Supporting NZ Power

Written By: - Date published: 12:37 pm, May 6th, 2013 - 12 comments
Categories: business, economy, energy - Tags: , ,

The chief executive of the New Zealand Manufacturers and Exporters Association supports the Labour / Green electricity proposals. Well worth clicking through to read the whole thing…

A dissenting business view on the Greens/Labour NZ Power policy


Since the release of the NZ Power proposal there has not been a solid, logical debate about what NZ Power might mean, and the current problems inherent in the electricity market.

What we witnessed this month in New Zealand politics reminded me of a line from Bob Edlin inManagement magazine a few weeks ago, Bob said “If scorn is better than robust debate at shaping good policy, we are in good hands”.

That pretty well summed up the government’s response to the NZ Power proposal from Labour and the Greens. Business New Zealand and other organisations urged Labour and the Greens to revoke the policy in an open letter.

The letter reads to say that higher electricity prices would better serve New Zealand businesses incentives to innovate. Would this really be the case? These are echoes of the comments made by the same group before the unbundling the local loop.

Sadly, scorn, distortions and exaggerated characterisations heaped on ideas and individuals seem to be an ingrained response from many; dismissing any new ideas at odds with the status quo.

Not very different

Take a look at Wikipedia’s entry on the New Zealand electricity market and you don’t have to read very far to see there is already a single regulator that balances supply, demand and price. Not very different than NZ Power as we read the proposal.

The key difference is the pricing mechanism, not the entire system. …

Perverse incentives

LRMC introduces some perverse incentives, bid less volume and make more money by ensuring the highest cost generators remain in the market and over time tend to run the market towards a supply deficit. These are gaming opportunities (ship less make more) that tends to bias incentives away from new large-scale low-cost electricity generation. These are perverse outcomes that have the opportunity to damage the rest of the economy because electricity costs more than might otherwise be the case. …

Removes windfalls

… It is about balancing the trade-offs between a tendency to support the expensive generators and pass windfalls to the lower cost generators, or introducing a system bias to ship the lowest cost watts available to the benefit of the wider economy.

John Walley is chief executive of the New Zealand Manufacturers and Exporters Association.

12 comments on “Supporting NZ Power”

  1. johnm 1

    The support for NZ Power by the NZMEA clearly shows up in a harsh light NeoLiberalism’s destructive emphasis on 1. Finance fueled asset bubbles 2. The cannibalisation of Public Wealth to make rentier monopoly profits for the wealthy at the expense of a low energy cost controlled to assist manufacturing and the public. 3. The parasitic nature of neoliberalism—- invest in nothing not your own country or its people or its manufacturing but follow the market: go where the easy money is by controlling essential resources and charging and charging for them even as in the U$K sell off your public utilities to foreign corporates. (The Thatcher disaster). 4. People are slot units the useless unemployed and disabled harass them off the benefit for you do not I repeat not see them as persons to invest in. 5. Society does not exist so don’t invest in it sell off and charterise all public schools.

    John key represents this nihilistic neoliberal financialisation serfdom model, he made is dosh playing the game, the game which has destroyed the U$K and U$ economies, both now have steadily increasing poverty. All in the pursuit of money making market advantage rather than investing in your own people.

  2. aerobubble 2

    Companies incorporate and so join the forces of many workers in one unit. Now Labour and
    Green argue that consumers should likewise be able to collectivize their demand and so increase their buying power (sorry pun). The rich socialists want government to continue picking them as winners which hurts small businesses and start ups, along with home owners who have less to spend and keep away from retailers.

    • AmaKiwi 2.1

      aerobubble, you forget the neoliberal sales pitch is that the consumers are supposed to always be winners because of market competition.

      “Companies incorporate and so join the forces of many workers in one unit,” a unit whose only purpose is to make as much money as possible for the shareholders, and the workers be damned.

      The REASON they incorporate is because legally the management is NEVER allowed to consider the social evil they do to workers, customers, the environment. Legally, they must justify every decision in terms of making as much money as possible. If management makes a socially responsible decision which does not produce MAXIMUM profits, management is sued by the shareholders.

      It was not always so. In the beginning shareholders were each personally liable for what their company did.

      It can be that way again.

      • aerobubble 2.1.1

        Labour-Greens have saved a lot of money for tax payers by reducing, as English admitted today in the house, the numbers who will get the share bonus.

  3. vto 3

    Why would John Walley have a view that is so completely opposite from his colleagues such as Phil O’Reilly?

    Something’s smelly

    • Daveo 3.1

      John Walley has a background in business and represents actual NZ-based manufacturing exporters. Phil O’Reilly is a neoliberal stooge who shills for our financier and rentier class.

    • georgecom 3.2

      Walley et al are grounded in the real economy, where real goods and services are produced, real people live and work and profits are tagged to tangible items. Value is created in the trade of items and underpinned by the trade of items.

      Others in the business world are enraptured with the financilisation of the global/nz economy where virtual profits are made. Profits are created in the circuit of finance. profits are not underpinned by actual items.

      The latter, rather than being a tool to ensure the former can function, has become an entity of its own with its own interests, and manipulates the global economy to its advantage.

  4. Craig Glen Eden 4

    Phil O’Rielly’s smelly all right.


    2. State-owned Assets, Sales—Mighty River Power Share Offer and Electricity Market

    [Sitting date: 16 April 2013. Volume:689;Page:9343. Text is subject to correction.]

    2. TODD McCLAY (National—Rotorua) to the Minister of Finance: What progress is the Government making in its share offer programme to reduce debt and free up capital for priority spending?

    Hon BILL ENGLISH (Minister of Finance) : Yesterday the Mighty River Power share offer opened to New Zealand investors. This is the first offer in the Government’s $5 billion to $7 billion programme. The Mighty River Power offer period is for New Zealand retail investors only.

    This ensures New Zealanders will be at the front of the queue for shares and encourages widespread ownership so that 85 to 90 percent of Mighty River Power shares are owned by New Zealanders.

    New Zealanders have until 3 May to apply to buy shares. Shares are expected to be listed on the NZX on 10 May.

    Todd McClay: How many New Zealanders pre-registered for shares in Mighty River Power?

    Hon BILL ENGLISH: There were 440,000 New Zealanders who pre-registered for shares in Mighty River Power.

    Those who pre-registered may get an allocation preference of up to 25 percent if the offer is oversubscribed. We have yet to see just how many of those who have pre-registered will actually apply for shares. New Zealanders with applications for up to $2,000 worth of shares are guaranteed not to be scaled back, and New Zealanders who hold their shares continuously for 2 years will receive a loyalty bonus.

    Hon David Parker: Why did thousands of pre-registrants for the Mighty River Power share offer receive emails last night with their names and reference numbers blacked out? Is it because the Government’s track record on privacy is so bad that it has swung too far the other way?

    Hon BILL ENGLISH: I understand that the provider of the email service detected some kind of error in the system after the emails had gone out. That has been corrected.

    But I can assure the member that that will not dampen the enthusiasm of those 440,000 New Zealanders who have shown an interest in Mighty River Power shares.

    They are making serious decisions about their personal investments, and that does not suit the Labour Party, which wants them to—

    Mr SPEAKER: Order!

    Todd McClay: What are the benefits of the mixed ownership programme?

    Hon BILL ENGLISH: There is a range of benefits. In fact, the benefits are significant enough that the Opposition parties have not promised to buy these companies back. These companies will be subject to the disciplines of financial markets, where they are likely, on average, to perform better than under public ownership. Funds raised from this partial sale will be reinvested through the Future Investment Fund. These investments will be in infrastructure, hospitals, schools, and the rebuild of Christchurch as part of a $19 billion capital expenditure programme by the Government over the next 4 years.

    We expect that the sale of shares will raise $5 billion to $7 billion, or around 3 percent of the Government’s balance sheet value.

    The alternative is to borrow more on volatile world financial markets.

    Todd McClay: As part of the Government’s wider programme to improve the electricity sector, what progress has been made in making the market more competitive for hard-working New Zealanders?

    Hon BILL ENGLISH: When the National Government came to office in late 2008, we considered it was urgent to do something about the runaway electricity price increases under the previous Government, which had added up to a 72 percent increase, or around 8 percent compound increases, in the electricity prices under the Labour Government. So we commissioned a technical advisory group to review the market, and, as a result, the Government passed the Electricity Industry Act to re-allocate assets among the State-owned enterprises to increase competition in wholesale and retail markets, created the Electricity Authority and made it responsible for promoting competition—a change from the Electricity Commission—developed a liquid hedge market, and created the What’s My Number campaign to promote consumer switching. All of these actions have had some impact on the runaway 8 percent per year price increases under the previous Labour Government.


    Penny Bright

    ‘Anti-corruption/anti-privatisation’ campaigner

    2013 Auckland Mayoral candidate

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