Not yours to sell

Written By: - Date published: 6:46 pm, August 16th, 2009 - 28 comments
Categories: act, auckland supercity, democracy under attack - Tags:

This video from Phil Twyford, Labour’s spokesperson on the campaign to make sure that Rodney Hide is prevented from buggering Auckland by selling critical assets to his mates in the business community so they can raise prices, diminish maintenance, stop capacity building, and make more profits for themselves.

Given the history of natural monopoly privatizations over the last few decades in NZ, it has resulted in asset stripping, greater uncertainty of supply, and increased costs to the consumers. The electricity sector being a notable case in point. The disembowelment of the rail system of the rail infrastructure being another. Auckland water costs almost doubled over a year for many consumers in Auckland city (including myself) in the last 90’s when the Watercare raised prices on both the water and especially waste water charges.

Phil currently has a private members bill in play to require that a referendum of Aucklanders will be required to sell city assets. Help its progress: irritate your local MP’s, especially the Nat’s. I’m sure that they will be pleased to hear from you that you’ll be looking closely at their votes in the house.

There is more at Not yours to sell.


28 comments on “Not yours to sell”

  1. Herman Poole 1

    “Big International Water Corporations”

    I haven’t heard about these, who are they?

    • illuminatedtiger 1.1

      Bechtel springs to mind.

    • Armchair Critic 1.2

      I expect they are Suez, Veolia/Vivendi, RWE, United Utilities and Thames Water. You might be surprised to know how many of the ex-employees of the latter two have made their way to Auckland over the last ten to 15 years and started spreading the word.
      The fact that people are asking “who are they” is a concern, too. The move to privatisation has been moving forward, slowly, for years. Water NZ is their lobby group.

  2. Do actually have any evidence that electricity sector is a natural monopoly? It doesn’t seem obvious to me that the cost function will be subadditive over the relevant demand range and I don’t know of any research that suggests this. So I’m just wondering what information you are basing this claim on.

    • Draco T Bastard 2.1

      What makes you think that it isn’t?

      • Paul Walker 2.1.1

        The fact that I have yet to see the evidence on which the claim that it is, is based.

        • Draco T Bastard

          So, no reason at all then?

          See, I haven’t seen any evidence that it isn’t a natural monopoly but I’ve seen heaps that it is. I’ve certainly seen huge amounts of evidence that competition doesn’t work for electricity or telecommunications, or health, or roads etc. These all share a number of characteristics

          1.) They’re massive infrastructure projects, as such there’s a massive barrier to entry.
          2.) Competition is simply impractical; How many roads do you need at the end of your drive? power cables? telecommunication connections?
          3.) Competition costs more and produces no added benefit and will, in fact, make things worse due to the higher prices needed to sustain the competition.
          4.) Increased bureaucracy adding even more cost.

          • Paul Walker

            Great! What are the references to the studies that you refer to?

            • Draco T Bastard

              Start here. Although I’m pretty sure I’ve pointed you there before. I assume from your answer that you haven’t read it and the line of thought and references needed to understand it.

              Also, what’s your thought on what I said? Not references but you thought. Why, in your opinion, is what I said wrong?

            • Paul Walker

              “Start here. Although I’m pretty sure I’ve pointed you there before. I assume from your answer that you haven’t read it and the line of thought and references needed to understand it.”

              One. That doesn’t answer my question in any way. To make the question even more precise for you. What references do you have to studies that show that electricity production in New Zealand is a natural monopoly? Just produce a list of them.

              Two. Some of the shortcoming in Keen work have recently been noted by myself at anti-dismal and by Matt Nolan over at TVHE.

        • RedLogix

          Probably because you don’t want to see it.

          I’ll try to keep this simple and jargon free. Most utilities like water and electricity are characterised by very high fixed costs and very low marginal costs. In fact for renewable generators (hydro, wind, geothermal) the marginal costs may well be zero.

          For this kind of enterprise, the larger it becomes the lower the average cost to service each customer becomes. The usually accepted downside is that with increasing size there is a tendency towards inefficient bureaucratic management, a tendency greatly ameliorated with the advent of modern IT automation. In a small market the size of New Zealand one firm could quite plausibly serve the entire market.

          By contrast a so called competitive or contestable electricity market does not maximise welfare because each firm has to apportion resources to sales and marketing, and return on investment to shareholders. A publically owned monopoly, run as a public service, does not have to do either.

          In the New Zealand experience the dominant cause of rising electricity prices has been the upward revaluing of assets and the ideologically driven requirement of successive governments (Labour included) to then demand an increased return on those new, paper values. This has amounted many, many billions of dollars of ‘deadweight losses’ over the last decade, losses that have come about because of a fixation with the false idea that a competitive market was universally more efficient.

          Worse still the ‘competitive market’ we set up was completely articificial and hugely bureaucratic and inefficient in itself. It was prone to game playing and manipulation. For instance the Whirinaki peak load station, built with the sole intention of providing 150MW of generation that could be brought online very fast (less than 5 minutes from cold to full load) to fill short term holes in capacity. It was however very expensive to run and for this reason no-one planned for it to run for more than a few hours a month during the peak winter evening loads.

          But the spot market pays every generator the same per unit for the most expensive generator online at the time. For this reason everyone was motivated to create ‘shortages’ in order to force Whirinaki online, and thus greatly increase the price. As a result it ran for weeks on end, costing the country and consumers a fortune.

          This sort of thing is a documented commonplace with oligopies. The usual response to this kind of egregious market failure is to write even more ‘rules’ to regulate the so-called marketplace, rendering it even more rigid, bureaucratic and inefficient, than any conceivable public monopoly.

  3. infused 3

    This is why Labour isn’t getting anywhere. Fear mongering just doesn’t work. It didn’t work in 2008, give it up.

  4. Err, I have yet to hear Rodney talk about selling anything to anybody. This is, until you hear facts or otherwise – complete scare tactics and fibbery.

    • Armchair Critic 4.1

      FFS, an absence of statements from Rodders shows SFA. NACT was quite happy to break its tax cuts promise, what is to stop them from breaking others? With a “good explanation”, of course.

    • Macro 4.2

      There are none so blind as those who will not see, and there are none so deaf as those who will not hear.
      No maybe never said it as such (it’s what is NOT said that is of most concern!) – But then Clint, there are some in this world who have lived through a previous neo-liberal administration, and then there was never much said either (at least not prior to the actual event – it was all smoke and mirrors), until it was all over and we had been well and truly shafted!
      Frankly you may trust Rodney implicitly – but I don’t.

    • lprent 4.3

      He has said that he wants councils to stick to ‘core’ services, and most of the public assets apart from libraries aren’t (in his opinion).

      What he hasn’t said is what he wants to do with the assets that will then be surplus to council requirements. In the absence of any words to the contrary, I presume that he would prefer them sold.

      Now if you can point to words or policy from either Act or Hide that say they don’t want them sold, then I’ll consider those. Otherwise as far as I’m concerned it is guilt by association – with Rodger…

      • RedLogix 4.3.1

        Don’t have to look hard:

        Based on World Bank estimates, New Zealand would gain over $1 billion a year or around 1% of annual gross domestic product (GDP) by privatising State Owned Enterprises. (SOE’s) That makes no allowance for assets held by local government which total around $50 billion. This is simply the difference in the return the assets would earn in the private sector as opposed to what they earn today in the public sector.

        ACT Govt Ownership Policy

        * Local government will be required to shed its commercial activity, thereby eliminating the need to separate regulatory and commercial functions between local and regional councils.
        * Roads and piped water will be supplied on a fully commercial basis.
        * Abolish the local government power of general competency.
        * Require councils to focus on their core functions.
        * Ensure there is much greater scrutiny of regulations that undermine property rights.
        * Promote contracting out of many council services.
        * Lower the cost of complying with the Resource Management Act and other regulatory regimes.
        * Review the two-tier structure of local government.

        ACT Local Govt Policy

  5. Swampy 5

    Bit inconvenient for your argument that Watercare isn’t privatised. Prices there have gone up because water used to be subsidised from rates, and now it isn’t.

    • Armchair Critic 5.1

      Watercare has been commercialised and corporatised. Privatising it wouldn’t be too difficult.
      Your point about water being subsidised from rates is, at best, a massive simplification.

    • lprent 5.2

      Don’t be absurd.

      1. Watercare pays dividends to its owners, that I pay for as a consumer.

      2. Rodney is obviously setting it up to sell to more rapacious owners, to whom I will have to pay more profits (while getting even less service) based on the electricity industry performance (which it resembles).

      3. If there had been a reduction in rates then I’d have noticed it.My rates have consistently gone up by about 4-5% per year to Auckland City and somewhat less to the ARC. However they have always gone up.

      At the time ~1999, Watercare were doing the sewage / storm water separation, and that has largely been completed for most areas of the city. Bloody good thing. I can remember finding great swathes of sewerage on Pt Chev beaches in my youth after a large storm.

      I believe that they have done a number of other projects to reduce various issues. But the point is that they managed to pretty well double most peoples water/sewage bills with no significant increase in services. Since then it looks like their price increases have moved along with inflation plus a bit more.

      What exactly am I paying for and how do I get some say in it? Because they are owned by aucklanders, I probably can. If they get sold to the Fay Richwaites or Becthels I won’t have ANY say.

      Better not to sell a natural monopoly to the even more inefficient (because of profits) private sector.

      • Armchair Critic 5.2.1

        1. I think they called them rebates or charitable donations, because that had some impact on the tax payable, which would have been different if they had been called dividends. Some people might consider the difference to be semantics. The charitable donations were used for stormwater works. The charitable donation funding source for stormwater was used as a substitute for funding from rates, effectively to ameliorate rate increases in other areas.
        2. Companies that would like to buy the water supply and sewers prefer big collections of assets, not fragmented ones. Amalgamating the smaller local reticulation (owned by the seven local councils) and trunk systems (owned by Watercare) makes it more attractive for these companies. Generally the privatisation modus operandi includes setting up an Environmental Protection Agency to monitor the water companies. NACT are legislating to do this too. Underfunding the protection agency helps to make the water company more attractive to potential purchase because lower environmental requirements mean lower costs/higher profits. While I haven’t seen any reports on how the agency will be funded, chances are NACT will underfund it.
        3. The rate rises for water and sewer were held to some inflationary index (CPI?) less a percentage (1%) for at least few years in the 00s.
        4. I don’t recall Watercare (the trunk network owner/operator) doing sewer/stormwater separation, but Metrowater have done a fair bit. Swathes of what is currently Auckland City still need work. The rest of the Auckland region are comparatively much better off.
        My experience of the electricity industry is that it is quite a way behind water supply and sewerage in many aspects, mostly because the privatisation/market model forced upon it distracted from the task of providing what is an essential service in a sustainable manner at minimal cost. In short, the market did not deliver the best outcomes, despite all the theory and cajoling from politicians. Why it would work for water is beyond me.

  6. Herman Poole 6

    Well if this is true:

    “FFS, an absence of statements from Rodders shows SFA”

    Then it could be said that Helen was part of a global communist conspiracy because FFS, an absence of statements from Helen shows SFA.

  7. randal 7

    hey you guys.
    dont you know that natoinal won the election.
    in their pinheads that means they can do whatever they like.

  8. graham 8

    i do love how labour when its not the government loves referendum where was it when they ramed though their social agenda over the last 9 years

  9. Tired old legends of “disembowelment” of the rail system. It reached its apex in 1953 and most of the line closures were in the late 1950s to the late 1970s. It carried its highest number of passengers in the late 1960s, and carried it highest tonnes per km of freight in the early 2000s (because rail has finally been moving towards what it is good at, long haul containerised or bulk freight). Myth masquerading as fact once again. Most of the running down of the rail system happened under state ownership, except for a few gleaming examples of gold plating that were appalling management decisions. The few private years saw some dodgy accounting practices, but frankly half the railway network today isn’t worth renewing, carrying volumes of freight that are laughably low – under private ownership that would have been left to happen, had not Jim Anderton got excited about the Napier-Gisborne line – which today still carries the equivalent of about 10 truckloads of freight every day, and has cost millions just to keep a fertiliser and forestry company’s freight costs subsidised a little.

    Of course if you are going to say “not yours’ to sell” presumably representing the “people”, then why don’t the “people” say “not yours’ to spend” regarding their taxes and rates? Or is this the mythical collective property rights, when you get to pay for the losses through higher taxes, but get no money in the hand if it makes a profit. Funny that.

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