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No spark in Nats’ power reforms

Written By: - Date published: 4:34 pm, December 9th, 2009 - 39 comments
Categories: energy, national/act government - Tags: , ,

sexycoal220A friend just texted: “Brownlee’s power reforms look relatively benign, what’s the catch?”

It’s true, Brownlee’s reforms are just minor tinkering. The only thing of note is the needless little kick in the guts for environmentalists by making Meridian take on Whirinaki.

And that tells us something. For all National’s bluster in opposition about power prices and the rest, they have no answers.

Of course, we know that if National had free reign they would just privatise and deregulate the power companies and we would soon be facing Enron-style disasters. But they were forced to promise not to sell any assets.

If a decent leftwing government were in power, it would be looking to treat electricity as a public service, not an ordinary good. The power system should be brought together under public control (rather than the silly system of government-owned companies competing against each other) and tasked with providing green, sustainable electricity, cheaply and reliably. But that’s never going to be an option for ‘Sexy Coal’ Brownlee and National.

So, instead, they’ve made some minor reforms and promised that power prices will come down. They won’t, of course. It’s more over-promise and under-deliver from National.

39 comments on “No spark in Nats’ power reforms ”

  1. Clarke 1

    The big effect from my point of view is that I can no longer buy carbon-free electricity simply by signing up with Meridian – I’ll have to jump through all sorts of hoops to achieve the same goal. So the power bill will remain the same, the carbon content will increase, and I’ll have higher administrative costs.

    Thanks a bundle, Gerry.

    • gitmo 1.1

      What the fuck is carbon free electricity is it related to carbon free sugar


      .. to quote viz ..It sounds like a load of old wank.

      • Clarke 1.1.1

        Meridian produces certified zero-carbon electricity … or at least it used to, right up until Gerry Browncoal mandated that they take on a fossil fueled plant at Whirinaki.

        Try and keep up, gitmo.

        • gitmo

          Is this zero carbon electricity cheaper than non zero carbon electricity ?

          Does it get used to produce naughty CO2 ?

          When will they start employing zero carbon employees ?

          Has the world gone fucking barmy ?

          • Macro

            “Has the world gone fucking barmy”
            Its stupid people like you with your stupid comments who are making it so.
            By having an energy supplier who produces ALL their energy from renewable sources, consumers had a choice to go with that supplier (Meridian). Now that choice has been removed.
            I thought that was what you free marketeers were all about? Choice in the market place.
            Of course Brownlie doesn’t give a stuff about promoting sustainable energy, despite the fact that he is the current minister. He is little more than an environmental hazard and the sooner he is gone the better.

            • gitmo

              What if the non zero carbon electricity is used in the production environmentally friendly products and services and the zero carbon electricity is used in the production of non environmentally friendly products and services oh noes oh noes won’t anyone think of the children.

              • felix

                Yeah that’s exactly how it works, gitmo.


              • Marty G

                For god’s sake gitmo. One of the major sources of carbon dioxide emissions is the production of electricity by burning fossil fuels.

                Carbon-free or renewable electricity is generated without emitting carbon. Of course, that electricity may be used in carbon emitting activities (like aluminium smelting) or, as in the case of someone like Clarke, they’re just using it for consumption at home.

                You must, must, by now understand about renewable electricity

                captcha: unreasonable (how does it do that?)

              • gitmo

                I don’t give a toss where my electricity comes from as long as it’s cheap.

          • Galeandra

            Wake up and smell the roses. Luddite

  2. tc 2

    Of course he’s not proposed anything significant…..that takes intellect/vision/motivation and committment.

    The bust up of the old ECNZ into what we have know is a disgrace all parties can take some blame for…..we all get ripped off and the shareholders just bank it.

    Cullen/Clark had one of the best chance but labor are never aggressive enough in pulling the SOE’s in and lack the top corporate talent connections to parachute them in to get what they want……that’s not necessarily a bad thing as that ‘talent’ is a moral vacum of greedy sorts like the bloke Smith chucked into ACC.

    Brownlee’s probably looking to follow the likes of Jim and Jenny and score a comfy board seat or 3 when he’s finished screwing up the sustainablitly initiatives.

  3. ben 3

    Marty, it’s all very well to dismiss the set of initiatives from National with a wholesale “no ideas”, but the fact is I count fewer ideas in your post than from National. In fact I count just one idea in your post: public control.

    So I’ll see your one idea and raise you another. Yours is the same idea repeated again and again. No matter how many times you say it, it will always be crap. It defies just about every bit of experience and evidence going. No, Marty, politicians do not make good controllers of technical assets. They don’t even make good owners of them, as the economic literature has tested and tested and tested and shown conclusively if not quite unanimously.

    I do not know what the solution to NZ’s electricity problems are, but putting politicians in charge of their operations is about the worst idea one could imagine. Has that ever worked? Anywhere? Ever? Is there even a single reason to think it possibly could?

    • Clarke 3.1

      No matter how many times you say it, it will always be crap. It defies just about every bit of experience and evidence going.

      Yes Ben, you’re entirely correct. No matter how National governments try and “reform” the electricity sector and introduce entirely mythical “competition”, electricity prices always rise faster than inflation and security of supply falls.

      That was what you meant, I presume.

      • ben 3.1.1

        Nope. Not what I meant. What I meant was what I said: putting politicians in charge of their operations is about the worst idea one could imagine.

        • Clarke

          Wow, you’re right! That private-sector company Contact haven’t raped and pillaged their customers at all!

          • ben

            Number of people who are forced to deal with Contact in the current market: zero. And they’ve been losing market share. And they operate about the same way as the state owned operators, give or take. What’s your point?

            Putting politicians in charge of their operations is about the worst idea one could imagine.

    • Armchair Critic 3.2

      So your idea is that an oligopoly is better than a monopoly? Even in just economic terms, I don’t agree.
      The generation, transmission and distribution of electricity in NZ is in a poor state, and the announcement from National is pretty pathetic. Even if this is just about lowering prices, or keeping price rises down, how will anything announced today help achieve that? What did they announce?
      1. The transfer of ownership of a couple of power stations from one company to another. That won’t have a big effect.
      2. Virtual asset swaps. No big effect there.
      3. A hedge market. To transfer costs backward and forward in time, rather than actually reducing costs.
      4. Allowing lines companies to retail electricity. No extra generation there, just duplication of an existing service (the retailing), so no cost saving.
      5. Establishing a fund to promote switching companies. So by spending money on advertising we save money on electricity? Sounds like the dumb kind of recommendation the productivity commission might make.
      It looks a lot to me like National have settled for placing their faith in the market to deliver, against all the evidence of the last fifteen years or so, and spinning the same old dogmatic lines. I’ll believe it when I see it, and I expect I won’t see it.
      So let’s see the economic literature you refer to – put some links up. Nothing from South or Central America, please, and nothing that requires a subscription to get into.
      In New Zealand the market approach has failed to deliver the required increase in generation or transmission and the competition between retailers is a joke. The difference in annual power costs is not worth the time or effort required to work out who has the best plan, then arranging to swap over. Especially given the uncertainty about how much electricity I will use, and when I will use it.
      Personally I’m in favour of a single operator for all the big generation plants, and the transmission, and a small number of distributors. Give them the task of covering their costs to produce, transmit and distribute the electricity, while ensuring that the cost to the user is minimised and affordable, there is always sufficient capacity and redundancy within the networks, the network/supply is accessible and the effect on the environment is minimised. Just off the top of my head.
      I also favour full public ownership, with some form of representative democracy to direct the technocrats managing the utility. The first reason that springs to mind can be summed up with one word – Enron.
      Because it is not only about the money.
      Finally, do you have any concerns that the government is doing the opposite of what you suggest in Auckland, with the water supply and sewerage? There’s no plan for competition at all there, and a significant degree of public ownership. Don’t you think that’s a bit inconsistent?

      • Lanthanide 3.2.1

        “In New Zealand the market approach has failed to deliver the required increase in generation or transmission”

        Actually, if this were the case, we’d be having rolling blackouts.

        I also saw some stats in a stuff article several months ago indicating that for the next 5 years they were bringing on more capacity than required to meet growth over the next 5 years.

        • Armchair Critic

          “Actually, if this were the case, we’d be having rolling blackouts”
          That’s a worst case scenario. Before then we would have high spot prices at peak demand times, then businesses shutting down production lines, then a campaign to save electricity. Sound familiar? Nothing in this latest announcement will change this, or address the problems in the electricity sector.
          My point was that since the market reforms were introduced the ability of the system to meet peak demand has decreased, and generation capacity has not grown at the same rate as demand. Feel free to show otherwise. Fantastic that stuff reports that generation growth will exceed growth in demand for the next five years. The assets being built will last tens to hundreds of years, so five years is a pretty short timeframe.
          Because the sole focus is on making money from selling electricity as a commodity, the incentive to do other stuff, like planning ahead, is reduced. And there is an incentive to asset strip, underfund maintenance etc.

          • Lanthanide

            When such a large propotion of our electricity supply relies on hydro power, there really isn’t much that can be done when there is a drought.

            You can say things like “we should have enough power capacity to whether any drought” but of course the only way to do that would be to have extra capacity equal to 100% of the existing hydropower capacity, and of course that costs money….

            • Armchair Critic

              Yeah, but I wouldn’t say that.
              I quite like the idea of distributed generation, lots of small generation near the demand. At present it costs heaps, too.
              And I haven’t worked out what I think the ownership structure should be, although my inclination is to favour local ownership for local generation.

      • ben 3.2.2

        So your idea is that an oligopoly is better than a monopoly?

        Nope. Not what I meant. What I meant was what I said: putting politicians in charge of their operations is about the worst idea one could imagine.

        I don’t have a view on the rest of your analysis (an important omission from your list is that the package includes increasing supply of electricity, which really should lower prices other things being equal.)

        My only point is that Marty’s idea of putting politicians back in charge of electricity operations is about the worst idea one could imagine.

        • Clarke

          You keep repeating this phrases over and over again:

          Putting politicians in charge of their operations is about the worst idea one could imagine

          … like some schoolyard mantra or a particularly spurious talking-point from the Brash 2025 taskforce report. Yet nowhere in this entire thread have you provided a single rationalisation for your position, nor any evidence to support it.

          The majority of New Zealanders would doubtlessly agree with the position that the electricity companies have deliberately gamed the system put in place by Max Bradford a decade ago, and our power prices have risen well beyond what is required to sustain ongoing investment in generation and transmission capacity as a result. The same people would also agree that Contact (the private enterprise) have been as ruthlessly efficient at price-gouging as any SOE.

          So we can conclude that the problem is the way the electricity market in New Zealand is constructed and operated, which seems to provide an incentive to business managers of all stripes to generate windfall profits by gouging captive consumers. This is clearly the problem designed and implemented by Max Bradford, ignored by the Clark government, and left largely unchanged by Gerry Brownlee.

          The trouble is, complete deregulation of the electricity market tends to lead to Enron.

          So what are your bright ideas? Or do they solely consist of repeating “putting politicians in charge of their operations is about the worst idea one could imagine” endlessly?

    • Marty G 3.3

      In ben’s mind, the test is the number of ideas you have, not how good they are

      • ben 3.3.1

        No Marty. No. That was simply a response to your criticism of National for being short of ideas, while you yourself propose even less. You’ll find the carping stops when your one idea is good and you stop being a hypocrite.

  4. tsmithfield 4

    Under Labour power prices increased at three times the rate of inflation. Its a bit rich to try and criticise National for trying to do something about it.

    • Clarke 4.1

      “They did it too!” – a defence unworthy of a 12 year old. So where’e the vision from National, then?

      • gitmo 4.1.1

        Yes I suggest everyone plays partisan politics and ignores the fact the Labour and National haven’t got a clue about the best model for power generation now and into the future.

    • Draco T Bastard 4.2

      Yes, the last government kept the same policies and they didn’t work then either. So, it would be nice if the new government did something different. The fact is, they haven’t worked at anywhere in the world.

    • Marty G 4.3

      ts. they’re not doing anything about it. That’s the point

  5. Rich 5

    Yup, the system is stupid and Brownlee’s done almost nothing to change the stupid. Mind you, nor did Labour in nine years.

    Why do we have three SOE generators? Just one would do.

    Why do we persist with a “market model” that just causes fluctuations in price? The cost of making electricity is a function of cost of capital employed, price of fuel for fossil stations, and operating costs. Public policy suggests that carbon emission should be minimised, so fossil fuel power stations (Huntly and various gas units) should only be used when renewable power is insufficient. A scientifically designed model could optimise this without a need for a pseudo-market.

    Why do we have a game of trying to buy the cheapest electricity? The power that comes out of your wall socket is from exactly the same generators whether you use Genesis, Mighty River or Meridian. There might be a few tweaks around metering and the fixed charge / unit charge balance, but basically, everyone should be paying a fair price for power that encourages energy economy.

    About the only good thing in Brownlee’s announcement is that by making Meridian take on a fossil fueled station, the capability for middle-class tokenism is reduced. (Stopping climate change needs the concerted efforts of government, not 5% of Grey Lynn dwellers using hessian shopping bags).

    • Armchair Critic 5.1

      “A scientifically designed model could optimise this without a need for a pseudo-market.”
      I vaguely recall that one was produced by a PhD student at Auckland university in the early or mid 1990s. I expect it was rendered irrelevant by the market reforms the government introduced around that time.

  6. My jaw dropped to my chest when the TV One News announcer reporting on this said gleefully that if customers are asked to reduce power use at times of shortage they will receive compensation from their power company.

    Compensation? Where do you suppose this ‘compensation’ will come from? Power companies will have to provide reserves against these possible compensation payments in their accounts, and where will the money going into these reserves come from? Where else but their customers.

    All it means is that you’ll have to pay a little more for your power in the good times to provide the cash to pay you ‘compensation’ in the bad times.

    And, far worse, the companies that have more ‘green’ power, ie wind, hydro etc. are far more liable to have ‘bad’ times than the coal, gas and oil burners and so will have to make a larger provision for this ‘compensation’ – effectively adding to the price of green energy as against dirty energy.

    As the ancient saying about market-place shysters goes, “Don’t watch their eyes, watch their hands.”

  7. tsmithfield 7

    I tend to agree that whatever the government does so far as structural changes is concerned is largely cosmetic. It may smooth the pricing, but I doubt it will have a major impact on the overall trend.

    The only ways to reduce the cost of power in the long term is to increase supply, reduce demand, or a combination of both.

  8. Peter Wilson 8

    What a limp-fisted attempt to fix up what most people recognise is a broken energy market.

    As other posters have pointed out, all this will result in is higher prices during the good times, as generators build up reserves for the bad times. It will also result in higher carbon emissions, as generators will probably just switch on the thermals in preference to planning for future generation properly. Brownlee, true to form, spoke of making it easier to bring new gas generation online. So, Keith Turner (former Meridian CEOs) bold vision of a renewable future for NZ has been killed, and we become more reliant on declining fossil fuels. Really smart…

    Giving Whirinaki to Meridian is similarly daft. Whirinaki burns diesel, and produces very expensive electricity as a result. It’s also poorly sited (a bad decision by the previous government), and not particularly capable of solving power shortages in the North Island due to transmission constraints. It is a reserve station, as in,under current rules, it can only be turned on under very specific circumstances, which require the calling of a “Grid Emergency” by Transpower. Now, I imagine that Meridian will be encouraged to use this station more frequently, because otherwise, why on earth do an asset swap for an asset that can’t get used!

    Similarly, passing Tekapo A and Tekapo B to Genesis, a company which has all its experience in running Huntly. The upper Waitaki Power Scheme is designed to run as a cohesive unit. By handing Tekapo A and B over to it you are basically removing one whole storage lake (Lake Tekapo) from the mix, which reduces the efficiency of the remaining Upper Waitaki stations down the chain (Ohau A, B, and C). That is a recipe for power crises and poor water management in two of the country’s most important storage lakes.

    Finally, we have a transmission system that was designed for long term predictable power flows in single directions, from generator to consumer, The electricity market has brought about short term fluctuations in power flow and direction, all of which place great strain on the transmission system. I can only see this increasing under the current regime.

    Brownlee = Fail.

  9. Homo Domesticus 9

    Well done Brownlee. I thought you were going to get tough with electricity providers? Months of study and debate and this all you could come up with? These reforms will have zero effect on the price of electricity.

    Mr Brownlee, where is the accountability, the payback for customers? Electricity providers have ripped off customers for years with power prices soaring over 70 percent.

    What a joke.

    Homo d.

  10. Jim McDonald 10

    The focus is clearly on what this Nat Govt can and will do. And so is this meant to be Brownlee’s and the Nat Govt’s pre-Christmas sizzler policy which is turning into a fizzler?

    Quite disappointing.

  11. rod 11

    Cheaper electricity for all, promises Brownlee. Where have I heard that before,oh yes,it was that other brilliant Tory politician, Max Bradford. What ever happened to him? Give us a break Brownlee, you couldn’t run a raffle.

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