage, and greenhouse gas emissions.

Australia's Environment (Cat. no. 4613.0) presents a broad selection of environmental statistics and information which illustrate topical environmental issues. Themes include land use; energy use; marine and freshwater systems; waste and pollution.

Australia's Environment: Issues and Facts (Cat. no. 4140.0) includes sections on greenhouse gas emission controls, sources and occurrences as well as Australia's natural resources, water and energy.

Business Operations and Industry Performance, Australia (Cat. no. 8140.0)

Directory of Electricity, Gas, Water and Sewerage Statistics (Cat. no. 1140.0).

Electricity, Gas, Water and Sewerage Industries, Australia (Cat. no. 8208.0)

Energy Accounts (Cat. no. 4604.0) focuses on Australian energy bearing resources such as petroleum, coal etc. with flow accounts showing movement of energy in quantity terms through economic sectors.

Environment Expenditure, Local Government, Australia (Cat. no. 4611.0) focuses on local governments and highlights financial transactions made by local government on environmental issues.

Environment Protection Expenditure, Australia (Cat. no. 4603.0)

Environmental Issues: People's Views and Practices (Cat. no. 4602.0) includes data on household water conservation practices.

Household Expenditure Survey, Australia: Summary of Results (Cat. no. 6530.0) includes expenditure on fuel and power, and on water and sewerage rates.

Housing and Infrastructure in Aboriginal and Torres Strait Islander Communities, Australia (Cat. no. 4710.0) contains summary information on the infrastructure of all discrete Indigenous communities including water, electricity, sewerage, drainage and solid waste.

Manufacturing Industry, Australia (Cat. no. 8221.0)

Manufacturing Production, Australia (Cat. no. 8301.0) (quarterly) which includes details of the production (quantity) of important manufactured commodities (including electricity and gas)-issued approximately four weeks after the month to which it relates.

Mining, Electricity and Gas Operations, Australia, Preliminary (Cat. no. 8401.0)

Water Account for Australia (Cat. no. 4610.0) provides quantitative data on a national and State level, e.g. volume of surface and ground water assets (stocks) and supply and use of water by various industries as well as monetary data linked to the use of water resources and some supply and sustainability indicators.

31 Current publications produced by the ABS are listed in the Catalogue of Publications and Products (Cat. no. 1101.0). The ABS also issues, on Tuesdays and Fridays, a Release Advice (Cat. no. 1105.0) which lists publications to be released in the next few days. The Catalogue and Release Advice are available from any ABS office.


ABS DATA AVAILABLE ON REQUEST

32 As well as the statistics included in this and related publications, the ABS may have other relevant data available on request. Such data is available subject to it satisfying quality and confidentiality guidelines.

33 Inquiries should be made to the ABS National Information and Referral Service on 1300 135 070.


ROUNDING

34 Where figures have been rounded, discrepancies may occur between the sum of component items and the total.


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