Asset sales mean power price rises

Written By: - Date published: 7:56 am, April 25th, 2012 - 79 comments
Categories: energy, privatisation - Tags:

Molly Melhuish was one of dozens of oral submitters on the Privatising Your Assets Mixed Ownership Model Bill yesterday – all of them opposed.

She presented research showing that the average price of power from a private provider is 3.31 c/kWh higher than from an SOE. The difference amounts to $265 a year.

Contact Energy’s boss has talked about the need for prices to rise further to make a sufficient profit for private investors. The implication is privatisation will remove the shackles. We won’t just see the SOEs move up to the price level of the private companies – the whole market will shift upwards.

Can someone tell me why it’s a good idea to sell our energy assets so that big profits can be made off them by someone else? National’s MPs on the select committee clearly had no answer.

79 comments on “Asset sales mean power price rises”

  1. tsmithfield 1

    It seems to me that the public ownership model hasn’t been very effective at keeping power prices in check with power prices increasing roughly 40% over the period between 2002 and 2010, at around 5% per year which I suspect is considerably higher than the rate of inflation for the period..

    One consequence of the government being the sole shareholder, and demanding dividends from the power companies is that they can use dividends as taxation by stealth. Thus, extracting unreasonable dividends from the power companies and driving up prices artificially. I wonder how much that has to do with the price rises over the last decade or so.

    • Eddie 1.1

      Um.

      a) if the SOEs were driving prices up unreasonably then they would have higher prices than the private companies. They have lower ones.

      b) I thought the whole argument was these were low return assets that the government shouldn’t bother to own. you’re saying they’re high return now.

      c) the private companies want to make prices higher. if anything, that suggests public ownership is keeping prices artificially low. And that conforms to logic too: the Crown has a lower cost of capital than private investors, so it can make a return off lower profit margins (ie lower prices) than private investors can

    • lprent 1.2

      Not much. You are thinking too small on the causation.

      The biggest single issue pushing price rises over the last few decades has been the lack of investment by the companies, both public and private, in generating and carrying capacity. That has caused a gradual reduction in the ability to deliver power where it is is required, which causes prices rises. So the question is why wasn’t that investment going in.

      The previous rounds of privatization in the electricity sector shifted to focus from creating power as a public benefit to the whole of the economy, to a model of extracting the most efficient use (ie profit) out of what power we had. Which was exactly what the changes in the 1990’s were intended to achieve – despite being billed as a way to get cheaper power prices. Of course anyone with a brain (ie not a National voter) who looked at the issue realized the it’d make power prices rise drastically over the long term.

      The problem is that the objectives were short-term in a industry that provides long term infrastructure. So it resulted in the generating companies playing chicken about adding capacity. We have less capacity per economic unit because it is more efficient for the companies to drive prices up than to make long term capacity building investments.

      The overall effect is to dampen economic growth and raise everyone’s bills to pay for the power company profits and returns to the shareholders (including the government – which is what you referred to) without major investment in capacity and carry.

      It is why letting idiots for National run the country is a dumb idea. They always think too short term and penalize businesses over the long term through stupidity.

      • Colonial Viper 1.2.1

        That has caused a gradual reduction in the ability to deliver power where it is is required, which causes prices rises. So the question is why wasn’t that investment going in.

        1) Invest less in your business.
        2) Charge more due to shortages, making more profit.

        Brings a tear to my capitalist eye, the beauty of it.

        • Draco T Bastard 1.2.1.1

          That’s it exactly and that’s is why privatisation of infrastructure is bad for the country.

  2. DavidW 2

    Can I refer you to a competitive analysis by Farrar at Kiwiblog. Quite clearly it calls Grey Power’s bullshit for what it is.

    • Eddie 2.1

      I refer you to the MED’s quarterly electricity price survey, which the Grey power analysis is sourced from. Add it up and you’ll see that the average price for the private companies is higher than that for the public companies across the country.

      Farrar’s analysis, typical of the man, is cherry-picked and misleading. He doesn’t look at the whole country, he doesn’t look at all suppliers, he doesn’t weight them for size.

    • Colonial Viper 2.2

      Quite clearly it calls Grey Power’s bullshit for what it is.

      I see you are backing National’s electoral suicide. The always voting elderly population who can do math and who will notice every single $5 increase in their power bill.

      • felix 2.2.1

        .. and have been around long enough to know a bunch of corkscrew shysters selling snake oil when they see them.

  3. Colonial Viper 3

    We saw how the private sector ran down and extracted the capital value of core NZ infrastructure (Toll/railways).

    They’ll do the same for our power generation infrastructure.

    That’ll screw the economy good. In 20 years.

  4. vto 4

    So let me get this straight….

    It is actually going to cost the government to sell (after lost dividends and cost of other funds are accounted for)…

    AND power prices are going to rise……

    So what’s the reason for selling again?

    • freedom 4.1

      if memory serves it was to build schools, fix hospitals, create vast employment opportunities, balance the books and make your dishes sparkle like the tell-tale eyes of the smiling assassin.
      If you order right now, for no extra profit, they will throw in multi-generational poverty.

      • seeker 4.1.1

        Initially I thought it was to pay off debt.. Just before the election I rang my local National electorate office to find out, just why Key and co. were so cavalierly and callously selling OUR necessary, precious public utilities.

        I was told by a wonderfully sincere, well meaning older National supporting lady that she had been thinking about this and this is what she had come up with. “We need to sell our assets so we can pay for more roads,schools and hospitals and we don’t have to go overseas to borrow more money to do so. What’s more it will give ordinary people, like you and me, the chance to buy shares and invest in something reliable rather than those horrible old investment houses. Anyone who had a spare $5,000 or $10,000 dollars could do this!”
        I said I didn’t have any ‘spare ‘ thousands. However, she was naively convinced that this was ‘the answer to life’ ‘cos John Key had said so.

        The next day she rang me to say that she had asked ‘Nick'(Smith) and she had it a bit wrong because he told her, as he was dashing out of the office, that the dividends the electricity companies provided were not enough to pay off the 16 billion/million dollar debt we had then (November2011) so we had to sell the electricity companies to pay for it!

        The reason for people to buy assets I owned was still too confusing. Still needing an answer I rang the pm’s office. They didn’t know the answer and pointed me to the nat’s website – blank.

        It is not enough that I have to freeze every winter for no valid reason. I have fought Contact as their prices rose and rose(swiftly followed by the other companies,but not as much). Now I have to endure and fight another self serving and ignorant government, voted in by nincompoops, who really has no regard for the people it is meant to serve and protect.

  5. burt 5

    Here is a reminder of how Labour gouged the public for profit from electricity when they were last in office.

    It seems that profit from power is great when the red team do it…..

    • Colonial Viper 5.1

      Weak burt. Labour’s model is profit from power for the people.

      Not profit from power for rich pricks.

      • burt 5.1.1

        Labour’s model is profit from power for via the people.

        Fixed it for you.

      • burt 5.1.2

        CV

        Perhaps you can tell me how during the last Labour government it was valid to crank power bills to help create a surplus for the government but now we need to focus on reducing power prices.

        I’m sorry I can’t see how when a person is struggling to pay the power bill it is OK to over charge them when it’s the government doing it but it’s wrong when it’s a private company. Over charging is over charging and the party doing the over charging is wrong regardless of their own perceived “right” to do so.

        • felix 5.1.2.1

          Yep, overcharging is wrong. The business model has failed.

          Re-nationalise the entire network and deliver electricity at cost to non-commercial users.

        • lprent 5.1.2.2

          burt – you are bullshitting again.

          The prices were set by the “market” that the National government set up in the 90’s when they seperated and sold a large chunk of the electricity infrastructure. The government had nothing to do with setting the prices.

          The conditions and legislation around those sales were such that to regulate extensively or to change the legislation would most likely have faced a difficult time through the courts as it would have removed property rights. That would have included rejigging the SOE acts to allow the government to direct the electricity SOE’s to bias the market.

          Sure the government could have nationalized the generating companies (and that is exactly what I’d like them to have done), but then you’d have been the first person attacking them for doing so.

          Either tell me I am wrong, or suggest an alternative approach that the government could have used to constrain or tar yourself as a complete hypocrite.

          Personally I think the latter.

          • burt 5.1.2.2.1

            lprent

            You are wrong….

            The prices were set by the “market” that the National government set up in the 90′s

            The prices are set by the generators…. the fact that they all decided to keep their prices at a level that enabled them to scoop up to $1.2b in a single year is nothing to do with the structure of the market.

            The state owned generators are the main players in the generation market, they could have easily pulled the market price down to a level that reduced their profit.

            Your position seems to be that minority market players force the dominant players to be profit takers.

            Stop defending this price gouging profit taking crap just because you support the “team” that did it. It makes you look like an apologist and you are normally better than that.

            • felix 5.1.2.2.1.1

              There shouldn’t be any profit in it.

              We built the dams. We built the generators. We built the distribution network. We maintained the lot for decades.

              Now we have to line someone’s pockets just to use the power? Ridiculous.

              • burt

                felix

                That’s actually a fair comment.

                The taxes of the older people today paid for it and the last Labour government made them turn their heaters off more than ever before. Sadly that reality has bugger all to do with the pricing structure and a lot to do with the government wanting the profit for other things – not for reinvestment in power infrastructure which would have made it more difficult to call the gouging wrong.

                • felix

                  Haha, who’d have thought you’d try to make it about the Labour party?

                  The neoliberals in the 4th Labour govt didn’t quite get around to ruining the electricity network although I’m sure it was on the list. Luckily for them, the neoliberals in the 4th National govt got the job done instead.

                  The slightly more moderate but still essentially free-market 5th Labour govt should’ve done something to reverse Max Bradford’s ideological nonsense. Pity they didn’t.

                  Reckon the crony-capitalist 5th National govt is going to help? Not likely. They don’t seem too keen on having public institutions under democratic control.

                  Any fool can see where the fault lies: squarely at the feet of the neoliberal free-market ideology both parties (more or less) subscribe to.

                  So who’s going to bite the bullet and do away with this absurd pretense of a market?

                  • burt

                    You seem to be missing something critical here. The structure may or may not be right, how it’s used is however what drives the profit (or loss) it generates.

                    Sure the structure allows the state owned generators to make massive profits as most succinctly demonstrated by the 5th Labour government. The largest profit take in the history of the model – hence their special place in my comments.

                    There was nothing stopping the 5th Labour government from reducing that profit to reduce the cost of power to the consumers – they didn’t. Now they sit in opposition and criticise National for doing a weaker job of pillaging the consumers than they were doing…. who would have guessed that partisan red flag wavers would miss this point….

                    You are right though, the model is open for abuse. The question is do we radically change the model OR use it for the benefit of consumers rather than have it as a stealth tax collection device while claiming it’s a bad model but doing nothing to change it???

                    • felix

                      I notice you only seem to have a problem with the generation end.

                      I’m talking about the whole kaboodle burt. Why do we need “retailers” to sell us our own electricity at all?

                      Why is any of set up to make money off the people who rightfully own the whole damn lot?

                      Simple question burt: You don’t like seeing the govt taking profits out of the community via our power bills. Neither do I. Does your concern extend to privately owned power companies doing the same or not?

                    • burt

                      felix

                      That’s a fair question. As long as we have choice and there actually is competition then the privately owned companies will soon work out that charging more than their competition is bad for their business.

                      The whole issue around return on capital can’t be ignored.

                      The problem we have at the moment is that the majority producers are the state and they set the benchmark for pricing. When they set their prices such that they make massive profits the smaller operators join them and also make (proportionately) massive returns on their investment.

                      The idea of a full state monopoly scares the hell out of me because time and time again we see that it works well for a few years then self serving politicians see it as a cash cow for stealth taxation. When there is only one petrol station in town filling up your tank is going to be expensive…..

                    • burt

                      felix

                      Does your concern extend to privately owned power companies doing the same or not?

                      To directly answer this; Yes of course it worries me.

                      But unlike some other dreamers I would be equally worried by there being a single private company as I would be with a state monopoly. Both would take advantage of their position and pillage the consumers because they can. The idea that the state is inherently “good” is quickly disproved by Labour’s behaviour wrt power prices in their last three terms of office.

                    • burt

                      felix

                      As a point of interest I have investigated going off the grid for electricity. I have the physical space to stand a wind turbine and I have a good north/west facing aspect for solar generation. I specifically directed the design of my roof lines to enable the placement of solar panels.

                      However the economics of doing so are dubious at best. They are getting better though with advancements is solar cell and battery technology.

                      The economics of small scale wind turbines are also improving and the council red tape to install one is decreasing. When I first fully investigated it about 14 years ago the consent process was arduous. About 2 years ago I re-investigated the consent process and now all I would need is a building permit and engineering report. However the return on investment is still not really stacking up.

                    • felix

                      But there’s no need for any of that.

                      No need for a single profit driven company – whether state owned or privately owned – in the entire chain.

                      The whole lot can be operated by democratically controlled institutions to supply electricity to the owners of the network – us – at cost.

                      Sometimes I doubt your commitment to sparkle motion, burt

    • Karen 5.2

      But didn’t the money that Labour supposedly ‘gouged’ from the public ultimately get returned to the public?

      • burt 5.2.1

        Karen

        I can’t speak for all power consumers but It’s hard to imagine that when struggling to pay their power bills they felt warm and comforted that the government was the one inflicting the pain rather than a private company.

        • felix 5.2.1.1

          Yeah, ‘cos a private company is only going to take that money and spend it on health education and social services just like the govt does.

          But I do agree with you, the model has utterly failed us.

          • burt 5.2.1.1.1

            felix

            The problem is that, as demonstrated by the last Labour government, when a single owner controls the market they set the price. Now you might trust the government to not use the convenience of monopoly power supply as a cash cow for other agenda’s – I don’t.

            • felix 5.2.1.1.1.1

              Good for you, burt.

              Trouble is you’re not arguing for an end to price gouging, you’re arguing for privatised price gouging.

          • burt 5.2.1.1.2

            Yeah, ‘cos the gummit used that profit for election bribes …. and that was good because they chose where to spend the money so they would stay in office and continue to rape the power consumers so they could continue to be popular so they could stay in office.

            • felix 5.2.1.1.2.1

              I thought they just gave all the money to their union mates to buy ferraris.

              • burt

                You need a capital “F” for Ferraris.

                Although I’m not sure that’s where the money went. I think it’s more likely that fees extracted from low paid workers paid for the union boss Ferraris. Perhaps we need to investigated the unincorporated societies that don’t publish their accounts but still call themselves unions.

                • felix

                  Yep, as far as I can tell the only thing holding up such an investigation is that these union bosses with the ferraris are very hard to find.

                  My guess is they mostly move through underground lava tunnels. Like Wilberforces.

  6. Can’t you guys leave aside the petty politicking for half a day at least?

    • felix 6.1

      Sure, you start.

    • Carol 6.2

      “petty”?

      ANZAC Day, and the wars it commemorates, has always been political.

      • Colonial Viper 6.2.1

        In the US they shut down any discussion on the political decisions around wars by claiming that it would be “unpatriotic” to those who died and that it would “dishonour” their memories. Or some bullshit like that.

        In other words, trying to sidestep the fact that geopolitical and economic factors play a huge role in the decision to go to war, that its always older, more powerful, (usually men) in comfortable offices who send young citizens to fight and die.

        Let’s not forget that one contributory reason that the NZ Government sent so many of its best and brightest to die on foreign shores in WWII was to guarantee our continued access to Britain for our agricultural products.

      • QoT 6.2.2

        Agreed, Carol. There’s a great article doing the rounds about how ANZAC Day’s “apolitical” aesthetic is actually anti-political (admittedly, an Aussie article but I think the same is true here): ANZAC Day celebrates forgetting.

        • Draco T Bastard 6.2.2.1

          It’s a central part of Anzac’s anti-politics: the hellishness of war separates it from ordinary life, transforming Clausewitz’s ‘politics by other means’ into a transcendental experience at which civilians can only marvel. Whereas for the writers of the twenties and the thirties, the Great War disappointed by representing, in concentrated form, the violent banality of industrial society, today the very bloodiness of the conflict is used to highlight the contrast with our own day-to-day life. The narrative therefore shifts from social critique (why did we allow these atrocities to happen?) to a veneration of sacrifice, the nature of which is largely irrelevant.

          Says it most eloquently.

    • millsy 6.3

      Ummmm, no.

    • Draco T Bastard 6.4

      Should we shut down political discussion on a day that commemorates political stupidity? No.

  7. KJT 7

    It is obvious now that the amount of State dividend demanded from the, still to be privatised, power companies was deliberately kept high to allow the privatised ones to compete.

    So much for extra efficiency from privatisation.

    • burt 7.1

      KJT

      The dividends were higher under Labour than they are now under National. So much for extra efficiency from the failed model of pretending to be serving the people.

      • KJT 7.1.1

        I have said many times I was extremely disappointed in Labour continuing failed policies from the 80’s.

        Labour has been NACT light for a long time.

        That is why I am a Green party member.

        I still have some hopes that Labour are learning their lessons from the failures.
        No hope of that with National.

        Why do you still think we are all Labour party members?

        • Draco T Bastard 7.1.1.1

          I still have some hopes that Labour are learning their lessons from the failures.

          I don’t. Just reading their press releases and Red Alert (very occasionally these days) proves that they haven’t.

  8. RedLogix 8

    Which is it burt?

    1. Public power companies have lower prices and higher dividends because they are more efficient.

    OR

    2. Public power companies have lower prices and higher dividends because they are a ‘failed model”

    • burt 8.1

      RedLogix

      I’m not sure. But I don know that Labour are completely hollow in their claims they would stop the profit taking from power generation. This is my key point.

      • Kotahi Tane Huna 8.1.1

        “Stop the profit taking” ≠ “Labour will, the next time it is in government, ensure that electricity prices will not be forced up due to higher dividends which are not being ploughed back into plant investment, to ease the burden on Kiwi families,”

        I’m not sure why Burt feels the need to make things up and make himself look deluded or deceitful, but I do know that he is completely hollow in his claims about anything that ever happened anywhere. That is my key point.

        • burt 8.1.1.1

          Labour will, the next time it is in government…

          That’s classic socialist rhetoric… we won’t fail this time…. now sure last time we were totally hollow and lied like flat fish… but trust us – this time will be different.

          If you believe; next time it will be different then you are exactly the type of dim-bulb that continues to support self serving govt and therefore it’s people like you we should be pointing the finger at when our power bills go through the roof under a failed ideology reelected for “one more chance”.

          • Colonial Viper 8.1.1.1.1

            That’s classic socialist rhetoric… we won’t fail this time….

            Wow you’re really reaching dude. Its just a statement of intent.

            • burt 8.1.1.1.1.1

              In 1999 we were paying a few cents more tax to fix health and education…. What’s on Labour’s agenda for 2014… Oh gee it’s a few cents more tax to fix health and education….

              You keep believing they will actually do something other than bribe enough people so they can stay in office using your money which they took with the intent of ‘fixing’ something.

              The problem is CV profit from artificially high power prices is possibly more regressive than GST as a form of tax. I simply can’t understand how you accept up to a billion dollars in tax paid profit in a single year from over charging for power while complaining about the likes of a GST hike. The only explanation is that it’s good when your team do it.

              • Kotahi Tane Huna

                LOL, hey Burt, you poor thing, do you always throw your toys out of the cot like this when your “facts” are exposed as total fabrications? Spewing, becoming more and more incoherent with every comment…

                Yes, you’ve got lots of tiny rage pent up against bogey men that don’t exist, but how does your tanty relate to Labour party policy?

              • Colonial Viper

                The problem is CV profit from artificially high power prices is possibly more regressive than GST as a form of tax.

                As the post makes quite clear, power prices are going to go up under hungry private sector ownership. So what’s your stance on that, One Eyed Burt?

                • burt

                  CV

                  My take on that is that this is a post on a one eyed politically bias blog. The “fact” that private ownership increases prices is simply a politically motivated opinion which is not supported by any facts at all.

                  But hey, how are you doing justifying $3.2b in profit from state owned power generation during 5 years of Labour government ?

                  How is that compared to a politically bias idea, unsupported by any facts, that private ownership = profit taking?

                  • RedLogix

                    The “fact” that private ownership increases prices is simply a politically motivated opinion which is not supported by any facts at all.

                    Absolutely no facts at all burt. Especially if you refuse to examine any evidence.

                    But hey, how are you doing justifying $3.2b in profit from state owned power generation during 5 years of Labour government ?

                    We are not. On the other hand the power industry is an oligopoly, so why do you imagine private owners would be motivated to reduce profits?

                    • burt

                      RedLogix

                      From the “presented research” link at the top of this post….

                      Sarah Free of the Domestic Energy Users Network said she was representing the children of poor households who would lose out under the policy.

                      It seems Sarah Free has missed the most critical point of profit taking in the power market. It was at it’s highest in recent decades under the last Labour government. I’m flabbergasted that she didn’t conclude that children of poor households lose out under Labour government policies…. I wonder why she missed that…..

                      Here are some actual price comparisons…. makes you go ummm eh.

                      This public ownership thing really isn’t all it’s cracked up to be is it… but the state can say what it wants to make people think it is even when the actual evidence runs against the spin.

                    • Draco T Bastard

                      Public ownership is fine – when it’s a public service but it gets really screwed when it’s used to provide a profit instead. The profiteering is the direct result of changing power (and telecoms etc) into profiting companies.

                    • RedLogix

                      It seems Sarah Free has missed the most critical point of profit taking in the power market. It was at it’s highest in recent decades under the last Labour government.

                      Love the way you blame everything on the last Labour govt, while totally exonerating the 1990’s National administration who set the system up. Just as with the leaky building debacle… National created the problem while you’d blame Labour for not fixing it quick enough.

                      Farrar is National’s spinmeister. I don’t trust him further than I can spit upwind into stiff northerly while clinging onto a steep Tararua ridgeline.

                      Rather than Farrar’s cherry picking you may want to spend some time taking a look at the MED source documents.

                      And you might also want to have a read of Grey Power’s actual submission.

                    • burt

                      RedLogix

                      I don’t trust him further than I can spit upwind into stiff northerly while clinging onto a steep Tararua ridgeline.

                      Totally relate to that… I’ve spent years running around up there. Hey this will make you laugh. As a green-horn tramper I was about to take a piss in a really strong northerly and one of the older chaps said ‘stand with your back directly to the wind’ so I did. They were pissing themselves laughing when the turbulence I created made the piss fly around and completely cover me. The effect was abaout as drenching as facing the wind… I quickly discovered that there is a ‘right’ angle to the wind that works…..

              • muzza

                I understand what you are trying to say Burt, and you are in the right direction.

                What many can’t get their heads around is that the political system is , other than a 3 yearly vote 100% out of their control. Hence why sites such as this exist, as it gives the commentators a place to “have some control”. It also serves to suck energy out of the bloggers, by way of the faux online protestations.

                The point is that the government are puppets operating against the best interests of NZ, and 99.9% of the people in it!

                Loss of control and helplessness can be disempowering for most. This country, like the swaths of the globe, is being relieved of its resources right in front of our faces, and the political system, regardless of the “teams flag, has been sponsoring the theft via its complicity for decades!

                It won’t be changing by moaning online!

  9. millsy 9

    The whole electricity market model is flawed anyway.

    What should have happened is:

    1) Retail operations left with community owned lines companies. They own the lines to houses and businesses and should be in a better place to bill customers and attend to queries.

    2) Transpower (National Grid operator) takes over planning and co-ordination from ECNZ, and tenders for power stations in specific locations, buying the electricity off them to onsell to the lines companies.

    3) ECNZ (which as a publicly owned company has various public obligations) operates stations and sells power to the national grid authority, and competes with private generators for the right to build power stations (of various shapes and sizes) as and when planned for.

    Makes sense to me.

    • insider 9.1

      Millasy you are years behind the times – ECNZ was discarded well over a decade ago. Transpower already plan the grid and has a regular planning and forecasting process which is discussed publicly and open to submissions.

      Under the current rules the electricity authority can commission power stations if it thinks the market is not providing enough to maintain energy security.

      The problem with having transpower buy and sell wholesale power and plan generation and run the system is it puts a huge amount of power in its hands but it is completely removed from any connection to the end customers, and creates the risk of a technocratic driven system that is designed, built and operated to meet the needs of engineers not the consumers paying for it. There is a really high risk of gold plated systems that are really cool engineering wise but also very expensive and over built.

      Note about 40 % of your power bill goes to monopoly lines providers. Much of the current power increase is being driven by transpowers massive construction projects which we are all,forced to pay for no matter whether we are benefitting from them.

      • Colonial Viper 9.1.1

        Under the current rules the electricity authority can commission power stations if it thinks the market is not providing enough to maintain energy security.

        And how will this new generation be funded, prey tell? By the tax payer?

        Note about 40 % of your power bill goes to monopoly lines providers. Much of the current power increase is being driven by transpowers massive construction projects which we are all,forced to pay for no matter whether we are benefitting from them.

        Yeah you are forced to pay for it because it is for the country, not for you.

        • insider 9.1.1.1

          electricity companies and consumers through the EA levy.

          I’m not sure old ladies in Invercargill being charged for the $1b transmission upgade for Auckland’s power system is that fair. We have the capability to charge it to Auckland consumers but the powercos including SOEs don’t want to suffer more than their competitors so they are happyfor the rules to smear it equally across the country because none of them are competitively disadvantaged. its a very cosy arrangement for them…but it is not only unfair to non Auckland consumers it doesn’t encourage powercos to demand value for money from Transpower, nor to look at alternatives.

      • lprent 9.1.2

        It is the inevitable result of having nearly 30 years of low investment in the grid. How long did you think it could carry on with patches?

  10. seeker 10

    I believe it was Contact Energy that put all it’s energy into raising electricity charges and the other companies followed suit from about 2004/5 onwards . I kept all my bills and could not believe how they jumped under Contact- 3 cents per unit at a couple of points plus bills went up twice, some times, three times year. I rang to remonstrate once(probably about2008) and the young man said that the shareholders required it.I hadn’t really known that Contact was a private company until then.

    At another point I also rang the electrucity commission to complain about Contact’s methods concerning the ETS rise. I think it was a guy there that said he remembered when Contact took over fom Origin and some executive said that he thought they could double the prices. Well they did from approx. 9cents in 200/4 to approx 19 cents in 2009/10, and who knows where the prices are now as I left after GST and ETS rise. Did not want to pay the shareholders their blood money anymore.

    I am still trying to work out how to be self sufficient if a miracle has not occurred and I am required to purchase electricity from other privatised companies because I do not have a choice anymore-and I cannot afford it as I will be on a fixed income.

  11. Matt 11

    Burt said: “As long as we have choice and there actually is competition then the privately owned companies will soon work out that charging more than their competition is bad for their business.”

    100% private industry as deus ex machina nonsense. Case in point, the ‘privatisation’ of electricity in California, where private companies colluded to manipulate the market and jack up prices astronomically. Ever heard of Enron? 

    http://en.wikipedia.org/wiki/California_electricity_crisis  

  12. xtasy 12

    For those interested in asset sales in NZ, perhaps also look at this story from Argentina. It may be a bit economically risky a step there, but people there support it resolutely, why? History tells:
    http://www.aljazeera.com/news/americas/2012/04/201242644253368164.html

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