Is there any aspect of government policy that isn’t either attracting popular protest or damning criticism from the experts, or both? We’ve seen the last minute back down on mining after tens of thousands of Kiwis stood up, we’re seeing a growing tide of anger as Kiwis realise that all our work rights and wages are for the chop.. but one policy that has avoided public criticism on the level it is getting from the industry is Gerry Brownlee’s mad electricity reforms.
I’ve been talking with some industry insiders and this is what they’ve told me.
Meridian Energy has been forced to swap dams in the Waitaki river system in return for Genesis’s gas generators at Huntly. Having two operators running the hydro system on on river system is nuts. Genesis has the upriver dams, so it controls how much water Meridian’s dams will get. If it spills water from its dams, the water actually bypasses half of Meridian’s dams, meaning less electricity is generated from that water.
And it may well be in Genesis’s commercial interests to manage its dams water in a way that results in more spilling, screwing over Meridian, some times. If Genesis spills water that would otherwise have gone through Meridian’s dams, there may not be enough hydro power coming from Meridian’s dams to meet national demand. When that happens, the price of power goes up, meaning more profit for Genesis’s dams, and it’s Genesis’s coal plants that step in to fill the supply gap.
It’s insane enough that we have government bodies that are mandated to compete against each other and to maximise their own commerical interests without regard for the good of the country as a whole – it’s like letting your hands do whatever they want to do, not what is best for you. It’s even madder to put a knife in one of your hands and give it an incentive to stab the other.
The point of the electricity industry is to provide supply to match our electricity demand at low prices and, preferably, from renewable sources. Giving Genesis an incentive to waste hydro water to force up prices is irresponsible and stupid.
The solution, of course, is to do away with this nutty competition system altogether. Renationalise Contact and the lines companies. Form a single body tasked to provide the service as efficiently as possible, just like we have NZTA to provide State Highways and Kiwirail to provide the rail system. It doesn’t make sense to have artificially divided government bodies spending money on competing with each other in a market that is a natural monopoly, where true competition can never exist.
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