When we sold off Wellington's power
Many Wellingtonians aren't aware that the city's local electricity network is owned by a Hong Kong-based Chinese multinational corporation chaired by one of the richest and most powerful men in Asia - Li Ka-shing. According to Forbes magazine, he is the ninth richest man on Earth, and has an estimated wealth of $31 billion.
As the Government prepares to sell off four state-owned electricity companies, it's worth recalling what happened to our electricity network when it was sold off in the early 1990s, and passed into private, mostly foreign ownership.
It's an example of what is likely to happen to our state-owned electricity companies when they are partly privatised.
Until the 1990s, Wellington City Council owned our local electricity network, and a council- owned company, Capital Power, ran the network. It was widely acknowledged to be a well- managed, highly competitive company, with one of the lowest line charges in New Zealand.
Despite this, a campaign was launched, in 1992, to sell off Capital Power.
The mayor at the time, Fran Wilde, said it was returning only a "derisory dividend" ($6.5 million a year) to the council, and was not a good investment for ratepayers. She said the council would be better off selling it, paying off its debt and holding rates.
Others argued that it would be run much more efficiently by the private sector. Some claimed that in the newly deregulated electricity market of the early 1990s, it was a risky investment, and public ownership was holding the company back.
The public didn't buy these arguments, and there was a groundswell of opposition to its sale. Opponents argued that the electricity network was a key strategic asset, because the city couldn't function if the electricity network failed, and warned that if Capital Power was sold, the sole objective of the new owners would be to maximise a return on their investment, and electricity prices would increase steeply.
At the last minute, a compromise was reached to sell 49 per cent of the company, rather than the whole lot, to a Canadian company, Trans Alta, for $120 million.
But no sooner had this deal been clinched, than a new campaign to sell off the remaining 51 per cent council ownership in the company to Trans Alta began.
The newly elected mayor, Mark Blumsky, said the council had no business being involved in running an electricity company, and that it would be run more efficiently by the private sector. He argued that the original decision to sell 49 per cent of the company "was always going to be the trigger for the eventual total sale" of the company.
Despite strong opposition, the council decided, by an 11-9 vote, to sell its remaining 51 per cent ownership of the company to Trans Alta in 1996 for $90m.
To placate Wellingtonians, the council persuaded Trans Alta to set up a customer advisory board, "to ensure the company does not get out of step with consumers' needs".
Trans Alta then bought a majority ownership of the local Hutt Energy Board, and secured monopoly ownership of the entire network in the Wellington region.
When the sale was announced, Mr Blumsky predicted that "the big winner in all this would be the Wellington region", because the council was exiting a risky investment. He assured Wellingtonians that Trans Alta had a long-term interest in owning the local electricity network and increasing its value.
But just four years later, Trans Alta sold the electricity lines network to Kansas banking group United Networks for about $560m - making a handsome return.
Four years after that, United Networks sold it to New Zealand company Vector for $800m - another hefty profit.
Six years later, in 2008, Vector sold the network to its current owner, Wellington Electricity Lines Ltd, a subsidiary of Chinese company Cheung Kong Infrastructure Holdings Ltd.
So our local electricity network has been sold four times in the past 16 years, and each sale has brought windfall profits for its mostly foreign owners. The problem is that as the value of the network has been inflated with each sale, the amount we pay for line charges has risen steeply as well.
According to Peter Harris, Jim Turner and Dick Werry, the capital value of Wellington's electricity network has quadrupled since 1990, and consumers have been forced to bear the cost of generating returns to a succession of different owners.
And Wellington Electricity Lines has just applied to increase our line charges yet again.
So has Wellington been the big winner in all of this?
Certainly, the council used the sale proceeds to pay off debt. But it lost its annual dividend payments from running the network.
And while the network appears to be running efficiently, there is no evidence that it is being run more efficiently than it was in council ownership,. And contrary to arguments at the time, there has been little obvious investment in the network, other than standard maintenance.
Indeed, the main objective of a succession of private owners has been to maximise profits for their shareholders. As a result, electricity line charges have risen steeply, and all the profits made from running our electricity network have flowed out of Wellington, mostly to overseas owners.
It's interesting that the same arguments used 20 years ago to justify the sale of our local electricity network are being used today to justify the part-sale of our state-owned electricity companies.
I predict that if the part-sale of our electricity SOEs goes ahead, it will be followed by a total sale, as happened in the case of Capital Power, and we will see a similar pattern of constant changes in the ownership of the company, rising electricity prices, little investment in the network and most of the profits flowing overseas.
Sue Kedgley is a former Wellington city councillor who voted against the Capital Power sales, and a former Green MP.