Written By:
Anthony R0bins - Date published:
12:02 pm, April 18th, 2013 - 223 comments
Categories: david parker, david shearer, economy, energy, greens, labour -
Tags: bold, electricity market, electricity prices
Power prices having been rising much more quickly in NZ than in other OECD countries. With the current privatisation of state owned generators, the problem will get worse not better. Something needs to be done.
At noon today Labour and the Greens jointly announced new energy policies. “NZ Power” is big and it’s bold. It will completely restructure the way the electricity sector is run, and result in lower power prices for both domestic and business consumers.
From Labour’s policy release document:
Key Points of Labour’s Solution
• A new agency called NZ Power will act as a single buyer of wholesale electricity. It will also have the power to set prices based on operating costs and a fair return on capital.
• NZ Power will introduce a new pricing system where electricity companies get a fair return and consumers finally get a fair go.
• These measures will also encourage more competition among retailers.
Impact of Policy
• Power prices for the average household will drop by $230 – $330 a year.
• Businesses will also see prices lower by between 5 and 7 per cent on average.
• This policy will create 5,000 jobs and boost the economy by $450 million per annum.
The projections for the impact on the economy have been independently costed by Business and Economic Research Limited (BERL).
It’s important to note that this model of a state run wholesale buyer / distributor is in place and working in other countries (including South Africa and Brazil) and some states of America (California, Virginia). This model can and does incorporate planning and funding of future generation capacity.
Why now, after Labour let prices rise during it’s nine years in office? Because it’s a new leadership with new ideas. And because with the privatisation of the sector (profits heading off-shore instead of being spent on health and education), prices are set to rise even faster in the future if nothing is done.
The downside is that share prices are likely to be affected. There is no way to control the prices that generators can charge without also impacting their profits, and therefore possibly their share prices (the markets will decide). That is why the policy is being signaled now. It isn’t an ambush and it isn’t “sabotage”. It will be put to the electorate in 2014, and investors have plenty of advance warning, time to respond.
This is a great example of Green / Labour cooperation – hopefully a model for the future! It’s a classic left wing / social democratic policy which sees a role for government in making life better for people. The market model has failed in the electricity sector. It’s time for a change. Bring on NZ Power!
Update: The Greens policy release is here. Labour’s is here. Between them they have plenty of supporting information and documentation.
Updated with responses:
This is their first joint announcement of a major policy plank for a Labour/Green Government, essentially creating the bones of a coalition government in waiting for the first time. It transforms the political landscape and signals what would be the biggest re-intervention in the New Zealand economy since its deregulation began under Labour in 1984.
Lower power prices good for families
The CTU welcomes new thinking from the Labour and Green Parties today to reduce power prices. It is long overdue.
Bill Rosenberg, CTU Economist says “New Zealand residential electricity consumers have suffered from the reliance on an electricity ‘market’ which has failed to deliver low cost electricity for much too long now. Low income families lose the most to power companies as a proportion of their incomes. We welcome these policies to lower the high cost of electricity. Just as we support fair wages we welcome initiatives that will ease the burden of unfair prices on low-income families and reduce inequality.”
A good summary by Herald writers Adam Bennett and Audrey Young:
Labour and the Greens are promising a major intervention in the retail power system in a bid to lower residential power prices if they win next year’s election. …
The parties would create a new Pharmac-style agency called NZ Power to act as a single buyer of wholesale electricity, Labour leader David Shear and Greens co-leader Russel Norman have just announced at Parliament. …
Mr Shearer said Labour had been working on the plan for some time and it was not an attempt to derail the Government’s Mighty River share offer which began this week or the wider asset sales plan.
He said it was the biggest market intervention Labour would make.
“It’s the big Kahuna”.
For reactions from Right and Left see Colin Espiner’s “Labour’s crazy new energy policy” and Chris Trotter’s “Okay! Okay! I surrender. Shearer Stays”.
The current rise of populism challenges the way we think about people’s relationship to the economy.We seem to be entering an era of populism, in which leadership in a democracy is based on preferences of the population which do not seem entirely rational nor serving their longer interests. ...
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Clearly some authors at The Standard are now getting advanced access to Labour press releases.
[lprent: a email turned up in my mail box from both labour and the greens earlier today. I would presume that as a blogging labour member that r0b gets the same thing. As does the standards own mailbox. There is this thing called the internet. ]
Why would you be surprised?
Also seems to be ‘proofed’ by someone else. Not his normal writing.
I can assure you that I wrote every word of the post apart from those quoted.
You must have taken more care with this post then 😛
Hey now – I take care with every post! Every one a highly polished jewel!
Pearls before tory swine, methinks.
Nice post.
lolwut?
Are you a textual analyst now?
Looks like r0b’s writing style to me.
Yes. And if R0b got help with proofing, then that’s good too.
I’m starting to fear that all my posts are riddled with errors that I cannot see! No – no help with proofing – I just wrote the thing.
Your posts always read well.
And while I’m talking praise, I’ll take the opportunity to tell you that I also like your firm stand against violence.
+ 1
Though not sure I like the mix of alphanumerical and numeric text in your username – looks unprofessional 🙂
[lprent: And the obvious answer to that is in the about, which you should have read before making such a patently dumb statement. This blog is neither our profession nor our paymaster. In fact it pays nothing.
Professionally I’m a computer programmer who mostly writes c++ and who has a attitude derived from many many hours of professionally crushing bugs. Writing sarcastic notes on the comments of jerkoffs is just a quite pleasurable variant.
r0b is an academic with far more social skills, a better attitude about people acting up that probably derives from too close a contact with younger humans, and with less of urge to whittle sarcastic chunks into comments. But blogging isn’t his profession either.
I’d suggest you read the about and the policy. I tend to get nastier when I have to repeatedly ‘notice’ people in my moderator role. 😈 ]
r0b was only ever meant to be a temporary handle for a temporary dabble in blogs – but it kinda got out of hand…
Only mildly 😀
Yikes – I’m not sure you got the humor
You should take a chill pill – its bad for the health to be that uptight!
[lprent: Yeah, we all know that I’m a grumpy old sysop more concerned with keeping our authors than trying to read your alleged mind. This means that the responsibility for any “humorous” “mistake” is entirely on your side because your job is to not leave me any ambiguous room to apply policies to.
In particular when referring to the authors who put up the content (r0b is the author of this post). You’ll find that the policy effectively says that when given a choice moderators prefer keeping authors rather than “humorous” commentators (who invariably are not, but who are usually the simple troll that you look like to my jaundiced but quite experienced eye).
I’d suggest you read the policy to figure out how to avoid my grumpy attention because I really can’t be bothered being nice, having seen all of the similar “humour” on social media for many decades already.
I’d prefer to just be able to ignore you unless by some mysterious fluke you say something actually worth reading. But that is something that only you can achieve by not attracting my moderating attention. And since I run the tools of the site that you are a guest on and have approximately the interest of a granite block has in being approved of, then you will learn to conform to the quite loose policies or you eventually learn how I will ensure unwelcome guests don’t comment.
I trust that this clears up the matter to my satisfaction, and that I won’t have to waste any more of my precious time “explaining” the laws of the relationship between a moderator role and a
victimcommentator to you again. ]Cheers Huginn.
I’m not particularly surprised, it’s just interesting to note.
Often it is levelled by commentators here that Kiwiblog and Whaleoil are getting help from people in the National party.
Clearly some authors at The Standard are now also getting information from the Labour party that is not made generally public.
It’s an interesting development, particularly in light of the general tone on The Standard towards the Labour party and David Shearer’s leadership there-of in recent months.
Also this looks like r0b to me.
I received an email re power from Labour at 12:02.
So an email turns up for you “earlier in the day” and you think you are perfectly typical compared to any other Labour member/supporter?
ianmac says he got an email at 12:02, so assuming that was actually the time it was sent to him and not just the time he opened it, it appears you got special treatment. And perhaps r0b too – both of your real-life names are hardly secret.
Presumably if many people were getting these emails “earlier in the day”, like you did, someone would have posted it on Open Mic. And yet we didn’t get any posts in Open Mic about this before 12pm.
It’s quite common for media to get embargoed press releases for stuff like this. That’s how they have detailed stories up about speeches and major policy announcements within minutes of them being released.
If the left-wing political parties have any sense they’ll send embargoed press releases to blogs like this too.
So, there’s your conspiracy. An embargoed press release. Like every other media outlet.
Sorry I didn’t realise there was a conspiracy theory! Yes – exactly, embargoed (slightly) early release. As far as I know it has only happened twice, KiwiBuild and NZ Power.
I get a few more of them. I think that people think that I actually write posts 🙂
Yes, certainly no conspiracy stirring on my part, just pointing out the facts as I saw them.
That isn’t uncommon for bloggers (and presumably other media). You wind up on everyone’s email lists for announcements, invitations, press releases, people giving hints and speculation, and just outright noise – from EVERYONE.
I get them and I have made dedicated attempt to be a grumpy anti-social maniac who makes a point of trying not to be nice. I’d hate to think what it’d be like for a blogger who is actually pleasant.
You should see our main e-mail stream with everything on it from transcripts of Q&A, to embargoed press releases, to requests that someone writes about this thing for amnesty, to stuff from scoop, curia, many MP’s with what waffle they’re into at the time, and whatever.
And that is a lot less than what turns up in my e-mail stream or on facebook.
Looking at what turned up today (now I’m back at my desk) it looks like a couple of people speculating on what the announcement was about this morning and something from David Shearer at midday followed by a few people pushing in links. I could have written a post on the topoic anytime over the last couple of days if I’d had some time. r0b obviously had more than I did.
you are the master around here anyway.
How would that create 5,000 new jobs? What’s the actual cost of the policy then? All to save $20 a month?
Underwhelming.
New jobs via economic stimulus – not an economist myself but apparently BERL did the numbers.
Were they the same guys who did the numbers for the cycleway jobs? BERL – bloated erroneous rented lies?
As opposed to treasury who don’t simply pluck numbers out of their arse of course…. Tui billboard?
Because treasury is crap that means BERL is reliable?
was just waiting for an attack BERL
No, AFAIK, it was John Key on how many jobs the cycleway would produce.
For the hundreds of thousands of New Zealanders that Key has tipped into abject poverty in 4 cold long years, $20 a month is the difference between life and death. How many impoverished elderly will die in their homes this winter because they can not afford to turn on a heater.
Buffing the home isolation policy I thought would be a better option then.
Or, lets do both!
did you just drop another n or was that the smell of KK?
No point of heating a crappy house. I have the same problem… waste of power.
Thank Christ they have not called it “Kiwi” power.
Looks good.
Key will be shitting himself right now
Oh god yes, not another ‘Kiwi’ institution!
https://www.google.co.nz/search?q=kiwipower&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
It was taken.
It is very good to see Labour and the Greens working positively together and new approaches being put forward by them.
I do not understand the implications of this idea, however it appears a good plan to start indicating to “the market” now, that this is in the pipeline; then perhaps we might get investors buying the shares who actually have an interest in the service this sector is providing, and not solely out for profit.
I don’t see how adding yet another layer helps reduce electricity prices.
Then read the Q&A link I’ve provided below…
So the answer to solving power prices is to create a monopoly?????
Same reply to you as to BM above. Read the links that are provided below.
@ tsmithfield
Perhaps two wrongs don’t make a right, however, would the “monopoly” of NZ Power, perhaps begin to address the huge monopoly corporations have in many areas of the markets? (Call it a counteraction to that monopoly, if you may?)
Or is corporate monopoly o.k in your book?
I don’t see anything there that it will be a monopoly.
“A new agency called NZ Power will act as a single buyer of wholesale electricity. ”
“single buyer” – more correctly, the term is ‘monopsony’. That is good news. Will protect the buyers. Something like the Pharmac model for drug purchasing, and so it will be like a Powerac. Great!
You are correct it is a monopsony but it is still a monopoly – it is also selling the power to many buyers
If its a pharmac model would it have the provision for a consumer to step outside the system and do their own buying?
Though i will be the first to admit that might not be as simple as it sounds
If it does – its just a bulk buyer – not a monopoly
Power is already a monopoly tsmithfield.
TS – No idea the realities of monopolies do you!
The monopoly is that we only have a limited number of power producers of power in NZ. Imagine if anybody could sell power to the grid from the solar collectors? That would be the best ay to bring down prices.
Yes. That’s always been the case but it must be a state monopoly that is democratically accountable.
Adding competition just drives up costs for no added benefit. We see this in telecommunications. We’ve got the competition but we’re still having to pay phone bills that are higher than they would be if we’d just kept the state monopoly due to the added bureaucracy and infrastructure. And on top of that inefficiency we also get the dead weight loss of profit.
At present we have Contact, MRP and Genesis generating all the electricity in NZ usually at locations remote from population centres with large transmission costs.
We know that the price of solar generation is coming down rapidly, so the obvious question is why not allow people producing excess energy simply to sell power back to the grid?
This is what has been happening in Australia for the past ten or so years and power demand is actually falling.
As the Germans and Chinese keep developing better and better solar technology you can pretty quickly see that most people will have no need to buy power from the large suppliers provided of course you get enough sun. The added bonis is that there will need no need to transmit power over huge distances. Surely this will be the cheapest power in the future?
You already can.
Yes.
Electricity markets are highly complex. There’s a lot of evidence that central planning can lead to a better outcome in NZ, but only with the right tools.
Go here to have a look at what these tools might look like:
About EPOC
Our research uses mathematical modelling, optimization and statistical tools to comprehend modern electricity markets such as the NZEM, and to analyze and develop methods for efficient generation schemes and demand-side participation.
http://www.epoc.org.nz/
Can’t say that I’m impressed.
First thing, let’s kill the concept of the electricity market. That will de-complexify it. And get rid of all this quant bullshit.
Then as a postscript can we imagine what modelling they did to build and run the first 150 years of NZ’s power infrastructure.
tsmithfield – yes, because hasn’t the free market worked so wonderfully well.
Tell you what, TS. As I said to Gosman, you have a choice in this matter.
You can,
(a) take the cheaper power sold via NZ Power (and grudgingly thank the Greens and Labour).
(b) continue to pay high “market” rates directly to the powercos. I’m sure they’ll appreciate your monthly cheques in the mail.
Your money, your choice.
Just seems strange to me that a post on a so-called joint release should focus solely on Labour. So in the interests of a more rounded picture… Russel Normans release speech is here http://www.greens.org.nz/sites/default/files/empowering_new_zealand_russel_norman_launch_speech.pdf
The Greens’ discussion doc (Q&A) is here http://www.greens.org.nz/sites/default/files/empoweringnz_qa_final_0.pdf
And it all leads off from this page containing more info/links here http://www.greens.org.nz/factsheets/empowering-new-zealand-supporting-documents
Well done Bill. This policy has Norman stamped all over it. All well and good that Labour is coming to the party but credit is deserved.
Thanks Rus
Farrar is shrilly screeching MONOPOLY and doing reducto ad absurdum. The neolibs really have no idea how discredited they now are.
Don’t get ahead of yourself. If this policy is aimed at the people on minimum wage, I’d bet these people are already voting for the left.
It’s only saving $20 a month, so I doubt it will attract other voters. Save $300 a year or have a labour / green free govt?
The poll will be interesting (as well as the costings).
Hey, I’d gladly take $20 month that you sneer at.
Shall I send you my bank account and you can start a monthly automatic payment?
Did you vote for any of the parties that are part of the coalition government?
Um, no? Also not sure what that has to do with infused saying $20 was meaningless.
it will attract more to vote for the left then; not just the minimum-waged face power price rises.
You really ARE utterly disconnected from those genuinely struggling! Are you happily ensconced behind some gated community, or Pin-powered entry mechanism?
Thankfully I’m not in that situation myself (yet), but God forbid I had you as a neighbour (and no doubt the feeing would be mutual)
Oh, ditto to Lanthanide. The $20 will enable the purchase of a 5 pack of noodles per week, or some cans of baked beans – the beneficiary’s staple.
“If this policy is aimed at the people on minimum wage, I’d bet these people are already voting for the left.”
Nope. They’re not voting at all, in large numbers.
‘
Hmmm . . . maybe I won’t buy those shares after all. This policy looks like it might deliver better in-the-hand returns.
I’m definitely not buying shares.
As per my comment below
If you believe that :
(1) labour wont win the next election (the ‘Shearer’ effect)
(2) that this announcement will lower the initial listing price of MRP
Then this policy should actually increase you desire to purchase shares as the upside in % terms is now much greater
Personally I filling my boots
‘
If you were a real player you’d have shut your gob rather than continuing to promote the share offer.
I wish I was a real player…
‘
Yeah, I thought you were a ticket clipper.
Better to clip than not to clip!
I’m sure if I told you I was a player (presumably by player you mean an investment banker or fund manager) you would give my views much more respect 🙂
I love it when people take a well understood idiom (in this case “chardonay socialist”) and use it so poorly that in the context it becomes meaningless. In this case a 180 degree misunderstanding of a very simple phrase.
Actually no I don’t, it’s boring as all hell and thick to boot.
you sweep them mines down the back nine Floyd
Remind me what Labour have to do to “win” the next election. Most seem to think it involves consistently polling above 35%. You do understand MMP, don’t you?
As Lanth says below, with your crystal ball you’ll have no problem making a killing on iPredict. Fill your boots.
I suspect iPredict fully accounts for the Shearer effect as the participants are ‘beltway’….so it would be hard to make a killing there
I’m not convinced that the wider public / investment community does yet…
But as Blip pointed out its not really in my incentive to ‘convince’ you of the attractiveness of the MRP offer….
Ah, so you don’t have the courage of your convictions. Or perhaps your previous assertions are simply bluster and bravado in the absence of anything substantive to say.
As regards MRP you should probably consult with some other wingnuts – some of them are quoting your god Friedman on price controls.
You can be sure I will remind you in 6 weeks of my prediction above that there is a significant (and now increased) stag opportunity… don’t let the left / right wing divide stop you making money here.
Imagine all the ‘good’ you could do with the proceeds!
Would buy you a few cases of chardonnay at least!!!
There are a number of fundamental flaws in this proposed system.
1. Price controls don’t work. Lets assume that prices are brought down. This will then increase electricity demand which will in turn increase the need for more infrastructure, driving up prices again, or causing shortages.
2. The unbrella organisation becomes another potential play-thing for future governments to rort taxpayers through inflated costs. There is nothing to stop future governments requiring higher dividends etc from the new organisation, so nothing changes.
3. If Labour ever gets the chance to impliment this idea, then it is highly unlikely the umbrella organisation will ever use its power to regulate electricity prices. This is because it would not only reduce the dividend paid to shareholders, but also income to the government. Labour governments tend to be addicted to spending other people’s money, so I can’t see this happening.
1. The Greens progressive pricing deals with your demand claim
2. Where does it say NZ power needs a dividend? Also, that’s happening now anyway.
3. That’s a strawman argument.
“1. Price controls don’t work. Lets assume that prices are brought down. This will then increase electricity demand which will in turn increase the need for more infrastructure, driving up prices again, or causing shortages.”
That’s a ridiculous argument, people don’t set out to consume electricity it’s just a byproduct of other actions like watching tv or using the dishwasher. Having lower prices won’t cause people to change their actions.
For consumers ,maybe during summer demand is inelastic, but in winter and for poorer consumer it certainly isn’t
Shearer has stated that his govt will accept less dividends from the SOEs.
wotta a tri-fecta of nonsense
Steve Keen
It isn’t a question of setting simple price controls.
Electricity markets are extremely complex – more so than any other energy market. The market itself needs reform to take this complexity into account and it needs an active regulator.
Labour and the Greens are indicating that they recognise these issues – and that tells me that they’ve got a better grasp of economics than National and ACT.
TSmithfield – “Labour governments tend to be addicted to spending other people’s money, so I can’t see this happening.”
You mean like this, TS?
“Government debt rises to $71.6 billion”
http://www.stuff.co.nz/business/5106876/Government-debt-rises-to-71-6-billion
$7m grants for Wellington tech businesses
http://www.stuff.co.nz/dominion-post/news/5448485/7m-grants-for-Wellington-tech-businesses
“Nats to borrow for other spending – but not tax cuts”
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10524905
$250 million: What our Govt borrows a week
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10603309
“Taxpayers fork out big bucks to movie studios”
http://www.stuff.co.nz/national/4522992/Taxpayers-fork-out-big-bucks-to-movie-studios
So tell us, TS – how come National can spend millions on subsidising multi-billion dollar film companies (Warner Bros) – but providing Kiwis like you and me with cheaper power is a bad thing?!
Why do our American cuzzies deserve subsidies – but not us?
Have you thought about this? What is it about rightwingers like you who believe that giving tax-dollars to a CEO in Los Angeles is a GOOD thing – but selling cheaper power to a superannuitant in Tauranga is undeserving?
I don’t get this mentality at all.Enlighten us, if you can?
don’t be holdin’ ya breath for some sense from the RWNJ on this topic of power Frank. 😉
Brilliant – MRP will now list at a much lower price due to this uncertainty, then once it becomes obvious during the election process the Shearer is a hopeless case, and labour is subsequently defeated (thus cant implement this economic sillyness), the share price will increase dramatically and I will make a killing.
Thank you Labour / Greens
Doesn’t really work like that, though. Because the uncertainty will be taking into account all of the same factors you mention. Effectively you’re betting that you are better at predicting the election outcome than the market is. Maybe that’s true. Then again maybe you’re just a blind ideologue.
Also you should look into iPredict, where you can bet on the election outcome directly and potentially “make a killing”.
If you believe the market is pure and efficient then you are of course right (ironic that you arguing market efficiency given your likely left wing views)
However, in a listing process the fund managers use any ‘negative’ news to beat down the price….this is that news.
Have a look at what happened during the Fonterra listing and the price uplift after listing. The fund managers used governance issues to talk down the price – then brought as many as possible and made a ‘killing’
In short the fund managers will use this to sc@w the government on price. As retail investors we can benefit on the coat tails of the fund managers
Second, the NZ public (and market) isn’t yet exposed to Shearer during an election process….
Also remember that buying shares for the single purpose of capital gain is taxable as income.
In theory yes – in practise the IRD pretty hopeless in this space
Interesting whether they use this listing as a trigger to police this more widely
“Cant remember my last username” – “and labour is subsequently defeated ”
The latest Roy Morgan poll sez you’re wrong.
But as I’ve said to TSmithfield and Gosman – no one will force you to accept cheaper power. You can take the discounted electricity from NZ Power, and pay the difference (the so-called “market” rate) to your powerco.
I’m sure they’ll look forward to your monthly cheques; we’ll take the cheaper power; you’ll stay true to your neo-liberal beliefs – everyone is a winner!
If there is going to be 300kw per month per household at a cheaper rate that the norm then for possibly the first time across all schemes from home insulation to tax cuts, it would seem that there is actually something in all of this for people in my position. And not before bloody time either!
National lowered the bottom tax rate, so anyone earning a taxable income would have received a tax cut.
I guess if you include the GST component it’s wiped out though. So fair cop on that.
Those on state entitlements didn’t recieve so much as a brass fart from tax cuts. And yes, entitlements are taxed.
Thanks be to a Labour Government, for that.
Any tax cut would have been swallowed entirely by the GST increase.
Excellent policy. Electricity should be a monopoly provided service.
Bloody hell, it looks like some Labour staffer has been reading my Standard comments:
-20 June 2012
Ho – good call!
Been a bit of that going on lately.
eerie
Not a true monopsony though, because remember that the generators and the retailers are often the same company, so the potential for the system to be gamed is still there.
Nice try, but somehow I doubt it, I understand that Leaders office regards these blogs as somewhat irrelevant and out of touch 😈
Tooheys
Ok, my comments.
1) This is bolder than I expected, so, mmm, words taste nice (I promised to eat them if Shearer came out with anything decent).
2) It’s still got some inherent flaws, large ones. We have a failure of a complex system, which NZ Power tries to solve, by adding more complexity.
3) Generators and retailers are often the same company. What this means, is that unless there’s another round of – yawn – power market restructuring, we’ll have the generating arms and the retailing arms conspiring to crush poor old NZ power in the middle. Hence, the Pharmac model doesn’t really apply (because the drug companies aren’t also NZ drug-using citizens!)
So, it only really works if the long run aim of NZ Power is to actually acquire the 51% shares left in the SOEs, and to replace the SOE model. If so, then it’s a good trojan horse, otherwise, it’s a complex boondoogle that might work in the short term, but not the long term.
So, Mr Shearer and Mr Norman, well done, but there’s still a wee way to go.
Yeah, wouldn’t it be easier just to say to the SOEs.
Don’t charge so much for power.
We own them or will majority own them, so why the need for all this extra complexity.
So the majority shareholder can issue instructions to directors to serve interests other than the interests of the company (i.e. make power affordable for poor people, rather than just maximise profits)? I.e. to the detriment of the other shareholders?
I think not.
I must be missing something here.
The NZ government/taxpayer owns the SOE, the SOE returns revenue to the government/taxpayer.
The NZ government should be able to instruct the SOE at anytime to return less money,then the SOE can then sell it’s electricity at a lower cost and the savings can be passed onto the consumers.
Why the need for another government department? also what happens to all the people employed on the retail side are they out of a job?
Can the majority shareholder legally issue instructions like that? I think the answer to that question maybe the thing you’re missing.
Yes, but only if the government is the only shareholder.
Otherwise directors have to work in the exclusive interests of the company, not the company’s consumers.
Ok gotcha, so once Mighty river power gets partially sold, the government no longer has any ability to control the price of power rising because to do so would be at the detriment of the company and would break some conditions.
If that’s the case, that would be the sort of info I’d be putting out to the public if I was Labour.
You’d probably find most think because the government still owns 51% they still get to control the prices and wouldn’t be particularly happy if they knew that wasn’t the way it works.
Very droll.
I’m not sure most people think that.
70-odd% or whatever are against asset sales, you know.
same goes for gay marriage, but oh, look at that.
I’m sure you wouldn’t want issues that only impact a minority group to be decided by the majority. Would you?
lol
Yes BM, you’re missing the massive glaring fact that 51 is not a magic number.
edit: yep, if you lot would all stop bleating “but 51%!!” like a flock of Dipton ewes that’d be a great help.
You are confusing generation with retail. And have you looked at the ownership structure at Contact recently? Not exactly a SOE
i’m sorry to say BM, yet you appear to be off your oats today.
You need to read the fine print Peter, there’s stuff in there about requiring structural separation of generation / retail.
Yes, reading now, that pleases me more. We may yet have a shot in 2014, most people I know had almost given up hope.
We’re all frustrated with the slow rate of change and the messy compromise that is politics. But Labour / Green is the only hope, and worth supporting – never give up!
I’m mostly just frustrated with the leadership, as is almost everyone who isn’t in some way tied to Caucus. This policy shows at least that there is some thinking there.
So where is Labour going to find the 300 million* this is going to take out of the Govt coffers
*2 million households times $300
Did you ask that question when National lost revenue stream by privatising assets?
Anyway, see: http://www.labour.org.nz/sites/labour.org.nz/files/20130418_NZPower_Fiscal_Impact.pdf
better than reading the MSM papers r0b; we always knew it would.
Raymond, did you ask that very same question when National cut taxes in 2009 and 2010, and had to borrow from offshore to pay for those cuts? I’ll betcha you didn’t utter a word in protest. Am I right?
Govt borrowing $380m a week
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10724665
The difference between the Green and Labour policies, according to Kate Chapman and Vernon Small, is that the Greens’ policy includes progressive pricing:
Surely some form of progressive pricing is necessary as an incentive to use less electricity? And I’m puzzled by what Parker might be getting at as electricity companies already have a tiered system for high and low users. Selfish bstard that I am, I’m all in favour of receiving a highly discounted 300kwh per month. But then, that’s maybe because 300kwh is above my total monthly use. And I live in the colder south.
edit. Just had a look through my account and for the 12 months May 2012 to April 2013 (inc) electricity costs were $815 compared to $590 for the 11 months of June 2011 through April 2012 (inc). So, if these reforms take me back to below my annual costs for 2011, then all fine and good. 🙂
Your power bill is less than $70/month 😯
Yup. And I curse the fact I can’t afford to install a wetback which would drop use by – oh I don’t know – somewhere in the region of 50% plus?
mine is approx the same (don’t have a computer for a START! ) 😀
Bill, prices have been progressing for decades now and the data clearly shows that the demand has stayed consistent (~8000kWh per year) for the last 30 odd years. Try as we might, there is a certain amount of electricity that people need to use and therefore should be provided. Until we can all afford to build new solar passive houses, that usage is going to stay roughly at that level, all the price ‘incentive’ will do is make people poorer as they pay more and more for the same ~8000kWh of electricity every year.
Sure. Except my usage (and others’) sits at under half of that. And, speaking just of my own situation, I live in a windswept 100+ year old villa in the south with only partial insulation.
So, I need about 3500 – 3750 kWh per annum. (So 300kWh per month sits nicely 🙂 )And I have no solar/wind generation and the structure is a million miles away from being solar passive or whatever else. 8000 kWh per year? I wouldn’t even know how to use that much. Sheer decandence!
That’s great for you Bill but your whole attitude sounds very much like the ‘I’ve got mine, everyone else can get knotted’ attitude that I’d expect from right-wingers, not you.
Also how many people in your house? When I said 8000kWh per year I meant per household NOT per person, perhaps that is where our lines have got crossed?
Cut your hair short mate, those hairdryers suck up power
300 kWh is quite a small portion of the average household’s annual usage (~8000kWh)
This may be ‘bold’ but will it allow the full benefit of manapouri power into the system or can it be gamed by the gentailers?
If the whole system was nationalised then you could provide everybody a full ration (ie 8000kWh) per year for free (upgrades and maintenance paid for by taxes) and the country would be far better off.
Good on the Greens and Labour but they really aren’t being brave enough for my liking.
If it works, it shows how ridiculous Bradford and National’s policy was in the first place: when was the last time an extra layer of bureaucracy made something cheaper?!
I don’t think they’ve gone far enough, but it’s a start. And good to see Labour and the Greens presenting a united front. An aside – by their acts ye shall know them: I’m unconvinced that stronger ties to the Greens represent a step to the right.
One Anonymous Knucklehead
“When was the last time an extra layer of bureaucracy made something cheaper?!”
– Pharmac,
– public schools and universities,
– police,
– NZ fire service,
– public hospitals,
– public libraries,
– water supply and waste disposal
– etc., etc.
My question to you: “When did a private company ever NOT make as much profit as it could off its customers?”
😆 you are right.
No it’s not. It’s classic Third-wayism.
A classic left-wing/social democratic policy would be to re-nationalise the grid and the generators.
And yet the Greens and Labour are looking to market policies to fix it?
Insanity is…?
+1
More of the same from the grey men.
Even a few drops of water tastes delicious in the middle of the neoliberal desert.
Yeah better than nothing. As long as we’re still building the dam.
Yes the top down approach of this policy announcement bothers me.
And I have an on-going concern about the Shearer-Norman partnership – both incline towards the neoliberal, and this is likely to be encouraged by working closely together.
I am however, pleased to see that the Green Party policy puts particular emphasis on sustainability and development of renewables. The main way of combating the anti-sustainable impact of the profit motive, is to (bottom of p13- p14 of the Green policy):
But then the next paragraph worryingly embraces the capitalist system:
Well as always the devil is in the details, but they would be wise to take a lesson from CAISO in California, which after the semi privatization debacle a dozen years ago (or as National likes to call it, “the future”) has proven to work well.
http://www.caiso.com/
According to deep thinker Simon Bridges, this is in fact re-nationalisation and will lead to the Soviet Republic of NZ or some such twaddle.
(sorry I can’t be more exact with the quote, but I heard it on the radio and I nearly laughed myself into a ditch).
“Communism is socialism plus electricity” VI Lenin. If only we already had socialism, aye?
It is your wished for nationalisation Draco. Government requires the other party to sell its product to the government alone at a price determined by the government. This removes the need for the government to actually own the grid. Someone else is obliged to give the government (and no-one else) exactly what it wants at the price it wants. This is not lilly-livered third way. This is total state control.
And still has the dead weight loss of profit in it, ergo, not full state control.
Meh. Most of those generation assets were built and run by the Government any way. What’s your problem.
Baby steps, comrade, baby steps.
Rule #1 – don’t spook the Middle Class punters.
Remnember, we took back NZ Rail and Air New Zealand…. we’ll take back the rest, as well. That day will come.
What we really, really need is a mechanism to ENTRENCH public ownership of our assets so that when the Middle Classes have a spasmodic rush of blood to their heads and vote National, that the Tories can’t then flog of these same assets all over again.
There has to be some way to lock in public ownership – or make it so complicated to undo, that a three year term would be insufficient to achieve a single privatisation.
If we can find that mechanism and implement it…
+ infinity
Except the sum total of Right Wing Governments sprinting to the right and sorta-Left Governments taking baby steps to the left is…a continual slide into the neoliberalism we have now.
heh – Phil O’Reilly of Business NZ squawking to the sound of a penny dropping 🙂
http://www.scoop.co.nz/stories/PO1304/S00223/economic-vandalism-bureaucrats-not-competitive-markets.htm
oh dear, how sad…nevermind.
Phil O’Reilly, looking out for SMEs who have been charged rentier power prices by the corporates….not
Someone remind O’Reilly that NZ’s power infrastructure was built, paid for and run by the public sector without the need for profit extracting private shareholders.
Somebody tell mr Reilly that profit isn’t god given right.
The louder they squawk, the more we know the policy is sound because it goes against their interests.
It would be worthwhile not even bothering to argue the case too much with corporate puppets like ZB. Use Norman as the main spokesperson, but get every front bencher briefed to the max so everyone stays on the same message.
Also best to do what Winston does here and speak to the punters around the country direct as much as possible. The elderly who will be affected the most can be connected through old school meetings.
The young through the Internet.
Bypass the corporate media wherever possible so that the message gets through their filter. It’s clear that they’ll throw every sort of propaganda and vitriole at this policy.
Stick to the principles and be strong.
🙂
This from Wiki on the stupidity of price controls.
Notably:
Also there is the often-cited example of Hurricane Hugo, where price controls proved to be disasterous in terms of hindering the recovery.
Has Shearer been reading up on Muldoon lately?
Blah blah blah. And then there’s the fact that in practice the price control model is working perfectly for the electricity sector in other countries – resulting in cheaper prices for consumers…
Yeah, sounds like a bad deal. I certainly wouldn’t want to own a power company, or even a share in one. How awful.
Notably, would that be the winner of the ‘non-existent’ nobel prize for economics that was more or less invented by a central bank to cater to charlatans? Yup. Think it is.
Did you notice the GFC? Yeah, Freidman basically said such a things couldn’t happen under his theory because the market would sort it all out before it got that bad. This delusion was propagated by other economists such as Ben Bernanke and Greenspan.
Freidman also went to a great deal of effort to say that economics couldn’t be falsified completely removing all credibility from himself and economics as a whole.
It’s not price controls that are the problem but the profiteering that the sociopaths think is their right.
Yep. The economic lie of market place general equilibrium.
I can never work out why opponents of state intervention to provide for a fair and prosperous society always confuse economic with social theory. In this case a social good (power generation) has been hijacked for the benefit of a few wealthy beneficiaries at the expense of everybody else. The issue is who has the influence and who benefits. Not how we can create a perfect economic model- which IMO will never exist.
The idiocy of orthodox economics is that they create all these nice mathematical economic models, and then expect real life to conform to their theoretical calculations. It’s backasswards.
A bit like socialism that created all these theoretical social constructs and then expected real people to conform……and ultimately led to brutal dictators to bring everybody into ‘line’ 🙂
Uh, except the political economy of centralised authoritarianism and military juntas has nothing to do with socialism or even communism. Remember, the Soviet Union was a properly communist state for…a couple of months at the start.
I disagree – communism always starts out with pure intentions but pretty much always morphs into “centralised authoritarianism or military junta’s” as these needed to control the populace to implement communism…its the flaw of communism, its unsustainable (along with being hideously inefficient in allocating resources)
Hence my point above re theoretical constructs and the real world!
I’m pretty unconvinced by this construction actually.
I’m no fan of any communist regime you care to point at, don’t get me wrong, but tying their faults down to ‘communism’ is a stretch.
More likely is that their faults stem from being revolutionary regimes who took power via the gun, and face guns in attempting to hold power.
You don’t see these things in western liberal leftist parties and organisations that are committed to democracy.
Obviously none of these western parties have managed to introduce communism, even when they desired to, but equally no western right wing parties have managed to re-introduce the sort of ‘free market’ capitalism that existed prior to marxist thought. In order to do so, they would need to resort to the same “centralised authoritarianism or military junta’s” that communists would need.
So I don’t think it’s *those* theories that are the determinants.
It’s a chicken or egg argument (what comes first the communist or the gun!)
Is the reason communism doesn’t work that it always implemented by guns or is the only way it can be implemented (and maintained) is via guns?
Either way my construct holds.., it doesn’t survive the real world (without guns!)
Agree with you capitalism analogy. it’s a good counter. though from my travels in Eastern Europe the best method to implement hard core free market capitalism is to get rid of ‘gun protected’ communism!
“It’s a chicken or egg argument (what comes first the communist or the gun!)”
Not really. Most “communist” regimes that people can point to came about via revolutions against despotic regimes.
The point is that it isn’t ‘communism’ that requires guns and oppression. It’s ‘non-pluralism’.
Just like this government is going for with it’s new GCSB rulings?
The flaw you describe has nothing to do with communism and everything to do with hierarchy which is why we see the same flaw in Western ‘democracies’. Capitalism is inherently hierarchical and authoritarian – they’ve just learned to hide it better.
How do you tell a communist regime? It has participatory democracy.
There has not been a communist society except possibly the 1871 Paris Commune which Marx liked better than Marxism (Marx, by his own words, wasn’t a Marxist) and that purported to be anarchist.
Lets agree to disagree – too late for me to be arguing the semantics of political definitions…thanks for the debate though was insightful and fun
I lived in a communist society. No heirarchy. No patriarchy. (And no-one considered themselves to be communist, anarchist or any such like.) It was small. But then what is society beyond everyday social contacts that weakens beyond the bounds of everyday conatct? Nothing. Society is precisely determined by social contact.
This small city I live in has thousands of societies perverted and twisted and squeezed by the homogenising efforts of the NZ state…its bureacracies and laws and norms….
The idiocy of orthodox economics is that it’s too stupid to use all these really useful and practical mathematical models that the nice engineers have made.
Raise your game, buddy.
http://www.epoc.org.nz/
If the devil existed, one of his human forms would be Friedman.
The devil is dead. Her name was Margaret.
dont forget Hugo Chavez in all this dead devil talk
lolz yeah, I guess the international banksters and corporate CEOs would see him as such
Chavez was pretty clear on who the devil was:
Brilliant brilliant brilliant and great credit to all who put it together.
What I like is that by introducing two simple mechanisms:
a) A single buyer in between the generators and retailers (and it’s much used overseas and not radical) and
b) An Average Present Price model to replace the dysfunctional Long Run Marginal Pricing mechanism –
it will skewer the gentailer oligopoly, generator gaming of the wholesale market, and the false price rises of the domestic market.
And so elegant – no awkward buying back of bloated MOMs and their wastefully duplicated offices, PR, advertising, and administration fluff, but yet no extra new hierarchy – NZ Power will merely replace the existing MCo or NZX or whatever it is called these days. Then I see the whole false synthetic fake competition model come tumbling down in due course because there will be no super profits to be made ripping off the consumer so no way to pay for the excesses of the present electricity market, so no reason for separate organisations to exist.
The fat arse shiny tail arrogant entitled directors and CEOs on million dollar salaries can go hang .
And last but not least let’s not forget that Doug Heffernan is being given a $500,000 bonus to float Mighty River on top of his million dollar plus salary yet he is resigning in August. (If is it next year it is still obscene.)
Hurray!
A true change to the electricity market to fix the current ludicrous ‘race to highest price’ system.
With Kiwibuild & other already released policies this is the final plank in place for a policy platform that people can really vote for rather than just ‘National lite’.
This is a brilliant policy!!!
Lets be clear, this is not only great for domestic consumers, I worked for a large electricity user in the early 2000″s, we purchased directly from the wholesale market. During the droughts in the early 2000″s our monthly electricity expense went up from $400k to $2m. It kind of fucks up your profit projections.
There is no logic in the way the electricity market works…its a massive balls up. Hodgson was in charge of energy at the time and like National, Labour at the time were more interested in collecting the massive dividends this fucked up market produced rather than providing businesses with fair electricity prices.
Great policy, the electricity market is flawed, this is a win for everyone except government coffers…in the end of the day electricity should not be used as a quasi tax, which is what it is being used for now.
Brilliant Greens and well done Labour, maybe you are finally getting your shit together.
One tip to Shearer, make sure that you understand every little financial detail of this policy, dont fuck it up like you did with the Housing Policy. As Leader you have to understand every detail…dont rely on your Finance Minister. The media are out to get another “show me the money” moment out of Labour…
Yes about the policy – not as left as I’d like, but better than anything the NAct government is doing.
Also, I still don’t have any trust in Shearer’s leadership, for diverse reasons. Grant Robertson led the charge on power in the House today and he did a pretty good job. Of course, being a Thursday, the leaders/PM usually are elsewhere.
I’m not totally a Robertson fan, but he seems a safer pair of hands to me.
I agree Karol, I’ve moved to the Greens….personally still a Cunliffe fan (have been watching his recent speeches in the Revenue area) but next choice is Turei/Norman.
I just hope that Shearer doesn’t stuff this up for the Greens.
Shearer did pretty good on Checkpoint.
Robertson did well in the House today as well.
Timing-wise this is good stuff from Labour/Greens. I live in the south and those winter power bills are just around the corner.
I don’t trust the Labour party as far as I could spit them…. vote Green.
Labour gone mad. Fatal mistake which will cost then another three years in opposition.
Lead by the foolish Greens the once proud Labour party is now a sad caricature of its former self.
Thanks for your “concern” Santi.
Maybe – depends how the media portray it, as the majority of the population wont understand the finer economic arguments
Will the MSM report it as :
1) economic sabotage / socialism by stealth / a hypocritical cynical attempt to torpedo the asset sales, a signal to international investors that NZ deserves a high risk premium, or
2) a genuine attempt to relieve the financial pressure on struggling NZ’ers
Sadly for labour, the person that needs to sell the policy as the later is a bumbling fool, so suspect it will be the former!
Agree…and National have become adept at the soundbite of bullshit that the modern media love. It doesnt seem to matter what crazy bullshit Joyce or Bridges are saying, the media will publish or broadcast it.
Clear panic from the Nat MPs on TV3 tonight. Policy compared to Albania, North Korea….
What about California? The Stalinist Sunshine state? Hilarious. Those with long memories will recall the Enron criminals, hardly a great example of deregulation.
Name it Powerac..brilliant parallel to Pharmac!
Surprisingly positive comments from Corrin Dan on TV One – also focused on the fact that the share pricces for MRP took a hit and spooked the market – but positive about the policy for people struggling to pay the bills.
Buuut… what on earth was David Parker doing standing there silently beside Shearer, staring at the camera?! Creepy!
Yes… he looked like he was trying to cuddle up to Shearer. Which is what we know he has been doing – albeit in a non physical way.
Who is Labour’s spokesperson for energy issues. He/she is the one who should have been there.
Oh I see… it’s Moana Mackey. She supported David Cunliffe at the time of the leadership contest. Was demoted to backbench along with Cunliffe and most of his other supporters.
I guess that explains why she was not there…
*Groan*
From what I heard Moana has been deeply involved in developing this policy
That makes it worse then. I agree with karol. It looked silly. Why was Parker even there? Norman didn’t have a side-kick. But of course Norman doesn’t need a minder?
“Clear panic from the Nat MPs on TV3 tonight. Policy compared to Albania, North Korea….”
Unfortunately Key has turned NZ politics into a second rate comedy now, so the public tend to listen only to the jokes and jokers, but a clear sign the water is rising and they don’t have a tree to climb.
Well.
While it was below what I wanted it was above what I expected.
The NZ Power concept is, with a few tweaking, a work of genius, and will take a lot of pressure off households, and it might just persuade me to vote for Labour in ’14.
The only losers are those who want to make money from poor people who struggle to pay their power bills, the sooner we ram this law through (at gun point), the better.
Or the Greens, who have the same policy but are pushing for progressive pricing based on amount of power used 😉
If the GP promise to let councils own buses again, then Ill vote for them.
Have not read anything regarding ets and the proposed tax that was to apply to power generation?
So this $300 pa savings is including or excluding any ets charges?
http://tvnz.co.nz/national-news/emissions-scheme-drives-up-energy-prices-3566996
http://www.odt.co.nz/news/dunedin/113165/ets-will-affect-every-part-economy-expert
I hope that this is not a case of an Indian Giver
I’ve linked to this very early Steven Keen paper several times before; but it’s entirely appropriate to point to it again:
The paper dips into a spot of differential equations at a few points but the text is perfectly plain and readable.
Please forward to Treasury
Ok NZ Power, good try but your still letting profits flood overseas. What your doing is a paliative cliche regardless (you might even be dropping the share price as a result of your announcement…..who does that work in favour for). Oil will run out…where do the wide boys go to next… renewables…….
Im for NZ owning its assests, if you start to look at the future, you relaise there is big money to be made or saved………….
1.
Quote from:
http://www.carbonbrief.org/blog/2013/03/energy-return-on-investment-which-fuels-win
The feature in Scientific American compiles a range of sources to look at which energy sources provide the most energy compared the the amount of energy it takes to extract them – called their energy return on investment (EROI). We take a look at the returns different fuels offer – and examine some other considerations to take into account when choosing how to meet energy demand.
This infographic puts hydroelectricity and wind, above coal solar, natural gas and nuclear
2. A conference in Wellington has been told how the deck is stacked against wind energy thanks to global subsidies for fossil fuels and nuclear energy.
http://www.radionz.co.nz/news/business/131042/deck-stacked-against-wind-energy,-conference-told
3. http://web.mit.edu/sloan-auto-lab/research/beforeh2/files/Cunningham_BS_thesis_2009.pdf The introduction and relatively quick adoption of hybrid technology in the United States and
the longer term growth of diesel technology in France provide baselines by which one can
anticipate the annual growth rates needed to place significant numbers of BEVs on US roads
and highways by 2020. In order to meet midlevel projections of 2020 BEV production rates,
consistent annualized growth rates in excess of 30%, and quite possibly in the range of 45-50%,
will be required over the next decade. These growth rates will be of the same magnitude as the
growth rate of hybrid vehicles in the United States between 2000 and 2009. These BEV growth
rates will be well in excess of the 9% to 11% annual growth rate of diesel vehicles in France
which was consistently maintained between 1970 and 2005. That transformation saw diesel
market share grow from less than 1% to 47% of light vehicle sales, but that required much less
technical innovation than a transition to BEVs will necessitate. Due to the non trivial change in
driving habits that BEVs will require from their owners, as well as the current lack of
infrastructure to support large scale fleets of BEVs, the BCG Scenario 2, BCG Scenario 3, and
Deutsche Bank production projections could be seen as highly optimistic. Even if CO2 emission
reduction becomes an increased priority at the federal, state and local levels and oil prices
return to $150 per barrel levels, the automotive industry will have to change its product
portfolio from gasoline and hybrid powertrains to BEVs at a very quick rate. Finally, industrywide
concerns over the production of automotive scale Li-ion battery packs, and the rate at
which their production can be increased, has the potential to slow growth rates in the near
term as well. While BEVs may indeed hold the key to long term CO2 emissions reductions, the
timescale on which their impact will be felt could be significantly longer than is currently
forecast.
I like the idea of a drop in power prices at the low end of consumption and if the Greens want to price progressively that will be even better. Power is a solid part of low income and beneficiary costs so this sort of social dividend is anti-regressive. Means low income people are more comfortable and the govt isn’t hiking benefits and old age pensions so that power profits can then go overseas. and if you want a heated swimming pool and 30 downlights well I guess you pay more for the privilege.
Anyone who thinks neoliberalism, if taken to its ultimate economic conclusion of a handful of people possessing all of the money in the economy, won’t result in military juntas and bloodshed is a sad dreamer.
There is another possible result. http://www.youtube.com/watch?v=5Madjqg7oGE
When National get back in they’ll just be selling shares in NZ Power.
If Muldoon were still alive he would be so proud of the Labour and Green parties for this kind of thinking.
Electricity Nationalization is ‘stalinist’ and only Venezuala did it, ORLY? xD
http://en.wikipedia.org/wiki/Tennessee_Valley_Authority
“TVA’s service area covers most of Tennessee, portions of Alabama, Mississippi, and Kentucky, and small slices of Georgia, North Carolina, and Virginia. It was the first large regional planning agency of the federal government and remains the largest. Under the leadership of David Lilienthal (“Mr. TVA”), TVA became a model for America’s governmental efforts to seek to assist in the modernization of agrarian societies in the developing world.[1]”
“Type Government-owned independent corporation
Industry Electric Utility
Founded May 18, 1933
Headquarters Knoxville, Tennessee, U.S.
Key people Bill Johnson, CEO
Revenue $11.26 billion USD (FY 2009 ending September 30, 2009)
Operating income $1.97 billion USD (FY 2009)
Net income $726 million USD (FY 2009)”