Dr Brent Layton of the Electricity Authority has produced a 28-page paper to refute the claims of Molly Melhuish, Dr Geoff Bertram and Bryan Leyland that “the Authority’s approach is a light-touch approach to regulating the electricity markets.”
He says Geoff Bertram’s chart, showing that other countries’ residential prices have stayed steady or fallen while New Zealand’s have doubled, is “misleading”. Then he produces his own chart, which shows that other countries’ residential prices have stayed steady or fallen, while New Zealand’s have doubled. Both rate of increase and size of increase are higher in New Zealand than anywhere else.
He claims that to claw back the excess-profit-based revaluations of the past decade would “breach the regulatory compact” established when ECNZ was broken up. But he has no record to show what that regulatory compact was. If you go back you’ll find that (a) Max Bradford expected prices to fall following his reforms; and (b) Labour’s Energy Policy 2000 explicitly targeted supply of electricity “at least possible cost”. The regulatory compact has been breached by the gentailers – all Labour proposes to do is roll back that breach. David Parker has this comment:
Dr Layton crafts arguments about some implicit but undefined regulatory bargain when ECNZ was split up. This is grasping at straws. You would think what is proposed (by Labour) will not pay production costs plus a fair return on capital, when it actually does. You would think new generation choices were being regulated rather than efficiently exposed by competitive tender. You would think that retail competition is being curtailed, when it is being encouraged.
Layton says that forcing prices and asset values down will have a “chilling” effect on weak, fearful investors. He neglects to take account of the chilling effect for a Porirua family of having their power disconnected in the middle of winter because they can’t pay the bill. The ‘”chilling” metaphor is particularly inapt when used to defend wealth transfers from the poor to the rich.