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ABOUT THIS PUBLICATION

This publication presents estimates for the electricity supply, gas supply, and water supply, sewerage and drainage services industries for 2004-05 from the Economic Activity Survey, together with data on a comparable basis from 2001-02 and intervening years.

REVISIONS

Data for earlier years may have been revised since the previous issue of this publication. All comparisons with earlier years are based on revised data. Any revisions to estimates for the periods to which each table relates are presented in the table. Revised data for other items and/or earlier periods are available on-line in updated versions of the original datasets. Please see below.

INFORMATION AVAILABLE ON-LINE

The text components of this publication are available free on-line. A PDF publication and extended data spreadsheets are also available free on-line. To access this information, go to the ABS website home page <https://www.abs.gov.au>.

INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or John Ridley on Sydney (02) 9268 4541.

CHAPTER 1 SUMMARY


INTRODUCTION

This publication presents estimates, from the annual Economic Activity Survey, of the economic and financial performance of the electricity supply, gas supply, and water supply, sewerage and drainage services industries.

These industries are specified in Division D Electricity, gas and water supply of the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. Please see paragraphs 1-4 of the Explanatory Notes for a full definition.

KEY DATA

Table 1.1 presents a time series for selected items, from 2001-02 to 2004-05. All value data in this table are shown at current prices.

In all four aggregate measures presented, the Electricity, gas and water supply industry overall showed growth during 2004-05. Sales and service income increased by 4% ($2b) and industry value added (IVA) by 6% ($1b). Growth of 12% ($0.5b) in wages and salaries outpaced that of employment, which increased by 5% (3,100 persons). These movements largely reflected increases in the Electricity supply industry, most variables having increased by smaller percentages for the Gas and Water industries.

In 2004-05 the Electricity supply industry's share of these key aggregates ranged from 62% to 72%. These proportions have increased since 2003-04 and generally over the period from 2001-02.

For information about survey methodology, see Technical Note 1.

The Glossary provides definitions for terms used.

GROSS VALUE ADDED

Table 1.2 illustrates the growth of Australian industries over time using chain volume measures of their gross value added. Chain volume measures provide estimates free of the direct effect of price change.

Of the seventeen industries shown in table 1.2, Electricity, gas and water supply ranked lowest in its average annual growth rate over the past 10 years and equal fifteenth over the past 25 years, with average annual increases of 1.1% and 2.4% respectively. By comparison, the highest growth rates were recorded by Communication services, with annualised rates of 5.9% and 7.0% for the 10 year and 25 year periods.

TOTAL FACTOR INCOME

Table 1.3 shows the contribution of industries to the production (as measured by total factor income) of each state and territory, as well as Australia, in 2004-05. For the purposes of this table, the activity of general government and the ownership of dwellings are each treated as industries.

Of the nineteen industries shown in the table, Electricity, gas and water supply ranked fifteenth (at 2.5%) in its contribution to Australian production for 2004-05. The largest share of production was attributable to Property and business services, at 12.8%. The contribution of Electricity, gas and water supply was greatest in Tasmania (at 5.0% of total factor income) and smallest in the Northern Territory (1.7%). In Tasmania, the Electricity, gas and water supply industry was the equal ninth largest contributor to total production, its highest ranking for any state or territory; the next highest was in South Australia, where it ranked thirteenth.

INDUSTRY BACKGROUND

Since 1991, governments in Australia have been introducing a competitive market for electricity, referred to as the National Electricity Market (NEM), into the southern and eastern states. In 1994, the introduction of competitive wholesale and retail electricity markets through the NEM resulted in trading across state borders. (Please see <http://www.nemmco.com.au>, the website of the National Electricity Market Management Company, for more details.) Western Australia has also experienced the effects of privatisation but is not part of the NEM, for reasons of geography. Tasmania entered the NEM on 29 May 2005.

Partly as a result, the concept of state bounded entities continues to lose relevance. State data for the electricity supply industry in this publication are allocated on the basis of state of head office (see Explanatory Notes paragraph 31 for more details). Accordingly, the state data presented should be interpreted with caution.

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 market and, conversely, gas businesses enter the electricity market as opportunities expand within these markets. Because each business unit reporting in ABS surveys is classified to one industry, based on its predominant activity, such diversification can affect the statistics in this chapter and those in Chapter 3 Gas Supply Industry.

Deregulation has also allowed new entities to come into the market and compete for customers. It has also resulted in a number of long established entities being dismantled or sold off. 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 supply industry into a number of smaller entities, most of which are classified to the electricity supply industry, but some of which may be classified to other industries. Those entities classified to other industries do not contribute to the statistics for the electricity supply industry. Examples of activities formerly carried out by businesses classified to the electricity supply industry, but which are now largely carried out by specialist businesses classified to other industries, are network construction, repair and maintenance of electricity transmission towers, and power pole inspection.

Effect on these data

These changes to business structures have a direct impact on the data presented in this publication, but not all impacts are in the same direction. Where several smaller specialist business units wholly classified to the electricity supply industry have been created from one vertically integrated business, transactions between these businesses are recorded in the statistics (such as sales from the generating business to the distributing business). 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, but should have little direct effect on statistics for industry value added, operating profits or capital expenditure. On the other hand, the estimates of several data items (wages and salaries and capital expenditure in particular) for the electricity supply industry will be reduced if activities such as those mentioned in the previous paragraph are now carried out by businesses classified to other industries.

Generally, private sector businesses which are engaged in the electricity supply industry and conduct their own construction and maintenance operations tend to do so through separate business units (typically classified to ANZSIC Division E, Construction), which employ most of the staff engaged in those activities. Government owned businesses in this industry, by contrast, are more likely to employ these staff in a business unit which is classified to the electricity supply industry.

Ownership changes and restructuring in the electricity supply industry continued during 2004-05. In a partial reversal of the disaggregation that has characterised the industry since 1991, some privatised electricity businesses have been sold by their original purchasers to operators that are already involved in a different segment of the electricity supply industry in Australia.

The Australian Bureau of Agricultural and Resource Economics (ABARE) reports that electricity consumption in Australia increased by 4.3% (from 242,744 GWh in 2003-04 to 253,117 GWh in 2004-05). Consumption grew across Australia, with Victoria recording the largest increase, of 3,643 GWh (6.7%). The Consumer Price Index relating to electricity (weighted average of eight capital cities) indicates that prices for household consumers were 2.8% higher in 2004-05 than in 2002-03.

SUMMARY

Major indicators for the Australian electricity supply industry showed increases, in current price terms, from 2003-04 to 2004-05. These increases related to employment (6%), wages and salaries (18%), sales and service income (6%), industry value added (8%), operating profit before tax (6%), and net capital expenditure (35%).

EMPLOYMENT

Employment in the electricity supply industry nationally increased by 2,295 persons, to 39,304 persons, at the end of June 2005. Of those states and territories available for publication, the greatest increase was in Queensland (1,028 persons, or 12%) in absolute and percentage terms. South Australia was the only state/territory that recorded a decrease in employment, of 227 persons (or 9%).

At the end of June 2005, employment in the electricity supply industry nationally was 11% (or 3,794 persons) higher than at the end of June 2002.

LABOUR COSTS

In percentage terms, the increase in wages and salaries paid by the electricity supply industry in 2004-05 surpassed its increase in employment. Wages and salaries rose by 18% ($470m) in 2004-05.

Wages and salaries per person employed increased by 11%, from $71,700 to $79,500, during 2004-05.

Over the period from 2001-02 to 2004-05, the electricity supply industry's wages and salaries have increased in current price terms by 27%, and by 15% on a per person employed basis.

The broader measure of selected labour costs increased by 16% (from $2.9b to $3.4b), in 2004-05, and by 9% on a per person employed basis.

PROFITABILITY AND EARNINGS

At $34.1b, sales and service income of the Australian electricity supply industry in 2004-05 was 6% ($2.0b) greater than in 2003-04.

Most indicators of profitability for the industry either increased slightly or were stable during 2004-05. Trading profit rose by 6% (or $703m), resulting from a 6% ($2.0b) increase in sales and service income and a 6% ($1.3b) increase in cost of sales. Earnings before interest and tax increased by 4% ($299m), whereas operating profit before tax (OPBT) increased by 6% to $3.7b. The electricity supply industry's increase of $1.8b (5%) in total income during 2004-05 was nearly matched by its increase in total expenses (up $1.7b, or 5%).

The estimated profit margin of the industry declined marginally, from 11.0% to 10.9%, between 2003-04 and 2004-05. Note that this ratio differs in concept from the trading profit margin presented in previous issues of this publication.

INDUSTRY VALUE ADDED

The electricity supply industry's $13.9b of industry value added in 2004-05 represented an increase of 8% (or $1.1b) over the preceding year.

As well as the increase in sales and service income mentioned above, capital work done for own use increased by $1.8b (109%). Offsetting this were increases in purchases of goods and materials ($2.5b, or 18%) and other intermediate input expenses (up $389m, or 5%).

CAPITAL EXPENDITURE

Net capital expenditure for the electricity supply industry in 2004-05 increased by $1.7b (35%) to $6.4b, reflecting substantial investment in upgrading networks, increasing capacity, and improving reliability of supply.

Acquisition of dwellings, other buildings and structures by the electricity supply industry increased by 45%, or $873m, between 2003-04 and 2004-05. An increase of 13%, or $417m, occurred in outlays on plant, machinery and equipment.

The greatest increase in net capital expenditure ($1.2b, or 134%) occurred in Queensland, mainly through acquisition of plant, machinery and equipment (up $639m, or 94%). Net capital expenditure rose by $519m (or 41%) in New South Wales and by $236m (22%) in Victoria.

CHAPTER 3 GAS SUPPLY INDUSTRY


INTRODUCTION

Statistics in this chapter relate to the gas supply industry as defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. These data are presented at the ABN unit / TAU level and, therefore, can contain data about activities normally associated with industries other than gas supply. (See Explanatory Notes paragraphs 5-20 for further details.) The commentary refers mainly to the tables in this chapter, and to the key data presented in table 1.1, preceded by some industry background material. The Glossary provides definitions for the more specific terms used.

INDUSTRY BACKGROUND

The current gas supply industry reflects the results of the restructuring which began in the early 1990s. Most states and territories have committed, under the terms of the 1997 National Gas Pipelines Access Agreement, to work towards implementing full retail contestability (FRC) to give all gas users their choice of supplier. FRC was introduced in NSW and the ACT in January 2002, and in Victoria in October 2002. Western Australia introduced market reforms to the retail gas market in May 2004. These reforms include the introduction of FRC and several new customer protection mechanisms. South Australia implemented FRC in July 2004 and it will be introduced in Queensland from July 2007. Natural gas has recently been introduced into Tasmania by pipeline from Victoria and FRC is operating now for connections to the embryonic distribution network.

As in the electricity supply industry, vertically integrated businesses have formed separate business units to undertake various stages of distribution and other activities. Increasingly, competition has been introduced along the various stages of the distribution chain with the entry of new businesses.

These changes to business structures have a direct impact on the data presented in this publication, but not all impacts are in the same direction. Where several smaller specialist business units wholly classified to the gas supply industry have been created from one vertically integrated business, transactions between these businesses are recorded in the statistics (such as sales from the distributing business to the retail business). Previously, such transactions were internal to a single business and generally were not recorded in the statistics.

Over time, as the market continues to develop, businesses have gradually rationalised and restructured their operations. This has resulted in several businesses widening their networks through corporate takeovers to include activities not previously undertaken by gas supply businesses. Conversely, some activities previously undertaken by gas supply businesses are now being undertaken by businesses classified to other industries, in particular, electricity supply and pipeline transport.

Demand for gas was affected by mild weather in many parts of Australia in autumn and early winter of 2005. The volume of gas (natural and manufactured) available for issue through mains declined by 1.1% between 2003-04 and 2004-05, from 808 to 793 Petajoules. (Manufacturing Production, Australia, June 2006 (ABS cat. no. 8301.0.55.001)). The Consumer Price Index relating to Gas and Other Household Fuels (weighted average of eight capital cities) indicates that prices for household consumers were 5.0% higher in 2004-05 than in 2003-04.

SUMMARY

Major indicators for the Australian gas supply industry showed divergent movements, in current price terms, from 2003-04 to 2004-05. Industry value added, operating profit before tax, trading profit and net capital expenditure all increased, as did employment (despite a decrease in wages and salaries). Sales and service income and earnings before interest and tax showed little change, and total expenses and cost of sales declined.

EMPLOYMENT

The gas supply industry employed 2,100 persons at the end of June 2005, 100 persons (or 3%) more than twelve months earlier.

LABOUR COSTS

Wages and salaries paid by the gas supply industry decreased by 14% ($11m) to $70m, in 2004-05.

PROFITABILITY AND EARNINGS

Sales and service income of the gas supply industry in 2004-05 was virtually identical to 2003-04. Total income declined by 2% ($117m), and total expenses declined by 3% ($154m) reflecting reductions in most expense items. As a result, operating profit before tax (OPBT) rose by $41m (9%) to $521m. Trading profit increased by $95m (or 10%) to $1.1b, reversing the decline of the preceding year, and earnings before interest and tax (EBIT) was stable.

In 2004-05, the profit margin of this industry reached its highest value for the past four years. Note that this ratio is based on OPBT, whereas previous issues of this publication presented trading profit margin.

INDUSTRY VALUE ADDED

At $1.1b, gas supply industry value added in 2004-05 returned to the level of 2002-03, and was 10% (or $96m) higher than in 2003-04. This increase reflects a decline of $134m (5%) in purchases of goods and materials, moderated by a $56m (4%) increase in other intermediate input expenses.

CAPITAL EXPENDITURE

Construction of new pipelines and other major projects, and acquisition of existing facilities, resulted in a 297% increase to ($1.1b) in net capital expenditure by the gas supply industry in 2004-05.

Acquisition of plant, machinery and equipment by businesses in the gas supply industry increased by 230%, or $232m, between 2003-04 and 2004-05. Expenditure on dwellings, other buildings and structures trebled. An almost sixfold increase (of $216m) occurred in outlays on other assets.

For the first time in four years, net capital expenditure of this industry exceeded its IVA; the usual ratio between them is less than 30%.





CHAPTER 4 WATER SUPPLY, SEWERAGE AND DRAINAGE SERVICES INDUSTRY

INTRODUCTION

This chapter presents statistics about the water supply, sewerage and drainage services industry as defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. These data are presented at the ABN unit / TAU level and, therefore, can contain data about activities normally associated with industries other than water supply, sewerage and drainage services. (See Explanatory Notes paragraphs 5-20 for further details.)

Both private and government units are included in the scope of the survey. In a manner similar to the electricity and gas supply industries, the water supply, sewerage and drainage services industry is also undergoing a process of reform. At the same time, changes in the structure of public sector units engaged in these activities have affected the statistics over time, by reclassifying such business units between this industry and ANZSIC Division M, Government Administration and Defence.

The commentary refers mainly to the tables in this chapter, and to the key data presented in table 1.1, preceded by some industry background material.

INDUSTRY BACKGROUND

The National Water Commission was established in December 2004 as an independent statutory agency responsible for overseeing national water reform, by assisting to implement the National Water Initiative and investment in the Australian Water Fund.

In 2004-05 much of Australia received below average or average rainfall. Following similar rainfall in 2003-04 and the severe drought of 2002-03, storage levels in the eastern half of Australia remained low.

The Water Services Association of Australia estimates that, despite population growth, the volume of water supplied to Australian capital cities in 2004-05 fell by 2.1% compared to the previous year. Declining water use is mainly attributed to water restrictions and to adoption by consumers of water conservation measures. Although not uniform across Australia, developer contributions and increased prices helped to maintain revenue levels.

The Consumer Price Index relating to water and sewerage (weighted average of eight capital cities) indicates that prices for household consumers were 3.2% higher in 2004-05 than in 2003-04.

EMPLOYMENT

The water supply, sewerage and drainage services industry employed 22,200 persons at the end of June 2005, 800 persons (or 4%) more than twelve months earlier and 2% (or 400 persons) greater than at the end of June 2002.

INDUSTRY PERFORMANCE

For the water supply, sewerage and drainage services industry, the major indicators of output and profitability either fell or were virtually unchanged in 2004-05.

Wages and salaries paid by the water supply, sewerage and drainage services industry were virtually the same, at $1.3b, in 2004-05 as in 2003-04. On a per person employed basis, wages and salaries declined by 2% (from $59,200 to $57,900). Over the period from 2001-02 to 2004-05, the industry's wages and salaries costs have increased in current price terms by 20% (and by 18% per person employed).

The industry earned $7.7b in sales and service income in 2004-05, the same as in 2003-04. IVA also was stable, at $5.1b, as were earnings before interest and tax and operating profit before tax. Trading profit declined by 4%. All these variables had decreased in the previous year.

CAPITAL EXPENDITURE

Net capital expenditure for the water supply, sewerage and drainage services industry in 2004-05 maintained the generally stable pattern of the preceding three years.