Labour power plan slammed

00:22, Mar 05 2014

A former Labour energy minister has slammed the party's proposed power policy, saying it would mostly benefit the rich while damaging the renewable-energy sector.

David Butcher, who now runs a consulting firm, was one of four speakers debating the merits of NZ Power at the Downstream energy forum in Auckland today.

The Labour-Greens policy, announced almost a year ago, would create a single buyer for electricity to keep prices tied to the cost of production.

Butcher said the proposal would overturn 25 years of collaborative market development for an "untested and very flawed model".

"I think it would largely destroy the renewables industry, or at least set it back five or six years," he said.

Butcher said that before deregulation in 1990, power prices were rising by about 20 per cent a year.


Today, 72 per cent of new generation was renewable, there was private investment in renewables and there were no blackouts, he said.

Butcher said the benefits of the policy would largely go to rich people with high power usage and companies like Rio Tinto, which runs the Tiwai Point aluminium smelter.

"It's been reported by the Electricity Authority (EA) and others that wholesale prices are largely in line with the cost of new supply," he said.

However, Labour deputy leader David Parker, who is also a former energy minister, took the EA report to task.

"I thought that attack on our policy was crap," he said.

Parker referred to Fairfax business columnist Chalkie, who found flaws in the modelling used by the EA relating to the cost of capital, leverage and other factors.

Green Party co-leader Russel Norman, on Parker's team for the debate, said power prices accounted for 14 per cent of the inflation families had faced over the past decade.

He conceded that the single-buyer model was not the perfect answer "because there is no perfect solution".

"But it does deal with some of the regulatory failures coming forward," he said.

Norman said the Greens had endorsed the policy particularly because it created a large and powerful industry player with the ability to influence demand-side management. For example, that would give them choices over whether to support the rollout of smart meters or enforce different power rates at different times of the day.

Outgoing Mighty River Power chief executive Doug Heffernan, on Butcher's team, touched on the damage the policy had already done.

"The single-buyer model was announced in a rush with a lack of detail," he said.

Heffernan said the Mighty River float was a "great outcome" for taxpayers as free use of public water was completely impounded in its valuation.

But the full implications of the policy had set in by the time of the Meridian float, hence it achieving a far lower sale price than it should have.

"The taxpayer got a really bad outcome around Meridian because of the scare-threat of a single buyer," Heffernan said.

Parker said the reason he was so annoyed with the EA paper was that it tried to justify the unjustifiable - the privatisation of a public water resource.

"We might never agree on that," he said.

Butcher and Heffernan conceded that there was a need for further discussion on how to treat public water.

The two teams found common ground on three other issues - enabling innovation, enabling competition and tackling poverty.

"If you actually dealt with those, we're probably in the same place," Heffernan said.

Fairfax Media