Plan puts frighteners on investors
Investors spooked by the Labour-Green plan to cut power prices have wiped more than $500 million off the value of three listed energy companies since the policy was released.
The amount is in line with Labour's $500m to $700m estimate of the total reduction in power company revenues - including the yet-to-be-partially-privatised state assets.
The plan to set up a single buyer of wholesale electricity, NZ Power, that would set prices and contract for new generation has sparked a war of words with Government ministers describing it as Soviet-style communism and Opposition MPs saying National's reaction was "hysterical".
Labour and the Greens estimate their broadly similar plan would slice about $300 a year off the average consumer's power bill and boost economic growth by $450m while creating more than 5000 jobs.
But Economic Development Minister Steven Joyce said that by 5pm yesterday $326m had been wiped off the value of Contact Energy, $200m from Trustpower and almost $34m from Infratil.
"It shows these guys haven't learnt. They left office with a moribund stock market and at the very best an ambiguous view as the positivity of people investing in New Zealand and here they are again."
He said investors needed certainty about a consistent regulatory environment, and the announcement had knocked $570m off the value of shares.
Prime Minister John Key said the policy was "barking mad".
The way to cut power prices was through a well-functioning marketplace, he said.
"Really, these people are taking us back to something we abandoned in the 1970s because people used to sit around candles when all the lights went out."
It sent a dangerous message to investors that at any time the Government may nationalise assets.
The policy would also not create the number of jobs promised and their plans for the emissions trading scheme would impose further costs on households.
The policy set clear dividing lines between the Labour and Greens on the "far Left" and his Centre-Right National Party.
Labour's finance spokesman, David Parker, said National's reaction showed it had no comeback.
"Their scaremongering shows they're worried that hard-working New Zealanders, who are sick of paying through the nose for electricity, will embrace our new policy."
Independent economic analysis showed the plan would lower power bills and provide a $450 million boost to the economy, he said.
Meanwhile, a comment by Labour leader David Shearer that the plan involved forgone dividends and tax was pounced on by National as a sign Labour would exempt power companies from paying taxes or dividends.
But Labour said Mr Shearer was referring to the impact of lower profits the companies would make under its policy, and therefore lower taxes and dividends, not to an exemption.
Energy Minister Simon Bridges pointed to comments in 2006 by Mr Parker critical of a single buyer in the power market.
But Mr Parker said a single buyer model in 2006 would have put big strains on the economy because of supply constraints, but many of those issues had now been solved.