Electricity again

Written By: - Date published: 3:05 pm, November 12th, 2018 - 146 comments
Categories: business, capitalism, Economy, energy, labour, nz first - Tags:

Just in case the Energy Commission would like to get off their fat asses and do something, Genesis Energy says there is absolutely no relationship between a massive price spike and driving smaller energy operators out of business.

After all, what motivation could the top four possibly have to smashing down any rival, no matter how small?

As noted in the ODT:

Genesis Energy says recent stress in the wholesale electricity market does not mean the major generators have colluded against the rest of the sector.

Small-scale retailers Flick Electric, Pulse Energy, Vocus Group and Electric Kiwi have complained to the Electricity Authority and sought a declaration of an undesirable trading situation, which they say is caused by the way the biggest players in the market are operating in the futures market for electricity.

Their call comes in the wake of the closure of boutique electricity retailer Dunedin company Payless Energy this week.”

Genesis is supposedly a “market leader”, but what that really means is it’s one of a very very tight oligopoly that makes it impossible to calculate whether assets are being used efficiently.

The littlies are alleging a failure of market-making in the futures market and the failure of timely disclosure about fuel supplies have disadvantaged them and shaken their confidence in the market. A combination of low hydro-lake levels and disruptions to natural gas supplies has led to volatile and skyrocketing wholesale electricity prices in recent weeks.

Again from the ODT:

Power prices jumped in late September as South Island lake levels fell and Shell shut production from the offshore part of the Pohokura gas field because of a fault on the production platform.

Those factors, combined with very weak wind production some days and other temporary generation outages, resulted in average wholesale prices exceeding $500 per megawatt hour (MWh) on some days in October — the most in seven years.

While the larger energy companies have said the market is working as it should, smaller companies cannot so easily absorb repeated peak prices.”

If small companies are finding it hard, how does the ordinary citizen feel?

Clearly this government realises there is something wrong with the market when it has to directly subsidise hundreds of thousands of citizens with a “Winter Fuel Allowance”

A case in point is Dunedin’s Payless Energy, which quit trading this week and transferred its 754 customers to another retailer, citing the recent high spot prices cost as unsustainable for its business model.

Note the small ones are doing what they can and making a complaint to the Electricity Authority.

Do we even have an electricity regulator? Can anyone remember the last time they had an effect on anything at all? If they were pushed over a cliff how long would it take for anyone at all in the country to notice they were gone?

We sure don’t have one that can take on the lazy Vector that leaves Auckland vulnerable to increasing storms. That’s because pretty much all it does is check the veracity of the spot price in times of stress, rather than expand its mandate to monopolistic line operators.

In short bloody useless for actual people.

Minister Woods has clearly bought the corporate line of “nothing to see here”, in no small part because her government is still the majority owner. After all why regulate when the government itself reaps half the profits? No one is motivated to protect the citizen, no major generator will lift a finger to enable competition, and line networks aren’t even in the frame of regulation, so we get royally screwed.

So far this government is having a great time pumping public cash into markets and subsidising the poor with cash.

I will have more respect for this government when it shows that it can face down the corporates and regulate them in the interests of the citizen.

146 comments on “Electricity again ”

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  1. BM 1
    12 November 2018 at 3:19 pm

    The government owns the controlling share in Genesis energy as well as Mighty River Power and Meridian Energy
    Can they not sell electricity at a cheaper rate?

    • Antoine 1.1
      12 November 2018 at 3:33 pm

      I do not think that the Government could give this sort of direction to Genesis/MRP/Meridian under the SOE Act (http://www.legislation.govt.nz/act/public/1986/0124/latest/whole.html)

      A.

      • Ad 1.1.1
        14 November 2018 at 2:53 pm

        The bit you are really looking for in that act is here:

        Notwithstanding any other provision of this Act or the rules of any company,—
        (a)
        the shareholding Ministers may from time to time, by written notice to the board, direct the board of a company named in Schedule 2 to include in, or omit from, a statement of corporate intent for that company any provision or provisions of a kind referred to in paragraphs (a) to (h) of section 14(2); and
        (b)
        the shareholding Ministers may, by written notice to the board, determine the amount of dividend payable by any company named in Schedule 2 in respect of any financial year or years,—

        As well as appointing the Directors (as a majority owner), they can also drive the SOI, and of course, they can also drive direct profitability and hence direction of the company through directing the amount of dividend if they felt like it.

        But it would take a strong Minister to do either of those things, and do them well.

        • Antoine 1.1.1.1
          14 November 2018 at 11:18 pm

          Who is the shareholding Minister?

          I can’t see that it would be an option to tell a SOE generator not to return a dividend, when they are competing with private companies.

          A.

    • te reo putake 1.2
      12 November 2018 at 3:34 pm

      They don’t have a ‘controlling share’. No one does. Companies with private shareholdings are obliged to do their best for all shareholders, no matter what the size of the individual shareholding. The biggest individual shareholder (in this case, us) doesn’t get to ride roughshod over the interests of the rest.

      This was argued out at the time the last Govt privatised half the ownership. It’s one of the reasons it was a stupid idea. We’ve lost more than a useful shareholding and the dividends that bought, we’ve lost directional control as well.

      • Ad 1.2.1
        12 November 2018 at 3:35 pm

        Exactly

      • Antoine 1.2.2
        12 November 2018 at 3:36 pm

        Prior to the partial privatisation, the Government was still unable to direct power companies to lower their prices. Don’t you think the Clark Government would have if they could?

        A.

        • Draco T Bastard 1.2.2.1
          12 November 2018 at 4:19 pm

          Yes, that is another failure of the present SOE model. Independence and the legal requirement to make a profit no matter how much damage it does to the population at large.

          • McFlock 1.2.2.1.1
            12 November 2018 at 5:18 pm

            A regional case being Delta electricity: now playing catchup replacing dangerous powerpoles after decades of returning dividends to the council.

            But it’s easier to rewrite SOE rules than it is to rewrite SOE rules and renationalise generators.

            • Antoine 1.2.2.1.1.1
              12 November 2018 at 9:20 pm

              Delta isn’t a SOE

              • McFlock …
                12 November 2018 at 9:33 pm

                A regional case of the same problem.

                • Antoine …
                  12 November 2018 at 9:40 pm

                  It’s not the same. Delta isn’t independent and isn’t required to act like a fully commercial outfit. (Although it does, in fact, seem to have neglected poles and wires in favor of returning dividends)

                  Edit: But what this shows is that even when something is 100% publicly owned it can still act antisocially. Nationalisation is no panacea.

                  A.

                  • McFlock …
                    12 November 2018 at 9:56 pm

                    “Seem”? It’s been well documented in the ODT.

                    CCOs are the misbegot regional kids of SOEs. Ministries and council works are much closer to public control and less vulnerable to asset stripping than Roger Douglas’ demonspawn.

                  • Draco T Bastard …
                    12 November 2018 at 10:32 pm

                    It’s not the same. Delta isn’t independent and isn’t required to act like a fully commercial outfit.

                    Has been acting that way though.

      • BM 1.2.3
        12 November 2018 at 3:45 pm

        Good point, I forgot about the “Companies with private shareholdings are obliged to do their best for all shareholders” thing.

        Well, that’s the crux of the issue, isn’t it? while the power generators are publically owned companies they try and set the highest price they can and there’s nothing anyone can do about it.

        Seems all a bit pointless and a waste of money having an inquiry into high electricity prices.

        • McFlock 1.2.3.1
          12 November 2018 at 5:20 pm

          jebus crust, seriously? Don’t look at the issue because nothing can be done?

          No wonder the tories left the country in such shit.

          • BM 1.2.3.1.1
            12 November 2018 at 6:12 pm

            Realistically, what can be done?

            As TRP pointed out the government can’t lower the electrical generation cost price, all that leaves is a bit of tinkering around the edges.

            The only option that would make a real difference is if the government passed its dividend onto power consumers in the form of a yearly rebate.

            I can’t really see that happening though.

            • Draco T Bastard 1.2.3.1.1.1
              12 November 2018 at 6:16 pm

              The only option that would make a real difference is if the government passed its dividend onto power consumers.

              No, that would actually be just as bad as what we have now.

              The best and only truly workable option is that power gets renationalised and run as a government service with a free amount available to everybody on a per person or per household basis. Lines would be fully installed and maintained via taxes probably by a local government entity.

              • BM …
                12 November 2018 at 6:56 pm

                But that will never happen, that’s one of those Fantasyland scenarios.

                You’re a smart man, flag the hypothetical shit and see if you can come up with practical solutions working with current parameters.

                • Draco T Bastard …
                  12 November 2018 at 7:59 pm

                  That is a practical solution.

                  It just so happens to be one that you and the other greedy schmucks don’t like.

                  It is capitalism in any form that is impractical.

                • WILD KATIPO …
                  12 November 2018 at 9:30 pm

                  Remember back in the day when NONE of these private outfits owned our state owned assets ? And when generations of tax paying workers paid for those services and then Douglas gave em away for a song ?

                  And remember not so long ago when Auckland had rolling power outages that had the Outer Mongolians laughing at us ???

                  WELL THAT’S WHAT YOU GET WHEN YOU SELL OFF ALL YOUR SOE’S TO FOREIGNERS !!!

                  THIS :

                  The Black Picture – YouTube
                  https://www.youtube.com/watch?v=MEnbcN6AXKE

                  Neo Liberalism ? – KISS MY ARSE !!!

            • McFlock 1.2.3.1.1.2
              12 November 2018 at 7:26 pm

              The problem, as I understand it, is that spot price fluctuations have essentially exceeded beyond the ability of smaller power providers to hedge against. Not because generation costs have changed, but because spot prices mean generators don’t lose out with reduced production and generator/retailers can undercut other actors in the electricity market.

              In other words, the amazing coincidence of reduced flows and Huntly going offline has reduced competition and maintained profits of the larger actors. Shades of Enron in California.

              So in the short term the spot price market can be regulated in some way. In the longer term diversified power generation should be encouraged, including wind and tidal generators to supplement other seasonal supplies.

              nothing needs be so drastic as renationalisation (although that would be the ideal result).

              • Antoine …
                12 November 2018 at 9:24 pm

                > spot price fluctuations have essentially exceeded beyond the ability of smaller power providers to hedge against

                This is not the case. Most smaller providers hedge. One smaller provider chose not to hedge adequately and ran out of money as a result.

                A.

                • McFlock …
                  12 November 2018 at 9:29 pm

                  “chose”

                  In the same way the unemployed “choose” not to insure their possessions, I guess.

                  • Antoine …
                    12 November 2018 at 9:33 pm

                    More in the way that a person might choose to go out without an umbrella even though there are rainclouds looming.

                    Lots of retailers hedge.

                    A.

                    • McFlock …
                      12 November 2018 at 9:37 pm

                      Indeed. Just as lots of people buy insurance.

                      But if you can’t afford to insure yourself completely, and shit hits the fan, there are people who will point out that larger economic units can afford more “insurance” than smaller ones. That the market seems to be structured in a fashion that benefits those larger players.

                      And other people might ignore structural issues and pretend we all get to buy as much insurance as we’d “choose”.

                    • Antoine …
                      12 November 2018 at 9:42 pm

                      I’m not ignoring structural issues. Plenty of small retailers can and do hedge. If you can’t hedge and can’t soak a period of high spot prices then you shouldn’t be in the market.

                      A.

                    • McFlock …
                      12 November 2018 at 9:51 pm

                      Yes. The current market coincidence of huntly and water levels conservation decisions has pushed a retail competitor out of the market.

                      And has no doubt made other retailers and prospective market entrants re-evaluate the amount of hedge pricing they’d have to afford, hitting their profit projections.

                      While providing nice profits for generators.

                      Funny how it fucks domestic customers, though.

                      A thorough review might find all sorts of ways to regulate the electricity market and help ordinary NZers.

                    • Antoine …
                      12 November 2018 at 9:58 pm

                      > Funny how it fucks domestic customers, though.

                      It actually doesn’t fuck most of them. How much has your power bill gone up in the last few weeks?

                      > A thorough review might find all sorts of ways to regulate the electricity market and help ordinary NZers.

                      There is a thorough review on now, it’s been going on for months (https://www.beehive.govt.nz/release/details-retail-power-price-review-released). I’m not holding my breath for it to deliver anything revolutionary (the last one didn’t), and nor do I think we need another review right now.

                      A.

                    • McFlock …
                      12 November 2018 at 10:07 pm

                      Copy that. It’s fine for the market to fuck customers, just as long as it doesn’t fuck most of them. You can fuck some of your customers all of the time, but it’s a cartel practise to fuck all your customers most of the time?

                    • Antoine …
                      12 November 2018 at 10:25 pm

                      > It’s fine for the market to fuck customers, just as long as it doesn’t fuck most of them.

                      I will interpret this as a sarcastic way of saying ‘I (McFlock) care about the ones that are actually getting fucked right now, Antoine you suck for not caring about them’.

                      So… Is all this seriously just about protecting a few Flick customers, and one small retailer, from their own decisions?

                      A.

                    • McFlock …
                      12 November 2018 at 10:36 pm

                      That’s the problem with capitalism right there.

                      If someone wants heat in winter, they’re forced to gamble their resources on a market. There is no possible way they can have sufficient information to make a sure decision. It’s a forced gamble they have to make in order to stop from freezing. But if the gamble doesn’t pay off, it’s the simple result of their own poor decisions. You get to blame them for a choice they were forced to make with insufficient information.

                      Sound familiar?

                    • Antoine …
                      12 November 2018 at 10:52 pm

                      > If someone wants heat in winter, they’re forced to gamble their resources on a market.

                      They absolutely are not forced to gamble. Flick customers chose to gamble; Most electricity customers (and of course electricity is not the only way to heat your house) don’t gamble. They choose a normal retailer and they know the rate they’re going to pay in advance. (*)

                      >You get to blame them for a choice they were forced to make with insufficient information.

                      That is right, I have little sympathy for anyone who signed up with Flick and did not realise that spot prices can go up as well as down. Most Flick customers do seem to appreciate this and are reasonably philosophical about the upward blips.

                      A.

                      (* Subject to small to medium price rises every X months/years, but I don’t think that’s what you had in mind when you talked about gambling)

                    • McFlock …
                      12 November 2018 at 11:00 pm

                      lol of course they’re forced to gamble. If they choose what you call a “normal” retailer they’d probably pay more for power. Unless shit happens, in which case they win the bet. But they can’t predict the future. Even choosing to stand on seventeen just means you have the best odds of not losing in a game you were forced to play.

                      And again, you’re acknowledging that the market is structured in favour of the larger corporations that can afford more hedging (or generate their own). But how is Joe Blow trying to figure out which company will save them the most cash supposed to know any of that in advance?

                    • Antoine …
                      12 November 2018 at 11:12 pm

                      >lol of course they’re forced to gamble. If they choose what you call a “normal” retailer they’d probably pay more for power.

                      Really, no one is forced to use Flick and anyone financially fragile should not do so. If you are struggling to make ends meet then you simply cannot afford to have your monthly power bill triple occasionally. End of story.

                      > And again, you’re acknowledging that the market is structured in favour of the larger corporations that can afford more hedging (or generate their own).

                      You are mixing two different topics. The hedge-or-not-to-hedge debate is a matter for _retailers_. We haven’t been talking about that for a while. We are now talking about the choices to _customers_. Households generally don’t need to hedge because their retailer does it for them.

                      > But how is Joe Blow trying to figure out which company will save them the most cash supposed to know any of that in advance?

                      It’s not that hard.

                      (1) Shop around
                      (2) Go to the Powerswitch website
                      (3) Don’t go on Flick unless you can afford occasional very high power bills.

                      If you can buy groceries, you can buy electricity.

                      A.

                    • McFlock …
                      12 November 2018 at 11:19 pm

                      lol when did flick last triple a power bill? It’s not like there’s a long history to go on.

                      Yes people a forced to gamble. Several people I know went to flick because it was cheaper. They thought I was paying too much. And they were right, until spot prices went through the roof because both hydro and coal power producers coincidentally chose to cut generation at the same time.

                      But nobody normal knew that would happen. I could just as easily be paying too much, rather than them. A conservative gamble is still a gamble, and electricity is a forced gamble.

                    • Antoine …
                      12 November 2018 at 11:49 pm

                      > lol when did flick last triple a power bill? It’s not like there’s a long history to go on.

                      There have been other spikes in the last few years.

                      > But nobody normal knew that would happen

                      Anyone who does a bit of research on the internet can find out that Flick is a potentially risky proposition.

                      If you want to get good prices you need to be a good shopper. It’s a skill. For petrol, for groceries, for electricity. It’s part of modern life. Sometimes people get it wrong and pay more than they need. It happens.

                      A.

                    • McFlock …
                      12 November 2018 at 11:56 pm

                      How do you seem to think we are saying different things?

                      A “potentially risky proposition” is also a potentially smart way to save. You can choose a conservative power option, or a “potentially risky” option, but you still have to gamble by picking an option.

                      It’s all a gamble. For something that is essential.

                      That’s a surreal way to run what’s nominally called a society.

                    • Antoine []
                      13 November 2018 at 12:23 am

                      I’m sorry but you can’t eliminate all risk and all opportunity from life. That’s just how it is.

                      A.

                    • Antoine …
                      13 November 2018 at 12:48 am

                      It’s like buying vegetables. You need some veges, you could go to Pak & Save, you could go to the market, you don’t know ahead of time which one is going to be cheaper. You might get some mushy apples or a bad tomato. It’s a gamble, it’s life.

                      A.

                    • Draco T Bastard …
                      13 November 2018 at 10:39 am

                      I’m sorry but you can’t eliminate all risk and all opportunity from life.

                      Should there even be opportunity and risk associated with power? After all its a demand monopoly – everyone needs it.

                      You need some veges, you could go to Pak & Save, you could go to the market, you don’t know ahead of time which one is going to be cheaper.

                      You do know that the free-market is based upon people actually knowing right? That that knowing is how the ‘market price’ is set?

                    • Antoine …
                      13 November 2018 at 11:17 am

                      > You do know that the free-market is based upon people actually knowing right? That that knowing is how the ‘market price’ is set?

                      Draco I mean it, I am not arguing economics with you.

                      A.

                    • Draco T Bastard …
                      13 November 2018 at 12:35 pm

                      Draco I mean it, I am not arguing economics with you.

                      Correct, you’re trying to ignore economics entirely.

                    • McFlock …
                      13 November 2018 at 2:53 pm

                      But draco’s actually correct.
                      Free market theory requires sufficient information to make a decision. Otherwise it’s just a gamble everyone is forced to make at gunpoint.

                      Spot prices are like if you shop around, find cheap onions, and the price might triple between you picking the onion off the shelf and getting it to checkout – and you have to pay the new price.

                      And your response seems to be some sort of quantum packet where other people’s hardship is either “the result of their own choices” or “It’s a gamble, it’s life.” And either way zero fucks are given.

                    • Antoine …
                      14 November 2018 at 12:31 am

                      > Spot prices are like if you shop around, find cheap onions, and the price might triple between you picking the onion off the shelf and getting it to checkout – and you have to pay the new price.

                      That’s correct! You understand the situation now.

                      So don’t pay the spot price (as a private citizen). Choose a retailer other than Flick.

                      Unless you are happy for your price to triple occasionally, in which case Flick might be OK for you.

                      And that is my last word on the matter.

                      A.

                    • McFlock …
                      14 November 2018 at 12:02 pm

                      Your last word on the matter is simply the same as your first: demand people gamble, then blame them for making the wrong decision.

                      You never addressed the question as to whether spot prices had ever trebled before, let alone for a sustained period. If not, then any decision made in the gamble was based on insufficient data.

                    • Antoine …
                      14 November 2018 at 12:09 pm

                      > You never addressed the question as to whether spot prices had ever trebled before, let alone for a sustained period.

                      I can easily answer this question if you want. However, if I do, will you mock me for saying something more after what I said was going to be my last word?

                      A.

                    • McFlock …
                      14 November 2018 at 12:29 pm

                      lol you already have 😛

                      But the thing is, you might “easily” find that information. That’s just another shortcoming of the market system, though. Even if everyone has equal access to all relevant information, not everyone has equal ability to exploit and understand that equal access.

                      But the trebling seems to be a pretty new problem, so I’d be interested in what you come up with and where from.

                      EDIT: According to Flick:

                      Right now, we’re experiencing an unprecedented period of elevated spot prices in New Zealand. Because our Freestyle bill and price estimates are based on historical average prices and usage, current conditions are not reflected in these calculations.

                      So if you demonstrate the current situation is reasonably predictable, the truthfulness of their advertising might be in question.

                    • Antoine …
                      14 November 2018 at 1:01 pm

                      I am not here to “call into question Flick’s advertising”. But if you want facts, I can provide some.

                      North Island spot prices went over $200 (for some time) last in 2017. Prior to that in 2013. Of course during the dry winter of 2008, there were high spot prices for months.

                      The regulator warns, has been warning for some time, that there is the potential for spot prices to be tripled for 3 consecutive months (see https://www.ea.govt.nz/consumers/my-electricity-bill/is-a-spot-price-contract-right-for-me/how-could-spot-prices-affect-my-bill/).

                      Be a mate and don’t respond with “but how could an ordinary person ever have known that”.

                      A.

                    • McFlock …
                      14 November 2018 at 1:53 pm

                      But that really is the point.

                      The regulator provided some case scenarios that you linked to. Flick provided average savings over a year, predicted on historic prices.

                      If the ordinary consumer goes with flick, they risk some issues, maybe a ten-year event, but based on historical data will save money.

                      Or they can pay a premium to lower the risk of price fluctuations.

                      Now imagine yourself on a genuinely tight budget – not enough to really cover the basics for you and your kids.

                      It’s a gamble they’re forced to make. Frequently on insufficient or conflicting information.

                      And the thing is, it’s not like we’re short of resources to generate electricity. It really doesn’t need to be this way. It wasn’t 30 years ago, and now power prices in real terms are increasing when the tech to provide it is getting cheaper and more efficient, small retailers are getting swamped by price fluctuations, and lots of individuals are getting hit, too.

                      Our electricity market is broken.

        • Draco T Bastard 1.2.3.2
          12 November 2018 at 6:12 pm

          And that’s why we need an inquiry into high electricity prices and a study into the best option for the country.

          Considering that a market price is specifically to prevent access to resources it’s probably not the best option available in that everyone needs to have access to electricity so as to maintain health.

          • Antoine 1.2.3.2.1
            12 November 2018 at 10:35 pm

            > And that’s why we need an inquiry into high electricity prices and a study into the best option for the country.

            Well we have one, it’s been running for months.

            A.

      • millsy 1.2.4
        12 November 2018 at 4:48 pm

        Which is why selling 49% of the shares is pretty much the same as selling 100%. That 49% is now in the hands of petty burgeouis “mum and dad” shareholders who will screw poor customers out of as much cash as they can in the never ending quest to fatten their retirement “nest egg”.

        • JC 1.2.4.1
          12 November 2018 at 8:58 pm

          Who the hell Sold Off that 49% ?

        • Antoine 1.2.4.2
          12 November 2018 at 9:22 pm

          It really doesn’t make that much difference. Prior to partial privatisation the SOEs were still being run to make a profit

          A.

        • Gosman 1.2.4.3
          14 November 2018 at 2:10 pm

          There is nothing stopping the Government directing their representatives on the boards of each Energy company to push for a particular strategy that does not entail screwing over the other retailers.

          • McFlock 1.2.4.3.1
            14 November 2018 at 2:26 pm

            Except the companies act requires directors of non-solely owned companies to maximise the interests of the company.

            This was well covered when the “partial” asset sales were made. Never believe anyone who says “just the tip” will be fine.

    • gsays 1.3
      12 November 2018 at 3:35 pm

      Because we would be able to generate electricity from Tories waving their arms bleating ‘state interference, let the market decide’.

      Thanks Advantage for another good post.

      As you say “I will have more respect for this government when it shows that it can face down the corporates and regulate them in the interests of the citizen.”

      After all, with CC casting an almighty shadow, the state must take lead on this.
      It can not be left to profit driven companies.

    • Draco T Bastard 1.4
      12 November 2018 at 4:12 pm

      Nope, they can’t. Legislation prevents a major stockholder from operating a business in ways that decrease the profit for the minority shareholders (this was addressed on this site before the sale).

  2. Tiger Mountain 2
    12 November 2018 at 3:27 pm

    a classic case for re-nationalisation of power generation and supply

    a long, narrow, sparsely populated country does not need an artificial energy market–power to the people at Rio Tinto prices or cheaper!

    • Antoine 2.1
      12 November 2018 at 3:35 pm

      To state the obvious, this coalition Government has no obvious appetite for nationalising anything

      A.

    • Brutus Iscariot 2.2
      12 November 2018 at 4:23 pm

      Of course it does. If something doesn’t have a price, you will have a massive overconsumption of it and a corresponding overbuild of capacity. Price rations demand to its higher value uses. The best way to solve energy poverty is redistribution not a removal of price signals (incidentally, the same logic applies to petrol markets).

      • Tiger Mountain 2.2.1
        12 November 2018 at 6:42 pm

        heh, well “going forward” solar power use, say, could be rewarded by power generators, not penalised as at present by the likes of Top Energy in Northland

        price is a construct not needed with such utilities, in my view free wifi will need to be universal too soon as significant paid work disappears for many, and as part of a UBI/GMI

      • KJT 2.2.2
        12 November 2018 at 10:05 pm

        A simple and immediate “fix” to runaway domestic power prices is to legislate away differential pricing for larger consumers.

        At present power companies overcharge households to help meet the costs of their discounting to corporate customers. Another hidden subsidy for big business.
        And the reason why the powers that be are going to have a hissy fit when power price overcharging is finally addressed. If it can now be done without an ISDS challenge from offshore owners.

        • Antoine 2.2.2.1
          12 November 2018 at 10:20 pm

          > A simple and immediate “fix” to runaway domestic power prices is to legislate away differential pricing for larger consumers.

          Instantly sweeping most large customers out of business? Good luck

          A.

          (Edit: where ‘large’ means ‘using large amounts of electricity’ like Tiwai smelter etc)

          • Draco T Bastard 2.2.2.1.1
            12 November 2018 at 10:27 pm

            Instantly sweeping most large customers out of business?

            You do understand that’s how the market’s supposed to operate right? Higher demand, higher price. With that price then being the same for everyone.

            What the retailers are doing is saying to the big demand businesses is: Well, you’re demanding more so we’ll charge you less and these other people (who use far less than you) far more.

            It’s a subsidy from the populace in general to businesses. And it’s to the tune of several hundred million per year.

            • Antoine 2.2.2.1.1.1
              12 November 2018 at 10:28 pm

              It’s just a bulk discount. Bulk discounts happen all over the place. Surely we aren’t going to outlaw them. Especially if the cost is destroying all NZ’s electricity intensive industry with one stroke of the pen. (Don’t you want NZ to have any industry? Should we import everything from overseas?)

              A.

              • Draco T Bastard …
                12 November 2018 at 10:37 pm

                It’s just a bulk discount. Bulk discounts happen all over the place.

                In a functioning market the price isn’t supposed to change between customers. That’s a fundamental assumption of the neo-liberal economics that we slave under. Nobody’s supposed to be able to alter the price as they choose. The fact that we have businesses doing that is against the entire bloody hypothesis and thus breaks it.

                Don’t you want NZ to have any industry?

                The price mechanism is there to encourage efficient use of a scarce resource. This lower price for businesses actually prevents that.

                I’ve mentioned that before. Someone mentioned that German’s power prices were much higher than ours. A bit of online research showed that their power use was also much more efficient.

                • Antoine …
                  12 November 2018 at 10:54 pm

                  > In a functioning market the price isn’t supposed to change between customers. That’s a fundamental assumption of the neo-liberal economics that we slave under. Nobody’s supposed to be able to alter the price as they choose.

                  All this is ridiculous and not true. I know you have weird ideas and I will not argue the point further.

                  My point stands, this Government simply will not “legislate away differential pricing for larger consumers”.

                  A.

                  • Draco T Bastard …
                    13 November 2018 at 12:53 am

                    All this is ridiculous and not true

                    So, you’re saying that all the economics textbooks and my economics lecturers at uni are all liars?

                    My point stands, this Government simply will not “legislate away differential pricing for larger consumers”.

                    I didn’t say that they would. I just pointed out that having different prices for different customers breaks the free-market hypothesis. Every product and service is supposed to have only one price – the market price. No one is supposed to have enough market power to change that price.

                    Reality proves that wrong and thus proves the mainstream economic paradigm wrong.

              • KJT …
                13 November 2018 at 8:49 am

                Businesses coped, before the privatisation of power with paying the same rates as everyone else. In fact business rates were higher, but the costs of supply to larger businesses were cheaper, because of scale.

                With a few well known exceptions like Tiwai Point, where power generation was specifically built and reticulated for them, in addition to the National grid.

                As a top power company executive said to me (when I was on a corporate public speaking course BTW) “Our business model depends on fleecing domestic consumers, so we can pay to attract large businesses”. Almost the same was repeated to me by yet another power company executive recently. They know, their large profits come from overcharging the captive domestic market.

                Tiwai Point definitely pays to little. It would be cheaper for New Zealand to close them down, use the power on the grid and give Southland, 30 million in business development funds. It would even be cheaper, to pay all the redundant Tiwai point staff, for life. It is not as if the company pays any significant taxes in New Zealand. One of the most blatant users of transfer pricing, to dodge taxes.

                • Antoine …
                  13 November 2018 at 9:15 am

                  So, assume you were Minister Woods, how would you go about closing Tiwai down.

                  A.

                  • Draco T Bastard …
                    13 November 2018 at 10:25 am

                    Not up to Woods to close down Tiwai. It is up to the government to prevent the general populace from being fleeced for the benefit of business.

  3. tc 3
    12 November 2018 at 3:30 pm

    They could start with mandating the retailers pay the same rate for the export KwH’s as the imported KwH’s where there’s solar panels reducing the load.

    Currently the system is gaming people with PV panels over that as they take power they aren’t generating at a 75% markdown which is then sold at top rate

    So by doing your bit in reducing the load and creating local generation you subsidise power industry profits with your own infrastructure……awesome !

    Where are the greens ?

    • Antoine 3.1
      12 November 2018 at 3:37 pm

      Retailers would lose money at this price, and would consequently have an incentive to refuse export customers

      A.

      • Draco T Bastard 3.1.1
        12 November 2018 at 4:17 pm

        But they should still be paying the wholesale spot rate.

        • Antoine 3.1.1.1
          12 November 2018 at 9:25 pm

          What do they get now? Its probably similar to the _average_ spot price. I don’t see the attraction of following fluctuations in the spot price up and down for the solar guys.

          A.

          • Draco T Bastard 3.1.1.1.1
            12 November 2018 at 10:22 pm

            What do they get now?

            ~8c/kWh

            That compares to the:

            Last year’s price of $50 per MWh soared to almost $350 last month.

            35c/kWh that they should be getting ATM.

            As I say, they should be getting the wholesale price the same as all other generators. The retailers shouldn’t be able to treat them differently as that tilts the market in the retailers favour.

            • Antoine 3.1.1.1.1.1
              12 November 2018 at 10:26 pm

              Do they actually want that? If I was a solar/wind operator I would rather have a steady income I could budget on, than follow the market up and down. Getting 35 c/kWh now might be nice, but if the price was getting 2 c/kWh in several other months…?

              A.

              • Draco T Bastard …
                13 November 2018 at 12:56 am

                In a market economy the super profits represented by the present high wholesale rates is supposed to entice people to invest to get their bit of those super profits with the result that the profits will come down.

                Or are you saying that the market doesn’t work?

                • Antoine …
                  13 November 2018 at 1:34 am

                  I understand that, but I don’t think the solar and wind guys need price signals for investment on a time frame of weeks to months. Are people really going to rush out and buy a wind turbine for their backyard, just because the export price is good this week?

                  No, their investment signal is the long term average price over the life of the investment. So you might as well pay them a long term average price so they don’t have to cope with month to month fluctuations in revenue.

                  I may change my mind however, if anyone comes on here and says “I export solar power to the grid and I would hand on heart prefer to receive the spot price, with all its variability, over a flat 8c”.

                  A.

                  • Draco T Bastard …
                    13 November 2018 at 12:33 pm

                    Got to remember that the wholesale price also affects those paying it. If the gentailers were paying thousands of people the wholesale spot price instead of just a few large corporations and/or themselves do you think that they may be incentivised to do something about it?

  4. Antoine 4
    12 November 2018 at 3:43 pm

    @AD

    1. It’s the Electricity Authority not the Electricity Commission (you keep calling it this)

    2. It is a bit misleading to talk about a ‘massive price spike’. Electricity prices have not spiked for most customers – only those buying at the wholesale price (Flick)

    3. You say “Clearly this government realises there is something wrong with the market when it has to directly subsidise hundreds of thousands of citizens with a “Winter Fuel Allowance”. Well, it doesn’t ‘have to’ do that. It chooses to do it because it sounds good and warms voters’ hearts. A broad based tax cut would have been just as useful in practice.

    4. It is just wrong to say ‘line networks aren’t even in the frame of regulation’. As monopolies they are heavily regulated by the Commerce Commission.

    5. What are you actually suggesting the regulator(s) should do??

    A.

    • Antoine 4.1
      12 November 2018 at 3:50 pm

      5b. or what are you suggesting the Minister should do?

    • Draco T Bastard 4.2
      12 November 2018 at 4:08 pm

      It is a bit misleading to talk about a ‘massive price spike’. Electricity prices have not spiked for most customers – only those buying at the wholesale price (Flick)

      But not for the people selling solar power into the grid.

      You say “Clearly this government realises there is something wrong with the market when it has to directly subsidise hundreds of thousands of citizens with a “Winter Fuel Allowance”. Well, it doesn’t ‘have to’ do that. It chooses to do it because it sounds good and warms voters’ hearts. A broad based tax cut would have been just as useful in practice.

      We’ve had tax cuts for the rich before. All they ever do is help make the rich richer while providing nothing for anyone else.

      It is just wrong to say ‘line networks aren’t even in the frame of regulation’. As monopolies they are heavily regulated by the Commerce Commission.

      True but the regulations don’t seem to be working.

      • Antoine 4.2.1
        12 November 2018 at 9:45 pm

        >> A broad based tax cut would have been just as useful in practice.
        > We’ve had tax cuts for the rich before.

        I specifically said ‘broad based’, as in ‘for all taxpayers, not just the rich’.

        A.

        • Draco T Bastard 4.2.1.1
          12 November 2018 at 10:12 pm

          All tax cuts are only ever beneficial to the rich as all they do is to put up prices so as to capture any more money going to the poor. the poor can’t do anything about it so tax cuts are just more bludging by the rich.

          The price isn’t what it costs but what the market will bear after all.

          That, BTW, is the full logic of the wage-price spiral that economists go on about.

        • Descendant Of Sssmith 4.2.1.2
          12 November 2018 at 10:14 pm

          Tax cuts don’t reach all taxpayers and especially not the poorest on benefits.

          That’s one of the reasons benefits and NZS which used to be the same are now well over $100-00 apart.

          Tax cuts benefit workers – the well off the most
          Tax cuts benefit those on NZS as NZS is paid at a gross rate
          Tax cuts don’t benefit those on benefit because benefits are paid at a net rate

          Tax cuts have made the poorest in society even poorer.

          A reminder too that the Clark government put Ruth Richardson’s $20-00 per week back on NZS but not on benefits and nor did they redress the shifting of the youth rate from under 18 to under 25.

          Labour is not the beneficiaries friend.

    • Ad 4.3
      12 November 2018 at 4:36 pm

      1. Happy for the correction .
      2. Customers are customers.
      3. You have not addressed the market failure – whereas the government did through straight cash transfer. Please show evidence that a broad tax cut would have been as effective in keeping actual people warm.
      4. Show me an example of effective regulation of lines companies.
      5. Stop customers getting screwed.

      • Antoine 4.3.1
        12 November 2018 at 9:31 pm

        > 2. Customers are customers.

        That’s right, and most customers are not having a price spike at present. Are you going to regulate just on the behalf of disgruntled Flick customers?

        > 3. Please show evidence that a broad tax cut would have been as effective in keeping actual people warm.

        The winter fuel allowance doesn’t keep people warm. It just puts money in their pocket, as a tax cut would. If you went round delivering firewood to houses it might keep people warm.

        > 4. Show me an example of effective regulation of lines companies.

        It happens every day! Every bit of lines maintenance that happens, and every time your lines bill comes in, it is a result of regulation of lines companies. Do you observe badly maintained lines, has the lines component of your bill increased too fast? No? Then the regulation is working.

        > We have had more rain and snow than we know what to do with.

        Aha, but not necessarily in the catchments that feed the hydro schemes.

        In sum: You have lots of gripes but no solutions. We have no shortage of gripes. When you have actual solutions, try putting them forward. (Please realistic ones, not nationalisation)

        A.

        • Antoine 4.3.1.1
          12 November 2018 at 10:01 pm

          P.S. Ad, you of all people must know there is no magical ‘MAKE STUFF CHEAPER’ button in the Minister’s office. If there was, Woods would already have been hitting it for petrol and Twyford would be hitting it for housing and all infrastructure ministers would have been hitting it for everything.

          Easy solutions are few and far between. (* Draco please don’t reply to this, I know you disagree)

          A.

  5. Antoine 5
    12 November 2018 at 3:55 pm

    6. You note yourself that we have “low hydro-lake levels and disruptions to natural gas supplies”. Wouldn’t it be a bit weird if wholesale prices didn’t increase under those conditions?

    A.

    • Ad 5.1
      12 November 2018 at 4:37 pm

      We have had more rain and snow than we know what to do with.
      And we have had plenty of wind.
      Th main generators in turn clearly don’t have to prove a thing to anyone.

  6. Stuart Munro 6
    12 November 2018 at 3:55 pm

    Time for phased compulsory reacquisition.

    It’d be a good use for some of that dubiously acquired ACC wealth.

    Once the sector is once more fully state owned then small private generators, be they solar wind or microhydro, can be supported.

    The current market, as usual, doesn’t work worth a damn.

    • Antoine 6.1
      12 November 2018 at 4:00 pm

      > Time for phased compulsory reacquisition.

      Not gonna happen under this Government.

      A.

      • Stuart Munro 6.1.1
        12 November 2018 at 8:29 pm

        You never know – day after day the failures and unpopularity of neoliberal policies smack them where they hurt – in the polls.

        The opposition are collapsing in a screaming heap, and this government would really like to cement their position.

        Never say never.

    • Graeme 6.2
      12 November 2018 at 7:39 pm

      It would be interesting to know how much of the electricity companies’ tradable shares are owned by crown entities, ie ACC and various super funds. The Crown still holds 50% of them directly but if there is a substantial quasi crown holding a delisting or move to get 75% could be on.

  7. Draco T Bastard 7
    12 November 2018 at 4:04 pm

    Those factors, combined with very weak wind production some days and other temporary generation outages, resulted in average wholesale prices exceeding $500 per megawatt hour (MWh) on some days in October — the most in seven years.

    And, of course, the people supplying grid power from their solar instalments wouldn’t have seen any of that high spot price despite providing obviously needed power.

    If the Greens legislation had gone through they would have and we would see incentives for people to put solar power up on their roofs. That would decrease the amount of profit for the big gentailers though I suppose.

    While the larger energy companies have said the market is working as it should, smaller companies cannot so easily absorb repeated peak prices.

    Working as it should then. Those companies that can’t compete fall by the wayside.

    And it’s really not the government’s job to ensure that private companies can make a profit even though that is usually what happens and what many regulations (and often lack of regulations) are actually for.

    Clearly this government realises there is something wrong with the market when it has to directly subsidise hundreds of thousands of citizens with a “Winter Fuel Allowance”

    But they still won’t do what’s necessary because the market, no matter how artificial with a natural monopoly like electricity, is king.

    Do we even have an electricity regulator?

    If the market actually worked as the economists and politicians tell us we wouldn’t need a regulator. The fact that we have one (that’s not really working) prove that the market doesn’t work the way that the economists and politicians believe especially for what is a natural monopoly.

    No one is motivated to protect the citizen, no major generator will lift a finger to enable competition, and line networks aren’t even in the frame of regulation, so we get royally screwed.

    That’s capitalism.

    I will have more respect for this government when it shows that it can face down the corporates and regulate them in the interests of the citizen.

    In the case of such natural monopolies it requires full nationalisation. Trying to regulate private companies is expensive and ineffective due to regulatory capture.

  8. WeTheBleeple 8
    12 November 2018 at 4:05 pm

    Clearly we need to support smaller players and especially alternative players or our ‘big climate change moment’ is merely wind. (yes I did that on purpose).

    Where is the solar subsidies?

    Where is the incentive to transition?

    Where are the bio-digestors on farms?

    Where are the Trompe’s on waterways?

    Tidal?

    Where are the R&D arms of our corporations – Or are none of them ours?

    Where are the Greens?

    WTF are we waiting for?

    • WeTheBleeple 8.1
      12 November 2018 at 4:58 pm

      Biodigestors: This NZ one won awards but there are hundreds of thousands if not millions of these around the globe. We talk the talk…

      Use greenhouse gases to help power the farm. As stated it pays for itself, controls odor, and reduces toxic waste to compost.

      Easily applies to Dairy. Old and widespread technology.

      Trompe: This technology is kinda hidden in plain sight. Was very widely used pre oil domination. Still widely used in mining.

      Free energy using water to compress air.

      https://en.wikipedia.org/wiki/Trompe

      Trompe expanded upon 11:00 – 35:00 ish.

  9. Jack Ramaka 9
    12 November 2018 at 4:23 pm

    National’s Mad Max Bradford told us the new electricity market was going to be more competitive and prices would go down after Privatisation ?

    Were we being sold a lemon or just the rough end of the pineapple ?

    • Patricia Bremner 9.1
      12 November 2018 at 4:36 pm

      Is that a rhetorical question Jack ?? Any wayyy!!
      Max LIED through his teeth straight to our faces!!
      We also then had a Lines bill introduced.
      Cheaper LOL LOLZ on us.

    • Brutus Iscariot 9.2
      12 November 2018 at 5:15 pm

      You have no counterfactual though. Have electricity price rises outstripped general inflation, and if so by how much?

      • McFlock 9.2.1
        12 November 2018 at 5:29 pm

        Yes.

        By 80%.

        If the price had increased at rate of inflation, real prices would not have increased. But real price increased by 80%. So yeah, counterfactual supplied.

        Another more detailed report here. Max fucked us.

        • tc 9.2.1.1
          13 November 2018 at 2:09 pm

          National fucked us…..max Bradford was the straw man ‘look over here’ guy whilst our electricity assets were plundered.

          The lines trusts are no better than the fat cat generators. The clipping of capex so they can maintain this annual rebate on the bill sham which they tell me retailers can clip that ticket on also…..it’s a very broken system.

          • Sean 9.2.1.1.1
            17 November 2018 at 11:16 am

            And Labour has happily allowed all the electricity privatisations to continue. Socialists? No. National lite? Yes.

  10. bwaghorn 10
    12 November 2018 at 5:37 pm

    Gee wait till we have 200 000 electric cars and more electric rail . And no gas or coal to burn .

    • KJT 10.1
      12 November 2018 at 10:10 pm

      Luckily we have more than enough potential sustainable generation in New Zealand, to replace all our transport fuel.

      We have an abundance of resources in that respect.

  11. WeTheBleeple 11
    12 November 2018 at 7:36 pm

    We don’t need to keep using gas and coal ad infinitum, it’ll cook us all. We need adaptation. Use your imagination and energy on change.

    The dinosaur burners are in their death throes, still so much thrashing about.

    Another favorite lunatic.

  12. joe90 12
    13 November 2018 at 12:18 am

    Here’s your problem; year on year of profit taking, and the pricks put their hand out.

    “We have carefully assessed Powerco’s proposal. We accept that the company is facing significant challenges as a result of a network built in the 1950s and 60s nearing the end of its life and under increasing pressure from powering regions with strong population and economic growth such as Tauranga,” Commissioner Stephen Gale said.

    The Commission’s draft decision proposes to allow Powerco to spend $1.27 billion over the next five years, a third more than the past five years, and to recover this increased spending from consumers over the longer term. This increase in spending would raise the average residential monthly electricity bill by about $2.70 in the next five years, and an additional $6 in the longer term if current demand and investment forecasts eventuate.

    http://www.scoop.co.nz/stories/BU1711/S00493/draft-decision-on-powercos-application-for-upgrade.htm

    • Antoine 12.1
      13 November 2018 at 12:50 am

      In the past they charged less and did less maintenance. In the future they may charge a bit more and do more maintenance. The cycle continues.

      If you want ’em to charge less AND do more maintenance however, you’re out of luck.

      A.

      • joe90 12.1.1
        13 November 2018 at 10:23 am

        In the past, engineers ran community owned and operated networks.

        Bradford’s reforms put shareholder returns first and broke the cardinal rule; never let the bean counters run the engineering.

        • tc 12.1.1.1
          13 November 2018 at 2:19 pm

          And it’s been underinvested in ever since at local and national levels.

          If it’s such a great system how come it took over 15 years after 97’s blackout for Akl cbd to get a second grid exit into it from the north shore in the event the Otahuhu feed goes down?

          To quote an old NZED manager….”we really f’cked it up for the consumer…”

  13. Jum 13
    13 November 2018 at 9:16 am

    ‘ her government is still the majority owner’
    Once you sell off 30% of a New Zealander-owned asset, you have lost control.

    The drive for profit for greedy private large shareholdings swamps any responsibility towards all New Zealanders and boards reflect that in their pricing decisions affecting the public’s ability to pay.

    (As an aside, it does make me laugh that nats continue to say private business is the only entity that provides jobs, yet their wealthy supporters can’t wait to get their grubby little hands on public assets, set up by the Government for all New Zealanders under Government projects, that created jobs.)

    • Antoine 13.1
      13 November 2018 at 9:26 am

      I keep saying, the SOEs priced just the same way when they were 100% Government owned. The partial selldown is not the problem. Slagging it off just makes you feel better because it means you can blame National for what was a pre existing problem

      A.

      • Stuart Munro 13.1.1
        13 November 2018 at 10:55 am

        Nonsense – we didn’t go from some of the cheapest electricity in the world to some of the most expensive without corporate fingers on the scales. Even with SOEs the spectre of accountability constrained ministers to some degree – or toppled them.

        • Antoine 13.1.1.1
          13 November 2018 at 11:16 am

          > the spectre of accountability constrained ministers to some degree

          [laughs] Yes, but did it actually constrain the SOE? Which is what we are talking about. It’s not the Minister who sets prices after all.

          A.

      • tc 13.1.2
        13 November 2018 at 2:24 pm

        A problem created by national in the 90’s……along with leaky buildings my that’s quite a legacy just there.

  15. Matthew Whitehead 15
    13 November 2018 at 7:14 pm

    I’m still disappointed we didn’t bring back the NZ Power policy this election/after being elected, I thought it was a winner.

    • Draco T Bastard 15.1
      13 November 2018 at 7:21 pm

      It’s a winner for the general populace but not for the bludgers. Government supports the bludgers in the delusional belief that we need them to pay for stuff.

    • Antoine 15.2
      13 November 2018 at 9:50 pm

      Who would implement it? No one has the capacity

      A.

      • Ad 15.2.1
        14 November 2018 at 6:19 am

        After all, since there are weak regulators in both the Commerce Commission and Electricity Authority, it’s better simply to agree that nothing can be done. Right? The most perfect self-serving circular argument.

        You do need a government prepared to review the regulations and actually change the law.

        And if you ask me: how would you design the regulations to ensure that we had a functioning market? You might want to go back and have a look at the NZPower policy.

        • Antoine 15.2.1.1
          14 November 2018 at 8:30 am

          > After all, since there are weak regulators in both the Commerce Commission and Electricity Authority, it’s better simply to agree that nothing can be done.

          I was actually thinking of Minister Woods. I’m not convinced that she’s up to driving the biggest electricity system reform in 20 years.

          I didn’t like NZ Power much but that is a separate discussion.

          A.

  16. Ad 16
    14 November 2018 at 6:16 am

    Great to see the Commerce Commission getting off their asses and prosecuting actor for the power outages in 2016.

    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12139946

    Typically however, Vector don’t give a flying fuck.

    The ComCom hasn’t bought Vector’s various explanations. On October 10 it filed a prosecution in the High Court under the Commerce Act, alleging an “excess level of power outages” during Vector’s 2016 financial year. Vector didn’t contest the charge (a penalty has yet to be set; it could run to millions) and indicated it had also informed the regulator of breaches of quality standard guidelines for 2017 and 2018.

    That means Vector is so rush and powerful it would simply agree that it is acting illegally and just pay the fine, and it will do that the next year and the next year.

    That is what you call a totally toothless enforcement regime.

    • Antoine 16.1
      14 November 2018 at 8:30 am

      Some strong personalities at Vector

      Edit: but I am not yet convinced that the ongoing tension between Vector and ComCom will not lead to decent outcomes in the end

      A.

      • Ad 16.1.1
        14 November 2018 at 9:30 am

        Hasn’t happened in decades so I don’t share your faith.

        • Antoine 16.1.1.1
          14 November 2018 at 9:38 am

          Time will tell

          (And bear in mind that you don’t hear when things go well, only when they go badly)

          A.

          • Ad 16.1.1.1.1
            14 November 2018 at 12:17 pm

            Obviously we have heard of things going badly for a while.
            So time indeed has already told.
            It’s time for reform.

            • Antoine 16.1.1.1.1.1
              14 November 2018 at 12:49 pm

              (laughs) How can it be time for reform? You don’t have a better approach to put forward! Do you?!

              Come up with a better system and then it might be time for reform.

              A.

              • Ad …
                14 November 2018 at 1:21 pm

                The time for reform is not during or right after a crisis (of which we’ve had several). The time to act is when the oligopoly is generating consistent unjustifiable price increases.

                So no, I don’t have the expertise to re-regulate, other than to point to the alternative policy from Labour which you could have got off your fat ass your self and had a look at.

                You are clearly also in need of a history lesson on why the state has so little power to change this course – and hence why it needs to regather its strength to do so.

                In every year mentioned below, the state influence over the industry continues to shrink.

                1987, the first phase of corporatisation commenced with the conversion of the NZED into a state-owned enterprise (‘SOE’), the Electricity Corporation of New Zealand (ECNZ).

                The Electricity Amendment Act 1987 removed the need for the Minister of Energy to approve all new hydro- electricity generation proposals.

                July 1990 the transmission duties of ECNZ (involving management of the national grid) were split from ECNZ and devolved to a subsidiary corporation, another SOE named Transpower. ECNZ was thus left solely with its generation responsibilities.

                Similarly, 1990 saw the government formally corporatise the ESAs, stripping local government ownership and accountability to voters at a local level.

                1992 Energy Policy Framework statement captures the new-found government commitment to a more commercially-oriented system.

                The generation sector was the next to undergo restructuring. The Wholesale Electricity Market Study (‘WEMS’), commissioned by the government, recommended substantial changes to the existing market system both to provide a predictable price path for wholesale electricity, and also to enable trading within marginal prices. Crucially, this set in motion the development of competition with the dominant generator, ECNZ.

                The 1993 independent review of WEMS identified further areas for development, including such matters as the pricing of tradable contracts and the formation of an infrastructure to delineate margins of market operation, with the threat of heavier regulatory oversight. The Electricity Act 1992 formalised these developments. It removed the remnants of the ESA monopoly distribution system, deregulated the sector and reconstituted ECNZ as the industry operator of the competitive generation and retail sectors.

                Also in 1993, the start of electricity markets; formation of Electricity Market Company Ltd (EMC), an entity intended to act as a focal point in the design of the wholesale market. EMC oversaw initiation of an on-line secondary market in trading of ECNZ’s ‘hedge’ contracts, as well as engineering the Metering and Reconciliation Information Agreement (‘MARIA’), a multilateral agreement to allow for competition between retailers for customers with half-hour interval meters.

                1996, the government split the system into two competing SOEs (ECNZ and Contact Energy), with Contact Energy receiving ECNZ’s Maui gas assets and certain South Island power stations, and other ECNZ energy assets being sold to private entities. Also the The New Zealand Wholesale Electricity Market (NZEM). The EMC acted as market administrator, whilst Transpower operated as dispatcher. Electricity prices were established based on bids by retailers in response to offers from generators, and prices were not capped.

                1998 Electricity Industry Reform Act 1998: supposedly the formation of a self-perpetuating competitive market.

                Part II of the Act provided for the mandatory separation of line and energy businesses, with segregation to be completed no later than 2003.

                Part VI signalled the threat of price control for distributors servicing domestic and rural consumers, should it be necessary to avert excessive line charges.

                Part VII strengthened the Electricity (Information Disclosure) Regulations 1994, which, in concert with the statutory obligation on the industry to establish low-cost switching arrangements for domestic consumers to change retailers, was designed to improve consumer choice.

                Finally, Part VIII stipulated the complete reconstitution of ECNZ into three SOEs.

                Also 1998: sale of Contact Energy to private interests.

                1999: splitting of ECNZ into Genesis Power Ltd, Meridian Energy Ltd and Mighty River Power Ltd. Likewise, promulgation of the Electricity (Information Disclosure) Regulations 1999 sought to enhance the efficacy of the existing disclosure obligations upon generators and retailers by facilitating access to already disclosed information via publication on the internet.

                2003 Electricity Commission established after 16 years of just fucking around as far as the consumer was concerned.

                What happened: 2004-6 total blowout in prices to consumers. A fruitless review. Mrs Muliaga dies, mini disconnection reform occurs as a result.

                2008 review: even more market-driven crap. Total resistance to reform ever since.

                2009 Commerce Commission report, totally resisted by industry and MED and Ministers, again.

                And then Prime Minister Key unnecessarily sold off 49% of the remaining public interest in the big generators, so that the public would never get them back again. And despite a massive petition to stop that sale. And he can go fuck himself and all.

                The summary of all of this by Jeanette Fitzsimmons has not yet been bettered:

                “The Max Bradford Bill [that became the original reform legislation, the Electricity Industry Reform Act 1998] was a matter of pure ideology triumphing over all practicality and feasibility. It broke up an integrated and efficient system that was the envy of the world in that it had a plan for dispatching the most efficient generation first. This is replaced these days by a market, which sounds fine, except that a market can be gamed …”

                It is being gamed and every New Zealander is paying for that game.

                • Antoine …
                  14 November 2018 at 1:49 pm

                  Why have you started talking about generators and retailers in a discussion about the regulation of Vector?? Vector is a distributor. A completely different kettle of fish.

                  A.

                  • Ad …
                    14 November 2018 at 2:07 pm

                    Look back at the entire content of the post.

                    Or do you need another history lesson on the failure to regulate lines companies as well as the generators?

                    Failing that you could show that you understand this stuff rather than 16 comments of mere sniping. Are you simply not able to contribute?

                    The separation of network and generator is a regulatory fiction, which has counted for little when you are a consumer.

                    As noted above their origin was from a unified system. That is where its regulation needs to head again, as a unified system.

                    The Commerce Commission has only recently had useful powers over the lines companies.

                    The Electricity Authority powers over generators are clearly weak.

                    Both impacts arrive in the one power bill. Paid by you and I.

                    That is what is missing, in both electricity production and electricity distribution: protection for the consumer.

                    • Antoine …
                      14 November 2018 at 11:20 pm

                      I disagree with your entire premise. The electricity sector is working OK.

                      What have most consumers experienced over the last 10 years? Adequate customer service, a generally good standard of reliability, and small to modest price increases. That is what a well functioning sector looks like.

                      In addition, we have had an increase in renewable generation and no environmental disasters.

                      Leave electricity alone. If you want to fix something, go fix housing. The housing sector is causing 1000x more pain than what electricity is.

                      A.

  17. Ad 17
    14 November 2018 at 6:27 am

    Brian Leyland in the NZHerald takes a similar view on the market not working, this time from the point of water conservation heading into summer:

    “Our electricity supply is at risk. The average spot price over a normal year is about 7c/kWh. Since the beginning of October wholesale electricity prices have averaged about 40c/kWh. On November 1 they peaked at about $1 but recent rain in the hydro catchments has dropped the prices somewhat.

    Prices have been much higher than they should have been because of shortages of generating plant, water (the hydro lakes were quite low), gas and coal. The generators controlled the prices and seemed to be making hay while the sun shines.

    If this was so, they were playing games with the economy and making a nonsense of the market. The high prices should not have happened. They prove that the market is not fit for purpose.”

    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12159186

    He also has some choice criticism of government ministers o the matter:

    “The Minister of Energy, Megan Woods, should be seriously worried. However, recent answers to questions in the House indicate she doesn’t understand the difference between energy (kWh) and power (kW), is unaware of the dry year risk and the need for large-scale, low-cost energy storage, does not know wind and solar power drops in the autumn and so increases the dry year risk and does not know hydrogen has to be manufactured from natural gas or electricity so it is not “renewable energy”.

    The minister does not have an elementary understanding of the industry she is supposed to lead.

    The Minister for Climate Change, James Shaw, is between a rock and a hard place, he can be caned for going along with importing lots of coal and forgetting about CO2 emissions or he can strongly object to the shipments and risk looking seriously silly if there is a shortage. Whatever he does, he is not going to look good.”

    A rational government would be striving to give us an economic and reliable supply, current government policies will give us an increasingly expensive and unreliable supply.

    • Antoine 17.1
      14 November 2018 at 8:32 am

      Bryan (note spelling) always says this kind of stuff.

      Do you think the criticisms of Megan Woods are on the money? I would characterise Leyland’s opinions as ‘hit and miss’, is he onto something here?

      A.

      • Ad 17.1.1
        14 November 2018 at 9:28 am

        Since I don’t claim expertise in electricity regulation, it’s the guys who have seen multiple decades of systemic evolution that I trust the most.

        On his accuracy here, this summer will tell.

        Yes Woods is out of her depth.

        • Antoine 17.1.1.1
          14 November 2018 at 9:37 am

          > Since I don’t claim expertise in electricity regulation, it’s the guys who have seen multiple decades of systemic evolution that I trust the most.

          Just bear in mind that most of those people disagree (usually amicably) with Bryan.

          > Yes Woods is out of her depth.

          Right, thanks for your take

          A.

          • Ad 17.1.1.1.1
            14 November 2018 at 11:48 am

            I recall Layton the previous Chair having a good slag at Labour’s proposals. Also he had a crack at Dr Jeff Bertram, Molly Melhuish, and Bryan Leyland as well at the same time.

            Asked whether he would be able to serve on the Electricity Authority if a Labour-Green government were elected, Layton said: “I personally wouldn’t.” Well of course. He implemented Brownlee’s 2009 reforms. And everyone else except a few outsiders are totally co-opted by the consultancy industry feeding the main generators.

            Result: almost total silence.

            We are well overdue to have a proper electricity regulation debate. If we don’t get reform we are going to see higher and higher electricity prices next year and not a word of a new policy framework to deal with it …

            … except for Shaw’s carbon bill, which appears to have a longer gestation cycle than a Blue Whale, and just as likely to be sighted from land.

            • Antoine 17.1.1.1.1.1
              14 November 2018 at 11:56 am

              > We are well overdue to have a proper electricity regulation debate.

              Well, let’s see what the Ministerial review comes up with and maybe that will kick stuff off.

              A.

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