Yesterday the National/ACT government pushed through the Electricity Industry Bill. It will do nothing to deal with rising power prices, fails to address issues around sustainability, and despite the rhetoric, doesn’t increase the security of supply. The evidential base for many of the changes the Bill imposes simply isn’t there.
The Treasury, the Ministry for Economic Development, and the Institute of Professional Engineers all raised concerns about the SOE ‘asset swap’ that will see the Tekapo A and B generators switched for Meridian to Genesis, thus breaking up the Waitaki hydro system. Treasury argued that the government hadn’t put together a business case to justify the swap, yet they went ahead and did it anyway. Given these are multi-million dollar state assets we’re talking about, that’s pretty concerning.
The Institute of Professional Engineers argued that splitting up the Waitaki hydro system could lead to water being used less efficiently given the competing generators would be encouraged to maximise their market position. They argued that no evidence had been presented to demonstrate that the benefits of the (small) increase in competition the swap is designed to create will outweigh the risks.
The government has also dodged some of the real issues. National claims to be committed to the goal of having 90 percent of our electricity generated from renewable sources by 2025, but they’re doing nothing to achieve that. It’s just more hollow rhetoric. In fact, Gerry Brownlee’s obsession with mining and mineral prospecting suggests they actually want to see less of a focus on renewables.
Then of course we come back to the biggie – power prices. Brownlee’s advice to those concerned about the increased cost of electricity is to switch companies. Does he really expect everyone to jot down their meter reading everyday and work out which company they should switch to? Perhaps if they set a common standard for smart electricity meters that might help consumers keep track of their electricity use and make it easier to switch, but they’re not even willing to do that.
The Electricity Industry Bill fails to address the big issues. It’s another case of National reverting to their 1990s ‘the market knows best’ mantra. Not surprising, therefore, that the loudest interjector in the House during the Third Reading of the Bill was Maurice Williamson. It was Williamson and Max Bradford who hacked up and partially privatised the electricity network in the first place, promising us that competition would lead to lower power prices – how did that work out in the end?
“The Electricity Industry Bill fails to address the big issues. It’s another case of National reverting to their 1990s ‘the market knows best’ mantra. Not surprising, therefore, that the loudest interjector in the House during the Third Reading of the Bill was Maurice Williamson. It was Williamson and Max Bradford who hacked up and partially privatised the electricity network in the first place, promising us that competition would lead to lower power prices – how did that work out in the end?
Not good at all.
http://www.stuff.co.nz/nelson-mail/news/2430240/Power-companies-overcharged
And power prices went up over what period?
“Power prices rose by 72 per cent between 2000 and 2008. Over the same period inflation went up only 29 per cent.”
Strange, was not Labour in power during that period? If so why didn’t they do anything to stop such extreme exploitation of consumers?
“But it will find that the big four electricity generators state-owned Meridian Energy, Genesis and Mighty River Power and privately owned Contact Energy effectively used their market power to maximise profits, including withholding power at peak times. ”
Now that explains everything.
Own goal once again
Chris, I’m interested to know how much retail electricity prices have moved since Max Bradford and the National government promised us that their reforms would REDUCE power prices?
JD – you’ve proved my point, over the 14 years since the system was carved up, power prices have gone up steeply, not down. Labour didn’t reverse National’s carve up, a bit hard to unscramble an egg, but there probably was more we could have done to ensure the big generators weren’t able to milk consumers the way that they did.
I actually don’t think that’s true… I think our dear dictator is deluded enough to think we can become a mini Western Australia and the wealth it’ll bring will allow us to magically solve a lot of our problems… This is what happens when you put a woodworking teacher in charge of billions of dollars of natural resources…
I think he wants people to look at their bill and if they think it’s too high call another provider – this one I happen to agree with…
This is just stupid because it doesn’t seem to make any sense how it will reduce prices… Also (as originally proposed) it breaks up our only 100% renewable generator (not sure if this is still happening)…
Glad you guys voted Gerry to be our dictator, he’s SO capable…
No it’s not, reconstitute Electricorp… It worked reasonably well, kept ahead of supply, price rises weren’t out of control… Labour had massive surpluses to buy back Contact and all governments have a big legislative stick (just ask Telecom)…
By the way, has anyone checked out Max Bradford’s website recently. It seems all the self congratulatory bravado around the success of his reforms and the promises that competition would reduce prices have gone.
“you’ve proved my point, over the 14 years since the system was carved up, power prices have gone up steeply, not down. Labour didn’t reverse National’s carve up, a bit hard to unscramble an egg, but there probably was more we could have done to ensure the big generators weren’t able to milk consumers the way that they did.”
I direct you to peruse s 4 of the State-Owned Enterprises Act 1986 which says”
“Responsibility of Ministers
The shareholding Ministers of a State enterprise shall be responsible to the House of Representatives for the performance of the functions given to them by this Act or the rules of the State enterprise.”
Furthermore:
http://www.comu.govt.nz/soe-oem-page3.html
“In practice, shareholding Ministers’ responsibilities include:
…supporting the SOEs’ medium- to long-term strategic direction…developing and communicating the government’s ownership policies…”
And most importantly
“determine the level of dividend payable by an SOE in respect of any financial year”
So by saying Labour could have done a lot more to prevent consumers being ripped off you mean that Helen Clark could have ordered that, as a matter of govnt policy, SOE’s were to have reduce their dividend payments to the Crown?
If so then why didn’t Labour do that?
QFE
Competition in infrastructure, and electricity supply is infrastructure, pushes prices up. Throw in profit maximisation (a dead weight loss) and prices will rise even further. Now, I’ve agreed before that the Labour led governments from 1999 to 2008 didn’t have time to do everything but electricity and telecommunications should have been renationalised in 2000. There were, and is, no excuse for maintaining the present failed and costly experiment in “free-market” economics as applied to infrastructure.
This is appalling and raises wider concerns about National Ltd™ than just its disregard for the impact on prices for the consumer.
It would appear that the disdain John Key and his mates have for the public service is such that they will simply ignore any data presented before them. Private sector experts with what appear to be genuine concerns are equally dismissed. It seems to indicate that National Ltd™ is so locked into ideology that reality has no bearing on this government – either that or John Key is taking his instructions from somewhere else and is lining up his pins as part of a longer term project.
Frustrating – and worrying.
The only efficient way to organise energy distribution is to run one system.
The idealogical carve up for profit has proven that beyond any doubt to those who were taken in by the mealy mouthed promises and hype from the well worn private sector myths.
Management was tightened by the state, in readiness for splitting and sale so maintenance was ditched. Eventually we pay more as the maintenance budget became embedded profit. Charges then rose to repair a sagging neglected system amid the difficulties of attempts to coordinate some sense through further restructuring and dissipation of control.
As we move to face greater demand promoted by our out of control pumped up consumerist culture driven by advertising and media funding structure, the ability of any system to meet demand will fail. The growth imperative our over geared economy relies on, will drive us into energy deficit. Private control will see this as opportunity to raise prices and increase profits. The investment of foreign capital will add further impetus to this destructive trend.
We will loose all control as we have with other services.
Coordination of energy resources will not have a chance if the profit motive reigns.
Small scale generation local and even household generation will become an essential part of out electrical energy supply. This will have to be run under one umbrella. A state run grid provider.
Our electrical energy system is far too valuable to allow private interests to continue with their responsibility to make profit directly or indirectly.
We are nuts to allow the American model to continue any further.
As oil supply fails to meet demand electricity will become more important and prices must be held. It cannot become a market driven supply where those who can afford to pay waste it and those who cannot get none or so little that families live without it and suffer grave consequences.
Dog eat dog market forces are dangerous toys for idealogs to play with.
I noticed that on the list of highest paid NZers this year all three of our SOE electricity generators CEO’s were on the list…
Surely reconstituting Electricorp (even without Contact) would save 2 of the 3 $1,000,000+ salaries, two accountancy departments, two lots of branding and logos, etc, etc…
JMH you are sounding like a proper Stateist oriented socialist
No, I wouldn’t care if electricity generation was fully privatised but that ain’t going to fly with the public and what we have now ain’t working…
I choose the lesser of two evils… So I’m a proper realist orientated Capitalist…
MMM!!!! all very interesting but I have just had a look at the average prices for the last 7 days and they are between 1 @ 2 cents per Kwh (unit) I reckon I am supplied by one of the cheaper suppliers but I will pay about 25 cents per Kwh and after Oct.1 GST even more. Go figure.
This morning’s news announces that Transpower will whack us for another price rise to pay for upgrades to the network,they have been getting paid for the network ever since it was Bradfordised but they have not maintained or upgraded their capital works. Hence Pole 1 failures after 50 Years operation.
Power too high
Me angry 
!
@Jeremy M Harris
Your spot on…
Your right, private profit has overtaken maintenance and updating to make the system more efficient! Instead they rather take the cash and run to the hills. Both state and private sector.
Plus they way the current system is it will make it harder and more expensive to switch over to renewable energy which should be a long term goal! Renewable energy over all is more overall more stable in supply and more efficient.
it not very good.
Apart from wind power
Sorry, I meant John W
But still agree with JHM on this one