Electricity policy move sends political surge

ROB O'NEILL
Last updated 05:00 21/04/2013

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OPINION: Say what you like about the Labour and Green parties' new electricity markets policy, you can't deny it's bold.

Politically, at one stroke, it makes the Opposition relevant, a player rather than a critic.

And the Opposition doesn't need much to sweep into power, despite the Labour Party's perennially poor poll performance. The Nats have damaged their prospects in Christchurch over the past year. That and policy coups like this could just make the difference.

But politics and good economic management are not the same thing. So is this good economic management or "economic vandalism" as Business NZ chief executive Phil O'Reilly dubbed it last week?

First, very few people are arguing that the electricity market is delivering for consumers, as opposed to the owners of power companies. Price-setting on the market is badly flawed.

If you accept that, then you have to accept that something should have been done about it before Mighty River Power was partially privatised.

It seems we have failed to learn lessons from previous flawed privatisations, especially that of Telecom. It took more than 20 years to finally establish a competitive market in telecommunications, years in which services were deliberately delayed, throttled and when prices were kept artificially high.

There is a real danger we are about to repeat that in electricity by embedding the current flawed system through fear of upsetting Mighty River Power's new shareholders and disrupting our revamped capital markets.

That would be easy enough to avoid by fixing the market first.

In that sense, the Labour/Green policy is good economic management, at least in intention. Leaving the market as it stands is not.

That is especially true if you follow the money. If our power companies are generating super profits at the consumer's expense, that is bad for the economy and a drag on consumption in other areas, such as food for the family.

If they are making super profits, those profits are being derived from all consumers, including the poorest, and delivered to a smaller subset of New Zealanders, the Government and Mighty River Power's newly minted shareholders, mostly people with a buck or two to spare.

There are issues of social justice here, and this isn't the first time the lowest rung in our society has found itself digging deep to pay such imposts.

Realistically, the Labour/Green move won't derail the Government's drive to finally get the Mixed Ownership Model off the ground. It might affect the sale price, though.

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