Charles Chauvel on power profits

October 5th, 2009 at 1:00 pm by David Farrar

The Press reported:

Labour yesterday called on the Government to stop taking big profits from the electricity state-owned enterprises (SOEs).

“The Government could do this today, with the instant result of lower electricity prices for hard-working Kiwi families and better security of supply from renewable energy,” Labour energy spokesman said.

The Government should tell electricity SOEs to cut dividend payments and invest the money in renewable generation that could flatten power price rises, he said.

I have previously blogged on the of Labour preaching lower profits, after it banked $3.1 billion in dividends from energy companies during their term of Government.

A Ministry of Economic Development energy outlook released this week says wholesale power prices are likely to rise by 40 per cent over the next 20 years.

That is much less than the near-50 per cent rise in some residential tariffs over the past five years.

40% over 20 years sounds a lot better than 50% over five years!

But is this standard hypocrisy, or even worse hypocrisy than normal? Because before Charles become an MP, he was a Director of .

In fact Charles was Deputy Chairman of Meridian Energy in 2005. And what was the company’s net profit after tax in 2005/06? It was $857 million.

Yes in 2005/06 Meridian had an EBIT of $1.03b on gross revenue of $2.22b. Now some of this was from a one off sale, but that money could have been used to lower power prices, as Charles now claims should be done.

Now maybe in 2005/06 the Government was short of money, and didn’t think it could manage with a lower dividend and profit. So what as the deficit in 2005/06? Oh no – it wasn’t a deficit. It was a whopping $11.5b surplus.

So where was Charles in 2005 demanding Meridian pay a smaller dividend, when the Government had an $11.5 billion surplus? Oh he was writing the cheques out.

And now in 2009, when the Government is running a deficit of $7.2b (over 11 months), Charles and Labour cry out to make Meridian less profitable as he says a dividend of $294 millions is far too high.

I am going to enjoy repeating posts like this, everytime Labour call for reduced profits from Energy SOEs.

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35 Responses to “Charles Chauvel on power profits”

  1. Kingi (142 comments) says:

    Labour has acknowledged that they didn’t handle the Energy dividend issue as well as they could have. Indeed it was a key feature of Phil Goff’s conference speech. I think its fantastic that Charles Chauvel and Labour have taken this position. It’s funny how when you change a position, on valid grounds, you laugh and call it “hypocrisy”. I suppose its the same as John Key’s flip flops on the Iraq War, Communism by Stealth..I mean….Working for Families and a multitude of other key Labour policies Mr. Key flopped around on.

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  2. Kimble (4,440 comments) says:

    Mmm, what caused them to change their tune, Kingi?

    What new information has come to light that made them realise they were wrong?

    Nothing. There is no new information, and they arent taking a new considered position. If they had won the last election they would be claiming this dividend and saying that taking the dividends previously put them in a better position today fiscally speaking.

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  3. KiwiGreg (3,255 comments) says:

    THe sooner the government doesn’t own these businesses the better off we will all be

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  4. Kingi (142 comments) says:

    Well Kimble, the impacts of the GFC, increased food and household item prices and higher unemployment are just a few of the new considerations that must be taken into account when considering why it is we shouldn’t be allowing State owned power companies to gouge consumers through high power prices.

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  5. trout (939 comments) says:

    Contrary to popular belief ‘hypocrisy’ is not about flip flops. The Oxford definition is ‘simulation of virtue or goodness; dissimulation, pretence’. Charles Chauvel to a ‘t’ I would have thought.

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  6. Kingi (142 comments) says:

    HA! Trout seems like such an appropriate name after that comment. Thank you for calling a spade well…a spade I suppose. Hypocrisy is exactly about flip flops, its about saying one thing to one room, while your actions convey the opposite. I merely pointed out that its a bit rich for DPF to be laughing about hypocrisy, when his own party’s record isn’t exactly spotless.

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  7. david (2,557 comments) says:

    stop picking on Chas you guys, you are only doing it because he is gay aren’t you. bloody homophobes!

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  8. Kimble (4,440 comments) says:

    So Kingi, you prefer the government cut the dividend when they would have to borrow to do so, rather than when they are running a huge surplus?

    If all that has changed is the economic circumstance, then that is EXACTLY what you are saying.

    Weren’t you lot wanking on about borrowing for tax cuts just a little while ago?

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  9. getstaffed (9,186 comments) says:

    … when his own party’s record isn’t exactly spotless.

    Kingi, if a critic should be silenced by having lower standards than their subject, I think that opens your beloved Labour party to criticism from pretty much every quarter. However if you demand a perfect record in order to have criticise offered, then let’s talk about Labour’s perfect record.

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  10. kaya (1,360 comments) says:

    Hypocrisy at it’s finest. The difference between the two parties is that Labour were gouging whilst raking in record tax takes. Greedy monkeys couldn’t resist. Then that nice Dr Cullen deliberately spent the lot just to get one over National, nice.

    Kingi – “we shouldn’t be allowing State owned power companies to gouge consumers through high power prices.”

    If we aren’t gouged there we will be gouged somewhere else. The maths are real simple, we have to earn more than we spend. If we don’t we have to borrow and pass it on to our kids and grandkids and great grandkids (ad infinitum or until the lenders say enough.) We are currently borrowing $400 million per week.

    National inherited an economy that was a basket case. The recession would still have come but Labour made it worse. National will take whatever they can get in the way of income, especially when it is indirect and they can appear to wipe their hands off it to the masses.

    Overspending in the public service needs slashed.

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  11. Spam (588 comments) says:

    Question: Would state-owned electricity companies run afoul of the commerce commission if they effectively became “not for profit”, or even ran at a loss? Surely this would be uncompetitive compared to the private generators.

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  12. Adolf Fiinkensein (2,903 comments) says:

    How much was Mr Chauvelle paid and for how many years while he was on the board? What particular expertise or skill did he bring to the board? How much of his director’s fees did he pass through to the sluglike Mike Williams?

    [DPF: Charles was a partner in one of NZ's leading law firms. While his political connections would have helped I do not regard Charles as unqualified for such a Directorship]

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  13. Johnboy (16,651 comments) says:

    Don’t forget though that Liarbore tax grabs were OK because they were reinvested in buying more Liarbore supporters whereas National taxgrabs are immediately recycled to the filthy capitalist lackeys so they could shaft the workers yet again.

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  14. Johnboy (16,651 comments) says:

    “How much was Mr Chauvelle paid and for how many years while he was on the board? What particular expertise or skill did he bring to the board?”

    Come,come Adolf every sensible person realises that there is a “Gay component” involved in electrical generation. Shovel was merely on the board to see that this aspect was duly considered.

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  15. barry (1,317 comments) says:

    Another bloody poofter trying to sound sensible. Although not as blatant as the supreme poofter – Chris(tine) Carter – this just makes Charlene (As Tamahere calls him) look stupid.

    [DPF: Why oh why are people so insecure they feel the need to bring an MPs sexual orientation up on every occasion, when it is not relevant to the topic at hand. Charles is gay - get over it. Criticise him for his politics, but not for things he has no control over. And 20 demerits]

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  16. david (2,557 comments) says:

    You do raise a very good point though Adolf. In the “real world” if you are appointed to the board of directors of an associated or subsidiary company, and in many cases even to the board of a professional body covering the employer’s industry, director’s fees are paid back to the employer unless openly exempted.

    So an MP in a governing party gets appointed to a board should have his fees passed straight to Parliamentary Services (as the MP’s employer) not the party or the MP IMVHO. Opinions/ explanations of common practice would be appreciated.

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  17. ben (2,380 comments) says:

    Great post. This is why blogs are a game changer. They raise the cost of bad or inconsistent behaviour.

    Go the wisdom of crowds!

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  18. frankflintstone (68 comments) says:

    There is nothing gay about electricity. Positives are only attracted to negatives – not other positives. Although I’m not opposed to 2 negatives getting together.

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  19. davidp (3,581 comments) says:

    Was any of Chauvel’s Meridian compensation tied to its financial performance? If he received any performance bonus for the Labour-era overcharging, then now would be a good time to return it to electricity consumers.

    In the mean time, are there any other Labour Party hacks still on electricity company boards? It seems that Meridian overcharged consumers partly because it was being run by the Labour Government in order to meet political objectives rather than provide a reasonably priced service to consumers. The only way we can ensure that doesn’t happen again is to sack the people involved. And then make sure Labour are never again in a position to boost the size of a surplus via overcharging for electricity.

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  20. Johnboy (16,651 comments) says:

    “There is nothing gay about electricity. “—-There might be if your electro-sex device gets a short in its isolating transformer.

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  21. lofty (1,316 comments) says:

    Johnboy it is not so much a short in the transformer that will turn a device anal, but a miscalibration in the homonomagrater.

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  22. burt (8,275 comments) says:

    ben

    Great post. This is why blogs are a game changer. They raise the cost of bad or inconsistent behaviour.

    Absolutely, in the past some twit like Charles Chauvel would have made the statements he has made and by the time someone said… hang on a minute… the news would have moved on and the re-write of public perception would be complete.

    Blogs, and the ability to link to previous statements and positions taken by MPs, are making holding people accountable to their expedient positions something that anyone can do rather than relying on the compliant MSM to do their job.

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  23. Repton (769 comments) says:

    DPF, forget about the hypocricy for the moment; do you agree with him? Why or why not?

    [DPF: I believe SOEs should pay dividends and make profits. These at a minimum should cover the cost of capital. I would be uneasy if their profit ratio was consistently higher than private sector companies in the same sector]

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  24. burt (8,275 comments) says:

    Repton

    Perhaps when dim-bulb said;

    The Government could do this today, with the instant result of lower electricity prices for hard-working Kiwi families and better security of supply from renewable energy,” Labour energy spokesman Charles Chauvel said.

    He could have said;

    The Government could do this today have done this 9 years ago… then he might have been worth listening to. Chauvel is just point scoring on this issue. If he had the slightest care for the consumers he would have made a statement like he has just done years ago… when his precious socialist party were robbing the public for the sake of profit.

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  25. jabba (280 comments) says:

    poor chuck .. what a tosser (no pun intended).
    I can’t believe how generous Labour are .. they want pay rises for fire fighters, teachers, Drs/Nurses, Parliament Staff .. oh bugger it EVERYBODY should get a pay rise and increase the min wage, bring back belly dancing classes on the tax payer, increase benefits, complete the expensive Waterview Tunnel, new trains and rolling stock in general plus new electric passenger trains in Ak plus upgrades for Wgtns units, stop profits from SOE’s going into the Govt coffers blah blah blah.
    Where is the money coming from ChucK?

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  26. Johnboy (16,651 comments) says:

    “Where is the money coming from ChucK?”

    Where it always come from. The rich-pricks.

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  27. kiwirights (48 comments) says:

    This is the winter when people are getting charged $500 for electricity when previously it would have been $200. Also, aren’t Meridian the people who have built lots of windfarms on the backs of good NPAT/EBIT results from past years?

    That crap above about directors fees shows serious business illiteracy amongst some of the glittering hordes commenting on this site.

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  28. burt (8,275 comments) says:

    kiwirights

    How long ago did you have a winter power bill in the $200 range ?

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  29. Grizz (244 comments) says:

    Labour MP like Charles Chauvel are just talk. Hot air. Full of shit to be blunt. All they can do is try to score political points by saying what they think people want to hear. They offer no solutions to the real problems like power prices being high because of a lack of investment in electricity infrastructure. I remember when Meridian sold their Assets. I thought great, now we can invest in Energy generation and distribution here. Perhaps the Cook Strait cable could be upgraded etc.

    But no, Labour stole the money and squadered it. They spent it on rorts like working for families and first class trips to Thailand for spouses. Gone was the opportunity for more electricity for industry and new jobs and we fell into recession faster than anyone else. So why should I or anyone else listen to the shit that comes out of the mouth of people like Charles Chauvel?

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  30. whalehunter (479 comments) says:

    it seems sensible that the profits from soe help lower the needs on rasing personal tax.

    we all know having soe aint really the job of government.

    but surely the arguments to keep them, are; if they are saleable/economic then why not keep them. i know in terms of capital that might not be quite true, but the/next government will blow the money from a sale… well, easily.

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  31. reid (16,511 comments) says:

    “All they can do is try to score political points by saying what they think people want to hear.”

    Good point grizz, who’da thunk.

    The Nats to counter this need a public Ansell-like explanation-response, everytime.

    Hulun used utterly shameless propaganda techniques and much of it was behind the scenes. Remember in her first term she held the Ministers in so tight they never moved and she had almost all the journos in her pocket so deeply they never squealed not once during her first term.

    Look what’s happening now by comparison to that. Look at the headlines. The Nats are already playing catchup on multiple fronts. This didn’t happen to Hulun before halfway through her second term.

    DPF’s message is a good one, but it’s read by how many swinging voters? I’d respectfully suggest a two digit number tonight.

    OTOH, today’s news headline on this issue, captivated how many swinging voters?

    Control of the Commanding Heights is why Hulun, despite being a really awful PM in reality but NOT in perception, survived for 9 long years. If the Nats, bless them, don’t learn from history, they are doomed to repeat it. That would be most regrettable.

    Astute message management ala Hulun is the key. Yes, it’s cynical. However, if you truly believe it’s better on balance considering the execrable alternatives to have a National govt in power, why wouldn’t you pull out all the stops?

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  32. Abbie (1 comment) says:

    What a crock.

    1. Opposition MPs are supposed to moan, that’s why they are there. The loyal opposition.
    2. What takes more courage: admitting you are wrong, as Charles said that Labour had last week (on backbenchers I think), or changing your position while in Government? While those National Government supporters can sit here and pillory Chauvel for his statement, it’s not like the Government is changing course either. I would consider that to be even more cowardly: if you have the power, and you know that it is a good idea, but wont do it for whatever reason then it’s either because your supporters aren’t affected by it (do you think Don Brash struggles to pay the power bill?), or they are just plain arrogant.
    3. I’m more P.O with the homophobic comments that run in the gutter in this post. I’m no wowser but if you make those types of comments, in a forum where you are not identified, and with no real context, then you aren’t funny, or cool. You are just simply disgusting. I expected better moderating from you David.
    4. Dunno if Chauvel took any profit based bonuses. Of course, how many National MPs have eihter before or after their lives as MPs have been in a similar situation and refused them (while working for an SOE…ask Jim Bolger)
    5. Pretty sure Chauvel quit the board when he became an MP, unlike other Labour MPs, he’s not a money grubbing twit. Actually, you could add ACT, the Greens and National to that list (pity NZF are no longer in, they would have immediately qualified as well)
    6. David, I don’t expect you to not take up the Government’s talking points, I only expect you to look like you thought of this yourself. Even Gerry couldn’t get traction on this last week.

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  33. david (2,557 comments) says:

    kiwirights (28) Vote: 0 2 Says:

    October 5th, 2009 at 7:30 pm
    ” That crap above about directors fees shows serious business illiteracy amongst some of the glittering hordes commenting on this site.”
    Was the crap you are referring to my request for info on common practice among pollies on BODs?, or my comments about returning Directors Fees to one’s employer being usual in the private sector? or just what?

    I can speak with some authority on common practice in the private sector kiwirights, perhaps it conflicts with your warped opinion of the motivations and propriety of management.

    I am still interested in what is the practice regarding Directors remuneration for Board members drawn from a ruling political party. There must be heaps of them from ACC to Air New Zealand and beyond so I would have though there would be a code of practice to avoid rorting by Mike Williams et al. So please give us more than a throwaway.

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  34. s.russell (1,642 comments) says:

    Though I disagree with Mr Chauvel’s views, the charge of hypocrisy on his part is surely unfair.

    When he was a director of Meridian it was his job to maximise Meridian’s financial performance and profit. Advocacy of cheaper electricity would have been incompatible with that. NOW, he is no longer a director but an MP. His duties are different and he is free to advocate whatever idiocy he likes.

    (Note that I am not denying Labour’s hypocrisy in calling for a dividend cut).

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  35. david (2,557 comments) says:

    But …. but …. he was an MP then too (wasn’t he?) If he was, then he was representing a particular shareholder. You make it sound as if a Director is not permitted to bring his morals or those of his employer (shareholding group) to the Boardroom.

    Mind you in Chucky’s case it is probable that he did bring the morals of his party to the table. Take that how you might.!!

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