Nationalise electricity

Last updated 10:13 25/05/2009

Why was the biggest billion dollar rip-off New Zealand has ever seen dwarfed late last week with reports of a service station manager running off with a mere $10 million from a bank?

To be honest I'm not worried about the bank. It lost the equivalent of less than 2% of its annual profit in a bank mistake exploited by a customer.

But who is looking out for New Zealanders who have been ripped off to the tune of $4.3 billion in inflated electricity prices between 2001 and mid-2007?

The rip-off is revealed in a Commerce Commission report released last week after a 4 year investigation into the anti-competitive behaviour of electricity providers in recent years.

"The Commission considers that each of the four largest gentailers (generator-retailers) - Contact, Genesis, Meridian and Mighty River Power - is likely to have held substantial market power on a recurring basis, particularly during dry years," said Commission Chair Dr Mark Berry last week.

"Each of these companies has the ability and incentive unilaterally to exercise market power and increase wholesale prices during certain periods. The price increases in dry periods are well above any increases in input costs, including the higher opportunity cost of water when hydro storage is low. However, the Commission concludes in the case of this investigation that the gentailers are using that market power to maximise their profits in a purely legitimate way within the current market structure, design and rules," said Dr Berry.

The Commission therefore concluded that while we have all been fleeced to the tune of $1000 for each man, woman and child, this behaviour did not meet the criteria of 'taking advantage' of market power for a proscribed purpose, namely the hindering or deterring of competitors, under section 36 of the Act, and is therefore not a breach.

Energy Minister Gerry Brownlee tells us not to worry because he already has a review of the "electricity market" underway and will bring proposed changes to stop the price-gouging.

We've heard this all before. There will be a bit of tinkering but customers will continue to be exploited by private companies and SOEs with profit-driven motivations rather than quality service provision.

Max Bradford's name always comes up in this context. Bradford set up this artificial electricity market in the late 1990s with a host of companies with flash names, corporate logos and alleged "customer-focus".

In a country of just four million people it was marketised stupidity. Labour followed on with nine years in government and allowed electricity prices to rise on average at five percent above the rate of inflation since 2000. 

Labour will have been relieved the Rotorua runaways took over the headlines from their own shameless silence at the exploitation (is there any other word?) of electricity customers. The gentailers and those who slavishly follow markets will be relieved too.

Full nationalisation of electricity generation and supply is the only way to protect customers and shift the focus from price gouging to service provision for what is an essential community service.

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Steve   #1   10:40 am May 25 2009

I remember watching a documentary on the Enron investment into california. They purchased the electricity grid and managed power in that american state. What evolved was a very clear abuse of "power" and dominance whereby it was possible to artificially raise or lower the generation and thus push prices up.

New Zealand faces a form of this abuse if the generators and sellers are permitted to collude over demand issues. As in the case of the Enron experience the people users suffered badly with the lack of air conditioning and failed elevators. People actually died.

Our homes are not exactly the most energy efficient and in winter they can require more heating. But for our elderly population that means higher power bills. People can't afford this and of course consider power on that basis to be a luxury. This should not be the case.

mike wc   #2   11:03 am May 25 2009

Yes john - being run by a whole lot of public servants will make things better! You do live in some weird other world don't you!

Deluded   #3   11:34 am May 25 2009

Yes government owned everything is the way to go.

Let us just nationalize everything.

Then maybe we can change the name from New Zealand to Zimbabwe!

343   #4   01:16 pm May 25 2009

mike wc, the evidence suggests that it was better. Power was much cheaper under Electricorp.

Dr Science   #5   02:12 pm May 25 2009

We need electricity. We need jobs. Lets put some of this wind and water we have in abundance to some good use and build some more generation capacity. Extra supply = safe and secure supply, with low loading on the generation centres. Extra electricity = cheap power bills.

It seems mad that in a country with more wind, water, coal, and geothermal generation potential than we could know what to do with we still even pay for power!!

Now we've got a $2m report telling us what we all knew - we are being ripped-off - it would appear they owe us a few new generation stations to the tune of at least $4.3b. Seems only fair.

The needs of the many out-weigh the moans of a few. Lets build some more generation capacity. I'll start, put some turbines on the hills behind my house.

Tony W   #6   02:14 pm May 25 2009

I seldom agree with you John, but you are right on the money here. Power, along with roading, sewage, water supply etc, is an infrastructure item provided for the common good and which we all need. After all, if a govt (any govt) cannot guaruntee the infrastructure of a country then its not really much of a country, is it? In a country this small, these things should be provided at an affordable price to all by the government. After all, we pay more than sufficient taxes to cover this, but they all seem to end in the coffers of bankrup, corrupt island nations, or wasted on endless lunches, limos and perks for the trough snufflers in Wellington.

It is ludicrous to suggest that a country of only four million people can support four seprate power companies, three generators and two separate transmission companies, all in the name of 'competition' and 'consumer choice'. It appears that everyone involved overlooked thoise two words when this whole fiasco was dreamed up and the consumers have yet to see the benefits of either,

Shame on a pig-headed, obstinate National Energy Minister (Yes, you Max) for ramming this fiasco through against all the advise to the contrary. Just who was pulling your strings Max, and would you care to comment on this latest development? No, I thought not.

Shame on a greedy Labour government who spent 9 years blaming the previous National govt for the state of affairs, all the while pocketing the record profits.

And shame on the sheeple of NZ for being stupid enough to believe Max Bradford in the first place, and for being so apathetic as to allow this situation to continue. You have no-one to blame but yourselves.

ziggy   #7   03:18 pm May 25 2009

How much evidence do we need to prove that privatization is not a good idea in every situation? Thanks R Douglas and R Richardson. Thanks a lot.

corey s   #8   03:22 pm May 25 2009

Eh? What are you all on about? 3 of the 4 big players ARE NATIONALISED. EG they are SOE. That is the Government and by default NZ tax payers already own these assets. If this doesnt work then surely the only other option is private ownership or Private-Public ventures.

I would like to see the generation and retailing arms split however, and this was a mistake in the intial psuedo privatisation of the eectricity sector. What we are suffering from is two fold: a LACK of true competition and a decade of Socialist governance that prevented any new (cheap) power generation. Even someone who studied economics to a 3rd form level would be able to understand that if demand increases but supply doesnt, then price will move until it does.

If NZ wanted REAL green and cheap power we would be investng in Nuclear.

But somehow NZers like to wear their Nuclear free status like some perverse badge of stupidity.

peter fox   #9   04:02 pm May 25 2009

well said john its hard to think the former labour gov did absolutley nothing about this. It is total incompetence to say the least . The salaries of the directors of these power companys needs to be made public . Be ready for a shock . After this issue is cleared up . the price of food especialy meat & veges needs an urgent inquiry . When you look at what the farmer is being paid and what the consumer pays at the supermarket the mark up is horrific its a bigger rip off than the power boys . Nz should have the cheapest meat in the world its a disgrace what is being charged an absolute disgrace .

ziggy   #10   06:17 pm May 25 2009

Corey - do the maths on nuclear. It ain't cheap sorry. You will be hard pressed to prove it's green too. But you sound like a good source for a wind turbine!

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