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Historical Background

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New Zealanders, by and large, are not stupid.

We can recognise a rort when we see it. And in the case of electricity prices, we see it on a regular basis in our power bills and media headlines,

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2008

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Acknowledgement: Fairfax: Government to seek inquiry into power price rise

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2009

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Acknowledgement:  NBR – More profit than power for state-owned energy companies

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2010

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Acknowledgement: Fairfax Media – High spot prices hint at power price rise

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2011

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Acknowledgement: NZ Herald- Power bills set to rise up to 8pc from March

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2012

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Acknowledgement:  Fairfax Media –  Electricity prices tipped to rise steeply

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2013

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Acknowledgement:  TVNZ –  Power prices rise by average $120 nationwide

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We all know the facts and figures by now,

• National Minister Max Bradford “reformed” the electricity sector in 1999 (see: Splitting up ECNZ expected to cut wholesale power price)
• We were promised cheaper power due to Bradford’s reforms (see:  Lower power prices coming says Bradford)
• Power prices have continued to rise, increasing by 87%  since 2000 (see:  Power prices nearly double since 2000)
• Consumer power prices rose by 72%between 2000 and 2008 whilst inflation went up only 29% (Put prices on hold, Brownlee tells power companies)

None of Bradford’s promises came to fruition and on 27 November 1999, Bradford lost his Rotorua seat to Labour’s Stephanie Chadwick (see: Rotorua – New Zealand electorate).

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A Bold New Plan

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On 18 April, Labour and the Greens announced a bold new policy initiative to reign in escalating power price rises. Called NZ Power, the reform would work thusly,

Key to the proposals is the creation of a central buying and electricity system planning agency, dubbed NZ Power, which would drive down power prices because of its market power and would not be required to make a profit.

It would also be the market regulator.

“It will not just supervise the market, it will be actively involved,” said Labour’s finance spokesman David Parker, a Minister of Energy in the 1999 to 2008 Labour-led administration.

It would tender for new electricity generation, or potentially energy efficiency measures, rather than the current crop of generators competing to identify the next least costly unit of new generation when demand rises.

In some cases, industrial users would be able to contract directly with NZ Power.

Power prices would be set not by reference to the cost of the next new unit of generation, but by average costs that include the anticipated price of new generation. However, there would still be a traded market in wholesale electricity, which could reflect regional variations.

Acknowledgement: Scoop –  Labour-Greens to rip up the book on electricity pricing

This new plan was the confirmation (if any was needed) that National’s grand experiment in privatisation and “competition” in the electricity sector was not working. Only  fools  (mostly those posting on right-wing, pro-National Kiwiblog) could possibly argue that the current system was “succeeding”.

In fact, even as far back as May 2009, National Minister Gerry Brownlee demanded that power generators put price rises on hold. He stated,

“There is something fundamentally wrong in the way in which we’re marketing electricity in New Zealand.“

Acknowledgement: NZ Herald –  Put prices on hold, Brownlee tells power companies

And even the architect of this ill-conceived “reform”, Max Bradford, was reported in May 1999 in the media as planning to regulate electricity line charges,

Enterprise  and Commerce minister  Max Bradford  is to press ahead with regulations to control electricity line charges, but sees no reason to implement regulation in the competitive end of the market.

Acknowledgement: Otago Daily Times – No case for regulation

So even National ministers reluctantly concede that the electricity sector cannot work in an unregulated “freemarket” model, and is unable  to deliver the ‘golden fruits’ of de-regulation and so-called competition.

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Carping & Criticisms

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After the press conference on 18 April, criticism flew thick and fast from National ministers; right wing bloggers;  pro-National sycophantic elements of the media, and their ideologically-wedded fellow-travellers.

On Steven Joyce’s twitter account,

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Source: Twitter/Steven Joyce

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Judith “Crusher” Collins added this bit of gratuitous fantasy-fear mongering,

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Source: Twitter/IBID

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From Simon Bridges, this little bit of muppetry,

“They may want to return to sort of United Soviet Socialist Republic of New Zealand days but National certainly doesn’t.”

Acknowledgement: NZ Herald – Power plan likened to Soviet era

It was  actually the Union of Soviet Socialist Republics, Mr Bridges, not “United” Soviet Socialist Republic. Get your Evil Empires  right, mate.

And anyway, most of New Zealand’s centralised planning occurred during National’s administration, from 1975 to 1984, under the late Robert Muldoon. Remember the price/wage freeze?

Mighty River Power chief executive Doug Heffernan, also called the plan “socialist” (by the way, is that a bad thing?) He declared,

“What you’ve just described is a socialist consumer model.”

Acknowledgement: NZ Herald – MRP chief slams socialist’ plan

To which I would point out to the reader,

1. Heffernan benefits from a $1.49 million p.a. salary – whilst Mighty River Power keeps raising it’s power prices. So the gentleman has a vested interest in this issue.
2. In February this year, Heffernan announced that Mighty River Power’s half-yearly profit has quadrupled; prices had risen by 2%; despite demand “being flat”. (see:  Mighty River Power profit quadruples )
3. Saying that “Mighty River Power would not have made the $1billion investment into geothermal energy that we’ve made in the last five years … The risks would have been too high” – insults our intelligence.  Mighty River Power was built up by the State, with taxpayers’ money.  Heffernan forgets himself; MRP is not a private company.
4. And anyway,  is it the role of  SOE chief executives to be promoting privatisation?

Steven Joyce added to the “red menace scare”on TVNZ’s Q+A on 21 April,

“By definition, it’s socialism.

“They are not just talking about the price, they’re talking about telling the generators when they can generate, which generating assets they can use, which ones they can introduce to the markets.”

The Minister said the proposed plan would also scare off investors, with evidence of this seen late last week when the market dropped.

“On Thursday and Friday, the market dropped nearly $600 million across three companies because they said, ‘Jeez, we’re not interested in this’.”

Which is rather strange… Joyce, Bridges, Collins, Key, et al, are likening Labour-Green’s plans to “North Korean economics” or “Soviet style socialism”.

But when did the former USSR or the current North Korea ever have a share market or multi-party Parliamentaty democracy?!?!

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Could it possibly be that National ministers have no intellectual, rational response  to the proposed NZ Power scheme?

Could it be that they must rely on fear-mongering?  Which reminds me of this,

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Acknowledgement: NZ History Online:  Dancing Cossacks political TV ad

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Could it possibly be that National ministers are placing their faith in free market economics – vis-a-vis the partial sale of state powercos – to get prices to drop? (Which, after 14 years is yet to happen for the domestic consumer.)

Could it be that National ministers are… panicking?!

Because as NZ Herald columnist, John Armstrong wrote on 19 April,

“There may be good reasons for the seemingly constant above-inflation hikes in retail prices. But politicians have given up explaining because consumers long ago stopped listening.

All this would suggest there is fertile ground for Labour and the Greens, who yesterday foreshadowed plans to slash power prices by setting up a new agency, NZ Power, to act as a single buyer of wholesale electricity.

National was truly gobsmacked. It accused Labour of “Muldoonism”, “loony tunes” policy making and “North Korean economics”.

National accepts that at the outset there might be lower prices. But it argues the policy would distort price signals that are so vital to matching supply and demand. That could lead to power shortages. The policy would distort and even discourage investment in power generation.”

Acknowledgement: NZ Herald:  National gobsmacked at Labour idea

“Gobsmacked” is about right.

And ironically enough, “Muldoonism” was a product of the National Party – not Labour. Hilarious stuff, indeed!

This is nothing less than a full-scale retreat from market-driven political orthodoxy. In effect, Labour has done the unthinkable; it has publicly announced that neo-liberalism and it’s supposed “free” market economics does not, and cannot,  deliver all of society’s needs.

We get a glimpse  of what it must have been like in 1989 when Mikhail Gorbachev sat down with his colleagues in the Soviet Politburo and announced to a stunned meeting,

“Comrades, our communist ideology and centralised economic system has failed.”

Mark 18 April 2013 on your calendar as the day that one of our two main Parties (or, two out of our three main Parties, if  Green political support keeps increasing) renounced neo-liberal free market ideology as a failure.

There is now a clear, unequivocal difference between an increasingly  right wing, ideologically-driven  National, and a decidely more-leftist – but  pragmatic – Labour.

And the public now has a clear choice as well, for whom to vote;

Option A (for the Blue Team): maintain the neo-liberal status quo; proceed with privatisation; and hope-like-hell  that Max Bradford’s promises eventually, maybe, one day, will  come true.

Option B (for the Red Team): vote for change; abandon our slavish adherence to neo-liberal dogma; and, as a side-effect, enjoy cheaper power bills.

Continued at: The Politics of Power and a Very Clear Choice – Part Rua

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Previous Related Blogposts

History Lesson – Tahi – Electricity Sector “reforms”  (4 March 2012)

John Key: Man of Many Principles (28 Sept 2012)

Labour, Greens, NZ First, & Mana – A Bright Idea with electricity! (10 March 2013)

References

NZ History Online:  Dancing Cossacks political TV ad

NZPA: Splitting up ECNZ expected to cut wholesale power price (16 Dec 1998)

NZPA:  Reforms aimed at business – Luxton (21 April 1999)

Otago Daily Times: Power Prices Set To Soar (12 May 1999)

Otago Daily Times: No case for regulation (24 May 1999)

Otago Daily Times: Lower power prices coming says Bradford (3 June 1999)

Otago Daily Times: Power prices to rise by up to 15.1% (29 June 1999)

Otago Daily Times:  Reforms blamed for hike (13 July 1999)

Scoop: Alliance to hold Winston Peters accountable (8 Oct 1999)

NZ Herald: Peters ‘forgets’ NZ First support for power reforms (13 Aug 2008)

Fairfax: Government to seek inquiry into power price rise  (30 September 2008)

NZ Herald:  Put prices on hold, Brownlee tells power companies (21  May 2009)

NZ Herald: Mighty River directors’ 73pc pay rise realistic – Key (5 April 2013)

Scoop:  Labour-Greens to rip up the book on electricity pricing (18 April 2013)

NZ Herald:  Labour-Greens plan could work, says Vector CEO (19 April 2013)

NZ Herald:  National gobsmacked at Labour idea (19 April 2013)

NZ Herald: Power plan likened to Soviet era (19 April 2013)

NZ Herald: MRP chief slams socialist’ plan (21 April 2013)

TVNZ:  Q+A – Transcript of Steven Joyce interview (21 April 2013)

NZ Herald:  Bernard Hickey: Power barons fail to fool the public this time around (21 April 2013)

Radio NZ: Power prices nearly double since 2000 (21 April 2013)

Other blogs

Kiwiblog: Electricity Prices

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