Treasury’s spin fail on electricity numbers

Written By: - Date published: 10:41 am, October 16th, 2012 - 2 comments
Categories: energy, privatisation, spin - Tags:

Treasury is trying to tell us that private power companies don’t charge more than SOEs to justify privatisation. Of course, a moment’s thought tells you that private owners, with higher costs of capital, need larger profits than public ones. And private owners always complain the SOEs don’t charge enough. Moreover, Treasury’s spin is a complete fail.

Here’s their logic in short: the data does show that the national weighted average price of electricity from SOEs is 12% cheaper than from private companies but –

you shouldn’t use a national weighted average because no-one pays that (huh? doesn’t that apply to any national average? How else can you work out a typical situation other than an average or median)

Trustpower pays its profits back to people living in Tauranga, so if they are Trustpower customers, their electricity price is really lower (huh? but not all Trustpower customers get TECT money and not everyone who gets TECT money is a Trustpower customer, anyway, if I own shares in Apple it doesn’t mean Apple computers are cheaper for me)

Contact gives an online payment discount that the data doesn’t account for (umm, so do the other power companies…. and not everyone gets the discount)

So, with that perverted logic, Treasury takes the data and assumes that every Contact customer and only Contact customers get a 22% discount.

And here’s the rub…. even with Treasury’s silly spin private power companies are still more expensive on average.

Having just said that you shouldn’t do weighted national averages, Treasury does one with the Contact price 22% lower. When you take that company-level data and do the maths it still shows that private power companies are 2% more expensive than SOEs.

Back in reality, of course, that’s a 12% difference. But whether you take the real numbers or Treasury’s skewed attempt to justify asset sales the fact remains: private companies charge more than SOEs for electricity.

And that means that, if National’s asset sales go ahead, we can all look forward to higher power prices.

2 comments on “Treasury’s spin fail on electricity numbers ”

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  1. Tom Gould 1
    16 October 2012 at 4:17 pm

    If Treasury want to engage the political debate, then Makhouf should stand for the Tories and get amongst it. Otherwise, he and his flunkies should stop running Tory spin tarted up as independent objective commentary. Sadly, they have allowed themselves to become so politicised under these Tories they have effectively offered their own resignations come a change of government. Silly people.

  2. KJT 2
    16 October 2012 at 4:58 pm

    What should also be mentioned is that SOE’s are already hobbled by having expensive boards, management and the requirement to “compete like a business”” i.e. add advertising and duplication costs.

    Not to mention the Government demands the same dividends as private owners, so the privatised power companies can compete.

    This means that far from private companies being more efficient and cheaper, public companies have to be deliberately handicapped, so that the private companies can make sufficient profit from us.

    The directors/management of SOE’s are also working against their employers best interests.
    They know they will make more money in pay and share options if SOE’s are privatised.