Key’s power price record

Written By: - Date published: 7:48 am, April 17th, 2013 - 78 comments
Categories: energy, privatisation - Tags:

Spooked by tomorrow’s joint announcement by Labour and the Greens on policy to cut power prices, National is trying to claim they have solved the problem. Get real. In the past year, household electricity prices rose an average of 5%, that’s over six times the rate of general inflation. In fact, power bills have outstripped general inflation every year under National. By my reckoning, the average power bill has risen 16%, or about $300 a year under Key.

This bullshit can’t go on. We can’t keep paying more and more and more for electricity, the bulk of which is produced with nearly no operating cost by hydrodams whose capital cost was recouped years ago.

And, with National halving the amount of revenue the Crown gets from electricity companies via its asset sales, the reasons for not acting are disappearing fast.

(The breakdown of electricity price increases is from Stats Infoshare, CPI)

78 comments on “Key’s power price record”

  1. Colonial Viper 1

    The NZ government has supported a profit making market-led dividend providing model of electricity generation, transmission and profit making private sector electricity retail for quite some time now.

    Why should the private sector change their modus operandi from what successive NZ government financials have structured, supported and benefitted from? Now that private shareholders are picking up the generation assets, they’re simply going to be doing more of exactly the same, and asking for what is due to them.

    • Draco T Bastard 1.1

      Now that private shareholders are picking up the generation assets, they’re simply going to be doing more of exactly the same, and asking for what is due to them.

      And what the rest of the country (and the rest of the world) need to realise is that nothing is due them.

      • Macro_adder 1.1.1

        “And what the rest of the country (and the rest of the world) need to realise is that nothing is due them.”
        QFT

  2. vto 2

    The electricity reforms (based on current policy neoliberal privatisation type thinking) were meant to keep power prices down to a minimum.

    However they haven’t worked.

    The cost of producing electricity has risen diddly squat, while the retail price has gone through the roof.

    Just like deregulation of finance companies, it has failed.

    Just like deregulation of mine safety, it has failed.

    Just like deregulation of house construction, it has failed.

    when will these bozos accept they have failed?

    • Colonial Viper 2.1

      Yes, but both Cullen and English were/are fine with hundreds of millions of tax revenue and dividends from various power companies and power SOEs flowing into Treasury. Getting those sums of money doesn’t really smell like “failure”.

      • vto 2.1.1

        Well that is a prime indicator of where our system fails with a capital “F”.

        What the politicians see as failure or success should match up with the populace. The fact it doesn’t is the monumental failure.

        • Colonial Viper 2.1.1.1

          Correct.

          Virtually all of our politicians act from a world view of market confidence, orthodox economics and financial/capital goals first. Not citizens first.

          • Draco T Bastard 2.1.1.1.1

            +1

            And those orthodox economics inevitably fail as all the wealth ends up in the hands of the few and most people end up in poverty.

  3. Melb 3

    16% over four and a half years, is what, 3.5%/year? And that’s only your reckoning, rather than actual statistics.

    That’s a lot better than the increases of 70% between 1999-2008.

    • Lightly 3.1

      It’s the actual statistics. You can follow the source yourself.

      • Tom Gould 3.1.1

        Indeed, just because Key and his cronies keep saying ‘70%’ and the brain-dead chooks keep printing it, doesn’t make it so.

        Sadly, once Max Bradford and his arch-Tory cronies set up the so-called ‘electricity market’ there was really no going back. I seem to recall that Pete Hodgson tried to fix it up to give consumers a fair go, but failed. And remember that Bradford actually promised ‘lower power prices’ as the generators and wholesalers and retailers all competed against each other? Fat chance. Funny how his website claiming credit for the ‘reforms’ has now disappeared.

        • Melb 3.1.1.1

          Sorry, I was wrong. It’s 63%. As that number comes from Stats NZ I’d so that makes it so.

          View post on imgur.com

          It doesn’t seem as though the Bradford reforms caused high prices until the Labour Govt hit upon the idea of jacking up them up as a profitable stealth tax. Grafic from the Otago Daily Times and Stats NZ.

          • Rob 3.1.1.1.1

            “This bullshit can’t go on.” I totally agree, Labour farmed the population of NZ in energy, slightly more than the current Govt has. People do not forget this.

  4. Alanz 4

    The power price increases actually feel worse this time round with less discretionary income left in the hand and other costs of living going up, eg food and fuel.

    Also, family, friends and neighbours are feeling more financial pressures with fewer working hours, less certainty at work, or no jobs 🙁

    Flying across the ditch is not such a promising option either as news from family and friends there sound less than sparkling.

    • Colonial Viper 4.1

      Stories of destitute and homeless Kiwis in Australia are increasing. It seems we are becoming a neglected underclass over there.

      In NZ…this is what energy poverty feels like, and perhaps half a million NZers experience it to a significant degree every Winter.

      Our country and our politicians seem fine with it though.

    • Plan B 4.2

      Agree that they feel worse. Because the actual numbers are getting bigger. A 16% rise on 100 is twice as big as a 16% rise on 50. So as the cost increases the percentage increase actually nakes it a lot worse. ‘We are the frogs in the pot on the stove’

      • Colonial Viper 4.2.1

        That’s the beauty of annualised exponential growth mate, embrace it.

      • ghostrider888 4.2.2

        good breakdown

        • Alanz 4.2.2.1

          oh how i yearn to earn directors’ fees like joan withers’

          > 50% rise
          $150k nom nom nom

          (and, shhhh, $85,000 pool ”for committee work” tee hee hee, thank you, john key, thank you, ryall)

          • ghostrider888 4.2.2.1.1

            urrggh, google and wiki just about made me sick; freakin’ unattractive and “defendent in law suit by shareholders against directors of failed Feltex. (are you trying to arm an assassin Alanz?)

  5. King Kong 5

    If this increase is finding its way into the Government coffers by way of dividends (so very important according to the “keep our assets” campaign) then it is just another tax. Considering how much you lefties like taxing people I cant see your problem with this.

    Surely more money to the state means there is more money for handouts to the idle and the baby factories that you seem to love so much.

    • Colonial Viper 5.1

      Better than having Australian shareholders suck up power company money for use in their own country.

      • King Kong 5.1.1

        Doesn’t the NZ Government still own 51% not to mention the massive chunk of dosh they get in one hit for selling the 49%?

        • Alanz 5.1.1.1

          handouts to the idle corporate rorters and baby factories of speculators

          ftfy

        • Colonial Viper 5.1.1.2

          Owning 51% of a good thing is somewhat shit compared to controlling 100% of it.

          • King Kong 5.1.1.2.1

            Depends how much you got for selling the 49%.

            • Colonial Viper 5.1.1.2.1.1

              Most NZers – nothing.

              The elite and the wealthy and the international money funds – I agree, its a great deal for them.

              • One Anonymous Knucklehead

                There’s nothing elite about wealth: that’s a false right wing frame.

                • Colonial Viper

                  I wouldn’t quite agree with you: this is a capitalist political economy that we are in. Therefore those who have the capital, control both the politics and the economy side of the equation.

                  But are they better human beings? Not likely.

              • King Kong

                Hang on a tick…I have been accosted every weekend in Cuba Mall by socially awkward Labour and Green supporters telling me that all NZers own these assets. Surely if we are selling “our” assets “we” get the money from the sale.

                • Alanz

                  “we”?

                  if we are talking within Natz circle, we need to take public money to give them to our cronies like Susan Devoy, Jackie Blue, Joan Withers, ….

            • Draco T Bastard 5.1.1.2.1.2

              Depends how much you got for selling the 49%.

              Not enough to offset the loss. There could never be enough or they wouldn’t be worth buying.

              • King Kong

                Maybe you should talk to some Bear Sterns stock holders about the risks of investing.
                What if a clean, unlimited, abundantly available power source is found in two months time. That would make the Nats look pretty shrewd.

                • Draco T Bastard

                  There’s no risk involved in buying the power companies as it’s something that the government cannot let fail – just like the banks.

                  And your “What if…” is a load of bollocks.

          • Rob 5.1.1.2.2

            Not for the power users if they are being farmed like they have been.

        • Plan B 5.1.1.3

          The government is trying to soak up the money it put into the economy but did not take out through taxation.Because it lowered the top tax rate.

        • felix 5.1.1.4

          “not to mention the massive chunk of dosh they get in one hit for selling the 49%”

          Yes monkey boy, and I know you trust the govt to spend that wisely…

          • King Kong 5.1.1.4.1

            You are talking to someone who thinks the Government should only be there to fund police, army, firemen and courts so spending it on anything else is a total waste.

            • ghostrider888 5.1.1.4.1.1

              and how much do they spend on the New Zealand Fire Service, oh wait, levies do.

            • Colonial Viper 5.1.1.4.1.2

              Where will the police, firemen, soldiers and judges learn to read and write?

              • King Kong

                With an education that their parents paid for.

                • One Anonymous Knucklehead

                  King Kong is right! That’s exactly what happens. There’s a pilot program going on right now in Somalia.

                • Colonial Viper

                  If you want police protection, or fire protection, surely then you should pay for that too, out of pocket, using competitive providers?

                  • Alanz

                    Maybe Shearer has good ideas for outsourcing to competitive private providers like Cosa Nostra, Chinese triads et al.

                  • King Kong

                    You are right about fire but Government needs to be in the business of upholding the laws of the land.

                    • geoff

                      Why? Couldn’t private enterprise do a better job than government at that too?

                    • King Kong

                      I think we have all watched enough Sci Fi movies to know that private police forces never work out that well.

                    • Draco T Bastard

                      Amazingly enough, we’ve also had privatisation rammed down our throats to know that that doesn’t work out to well either, i.e, government subsidies to Telecom for UFB.

                • Draco T Bastard

                  Yeah, that would be the education that most people had before government funded compulsory education was brought in because the factory owners needed better educated workers.

            • ghostrider888 5.1.1.4.1.3

              Fire!

            • felix 5.1.1.4.1.4

              “You are talking to someone who thinks the Government should only be there to fund police, army, firemen and courts so spending it on anything else is a total waste.”

              Then I’m talking to a hypocrite.

              Now get the fuck off our telecommunications network, bludger.

              • mac1

                And the roads, King Kong. Don’t walk on the footpaths, either. Keep out of the P/parks and Reserves. Hope you don’t pick up a bug from a sick and unscreened visitor. Hope you can pay for your own sicknesses. Pay (fully) for your own children’s education. Hope you aren’t a farmer at the risk of imported plant disease and pests.

                I hope you can trust your builder. Your butcher. Your restaurant. Your supermarket.

                And finally, that piece of real estate in which we all end up?

                The horror! Mac’s Cemeteries. RIP. Rest In Payment.

                • King Kong

                  I pay for all this stuff now, I just have a bunch of numpties in Government making the spending decisions for me.

                  • mac1

                    But, would you pay for it if you didn’t have to to? Remember, it’s you who wants state involvement restricted to four areas. I questioned, and you have swiftly sidestepped, as to what you would do in such a minimalist state-involved society in terms of all those areas that I itemised..

                    Remember also that you just might have private enterprise numpties, as you call them, in charge of all this stuff- and the record of private enterprise is not necessarily all that good when it comes to safety and all the other reasons as to why we ask the State to step in and act in the common good.

                    I’ve just finished reading a Llargas novel on Sir Roger Casement which covered individual conscience and action with regard to Amazonia and the Congo under unfettered, unsupervised corporate control pre-WW1. Not a pretty sight for private enterprise ‘control’.

              • King Kong

                So to avoid hypocracy yourself I guess you don’t shop at any of the major supermarkets or chain stores due to their participation in the neo liberal capitalist crusade.

                • felix

                  That would be true if I were saying that the state ought to own everything.

                  But I’m not, so it isn’t, and you can try again.

  6. Adrian 6

    I’m under the impression that about 10-15 years ago world accounting practices ( led by the big accounting companies or “crooks”) changed the way things like assets were valued, i.e NZ dams while paid for decades ago at a fraction of current costs, were to be valued at replacement value in the current tax year, and depreciation etc to reflect this. Brilliant tax reduction tactic. Therefore power prices rose to get the books to balance. Am I right or just blinded by a totally rational hatred of accountants and money market manipulators?

    • Draco T Bastard 6.1

      No, I suspect that you’re right. It’s a system designed to benefit the few and so making things look more expensive than they are can increase profits for those few. Those profits, of course, come from everyone else.

    • prism 6.2

      Adrian
      I had thought that was happening in another area that I am concerned about. Rental housing. While commercial shops have their rent regularly updated on the basis of certain criteria like more traffic past, renters are needing a home as a basic requirement. Yet renting is a business and tenants will have their rent put up on the basis of current valuation, often without having any money being expended on maintenance, remedial work, or improvements.

    • DH 6.3

      Yeah, NZ adopted IFRS. (International Financial Reporting Standard) It requires assets to be on the books at “fair value” rather than depreciated or replacement value, which gives the beancounters more leeway on how they set the values.

      Mighty River, Meridian and Genesis between them have revalued their assets upwards a total of 8.25 billion dollars. They need around a 7% return on equity (8% for borrowed money) so that’s an extra $600 million profit they’re making out of us mugs.

      • Ed 6.3.1

        Tehre was comment at the time that the erason for some of the sales between power companies (all govt owned) was purely to ‘set’ a market price which would increase the deemed capital values of the companies assets. Since it was a sale between two companies owned by the govrment, there was no real “market” determination, but it did then ‘justify’ increasing the price of electricity to get a desired ‘return on equity”. Cynical, yes, but that is what we expect from National.

        • Colonial Viper 6.3.1.1

          Justifications for rentier capitalism

          Don’t just blame National, Labour was quite happy with a corporate for-profit SOE structure sucking money out of communities into Treasury.

          Is anyone surprised that after having left the Key in the ignition like that, the Nats came along in the next government and drove off with our assets.

        • DH 6.3.1.2

          “Tehre was comment at the time that the erason for some of the sales between power companies (all govt owned) was purely to ‘set’ a market price”

          That’s possible but they already do set the book values and report it in the balance sheets. It’s probably more likely Bill English was just grabbing some extra tax to make his books look better. Asset revaluations are taxable but the tax is deferred until the asset is sold. Mighty River alone has $900 million in deferred tax. When Genesis bought the dams etc off Meridian I’d think that Meridian would have had to pay the deferred tax on the revaluations of those assets. Doesn’t affect the equity so the Govt gets more tax revenue and there’s no change in the book values.

  7. Plan B 7

    I simply do not know what the fuss is all about. We only use imported electricity in our home anyway. We would not be seen dead using that local stuff. It just isn’t the same is it. Really good quality European electricity is so much better. We enjoy our appliances so much more now we use imported electricity. We often fly to Sydney for the weekend and pick up some Australian Duty Free electricity at the airport before we fly home. Oh and last time we were staying in our timeshare in Hawaii we brought back some US electricity in our hand luggage, straight through customs, no one seemed to care and it was so much cheaper!

  8. infused 8

    So from kiwiblog:

    The history of electricity cost increases in NZ, according to Stats NZ is:

    4th Labour Govt – 98.7% or 16.4% a year
    4th National Govt – 47.5% or 5.3% a year
    5th Labour Govt – 63.7% or 7.1% a year
    5th National Govt – 16.2% or 4.1% a year

    Why was it ok then? Why is it suddenly bad now?

    • Colonial Viper 8.1

      You’re correct, this is just the end stages of a decades long neoliberal market led gang bashing.

    • Mike Smith 8.2

      The commenters on Farrar’s Kiwiblog post put some useful context around these raw numbers – inflation running at 17% in the 1980’s, and privatisation of Contact in the late nineties. I think the same old blame-shift is starting to run out of steam

      • Rob 8.2.1

        The issue that steams people up is that the title of this post is “Key’s power price record”. Everybody (except it seems the author) knows that the current farming of energy users was in place well before this Govt came about, and that people have very litle faith in labours ability and conviction to do anything about if they are to be re- elected.

  9. Draco T Bastard 9

    Green Party Press Release

    The low headline Consumer Price Index change hides significant rises in electricity prices, the Green Party said today.

    Statistics New Zealand Consumer Price Index (CPI) data shows that electricity prices were up 5.2 percent for the March year, meaning prices have risen 18.8 percent since National took office.

    • prism 9.1

      DTB
      Yes that’s a point – I think that the inflation index is averaged out isn’t it? So that can mean that a shortage or glut of cabbages can affect the food part, and obscure the energy part. (Cabbage availability did affect the CPI one year – way back.)

      • DH 9.1.1

        “Yes that’s a point – I think that the inflation index is averaged out isn’t it? ”

        They use a weighted average format. Electricity is part of the Housing and household utilities group and has an individual weighting of 3.5. Translated that roughly means a 10% increase in power prices would add 0.35 to the CPI.

        The CPI is a terrible measure of inflation for households because they spread it across all types of households to get broad inflation rather than targeted. Rent for example has a weighting of 7.85 and no-one spends only 7.85% of their income on rent.

  10. aerobubble 10

    Under Labour electricity price went up 70%+ at a time of interest rates hitting? 10%?
    Under National electricity prices have gone up 20% in a time of deflation….

    Key spin.

  11. Green machine UpandComer 11

    As the Dompost editorial stated, Labour has absolutely no credibility on power prices – they were much much higher under Labour, always.

    Further, the Green’s policies will push power prices through the roof.

    CPI is way down, the economy is doing pretty well.

    I really hope the snivellers keep banging on about what colour the phone was that Key used to maybe call a directory 🙂 keep up with the negative pettiness, that’s always a real vote winner and is about all Labour is good for these days 🙂

    • Colonial Viper 11.1

      CPI is way down, the economy is doing pretty well.

      price increases are down because unemployment is high, few are spending money, and the same high dollar which gives you cheap iPhones is crushing our export jobs sector.

      Your analysis is plain sad, actually.

      Further, the Green’s policies will push power prices through the roof.

      National’s will push them higher, and give the difference to foreign shareholders.

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