Power Prices
Labour’s at it again, with Grant Robertson blogging:
Today I spent some time with the residents of one of the Council housing blocks in Wellington. I really enjoy my catch ups with these groups as they give me a regular update on what matters to people who come and go on very modest incomes. And there was one resounding message. Coming out of winter the biggest issue is power prices. These folk are watching every dollar, and they see the moves up and down. This has been a hard year and looking back over the last few years the increases have been large. They are not necessarily up to date with moving between companies, and the companies are generally not chasing them. They do wonder why the government is taking such a big profit from the power companies it controls on the public’s behalf.
I’ve dealt before with the hypocrisy of taking $3.1 billion of dividends in a time of massive surpluses, and then complaining about more modest dividends in a time of huge deficits.
But today I want to look at power prices itself. Luckily the CPI has a section on domestic power prices, so one can calculate average increases each year. And here is what it has been:
- 2002 7.2%
- 2003 9.1%
- 2004 8.8%
- 2005. 4.4%
- 2006 7.8%
- 2007 6.2%
- 2008 7.9%
- 2009 2.3% (for three quarters)
So since the election power prices have gone up 2.3% on average and according to Grant this is the biggest issue.
As even Grant acknowledges there have been large increases for many years. Including when Grant was effectively the Deputy Chief of Staff in the PMs Office. Did Grant use that position then to advocate for lower power prices? Did anyone say “Hey Michael, our surplus is almost $10 billion, so why don’t we ask the power companies we own to reduce their profits?”
So let me see if I have Labour’s position summed up well:
- It was okay to take $3.1 billion in dividends from state owned power generators, during a time of huge Crown surpluses, but we are now very sorry about it.
- Now when the Crown is borrowing $250 million a week is the right time to reduce the dividends, so even more money than $250 million a week needs to be borrowed
- A 2.3% increase in power prices since the election is the biggest issue facing most households
- Hope people forget that power prices in the last seven years of Labour went up 64%, an average of around 9.1% a year.
I really hope Labour keep campaigning on power prices. I’m never going to get sick of reminding people of this.
October 20th, 2009 at 1:03 pm
David
Yeah but who changed the energy market?
National.
So who set us up for company directors and owners to run the system the best way for them to profit?
Is that why they haven’t built capacity?
Who benefits by higher prices?
You do a good job of tabulating it all but really who set it up to be like this?
National
October 20th, 2009 at 1:06 pm
Seems like a flawed model to me. Hey, lets get companies to sell us the power we paid to install, not to mention the distinct lack of incentive for these providers to encourage power savings.
October 20th, 2009 at 1:08 pm
MikeNZ probably blames Toyota everytime a Toyota has an accident. What …. blame the driver for crashing the car… Not when labour are driving….
DPF
It would be very interesting to see the % increase for 2000 as well. On the face of it the increases seem to be largest in the years following an election. You know claw a bit back to pay for WFF, Interest free loans, more WFF etc.
Interesting after an election won by National the increases rate declined…. Oh well – Blame National for putting the model in place that allowed Labour to rort the consumers to fund their ideology of giving out free money to buy votes.
October 20th, 2009 at 1:11 pm
As ever, the important issue is the hypocrisy of Labour, not the power prices that the very poor in those revolting council flats are worried about.
October 20th, 2009 at 1:12 pm
But what do you think about his point? Should power companies pay the government lower dividends in order to keep prices lower?
October 20th, 2009 at 1:16 pm
No dividends.
but invest to improve system and build future capacity.
We have too many companies for far too small a market.
Those who made the best profits probably did so in the beginning.
All at our expense as WE owned it all before National sold it.
Not everything should be in private hands.
October 20th, 2009 at 1:17 pm
It was okay to take $3.1 billion in dividends from state owned power generators, during a time of huge Crown surpluses, but we are now very sorry about it.
..reason number 125 liarbour lost the election…greed…and another reason liarbour and goof are down in the polls…people have bloody good memories…
October 20th, 2009 at 1:17 pm
RRM
So defending Labour means turning your back on the people who can’t afford to turn a heater on when Labour are in govt then suddenly standing up for them when National are in govt ? Sounds to me like Labour should stay in opposition for the benefit of the people Labour only care about when in opposition.
October 20th, 2009 at 1:28 pm
Burt – true!
Starboard – Greed? Do you think Clark & Cullen personally pocketed the $3.1B?
Repton – yes. Taxation should be simplified to the maximum. My point was that it is a pity interesting/constructive stuff like what people think about the power prices/dividends was buried under howls of “oh the hypocrisy of the left” as usual. Even in a thread in which DPF explicitly feigns that this is not the subject. DPF could be a much bigger force for new ideas and the general good of the country if he wasn’t so focussed on just slagging off Labour and the Greens wherever possible
October 20th, 2009 at 1:37 pm
Completely agreed. DPF’s hypocrisy point is a fair one, but his party is in government now. That means they get to do things, rather than just shout in the media — and so I’d like to know what he thinks they should do (and why).
October 20th, 2009 at 1:43 pm
Sorry I thought David was putting up a subject for us to comment or suggest answers.
Whether he’s part of National’s marketing team or Curia’s doesn’t matter surely?
October 20th, 2009 at 1:45 pm
While people are on the Hypocrisy-watch with Labour, look out for Annette King and colleagues campaigning on behalf of beneficiaries to say that the in work tax credit component of Working for Families shouldn’t be denied to those families out of work. For years and years, Labour argued against doing anything for beneficiary families, and even fought a caught case against the Child Poverty Action Group to justify leaving the poorest group out of the WfF programme. Hypocritically, now that Labour is no longer in a position to implement such a change, they seem to be in middle of a major U-turn on this and about to beat National over the head with it.
Bryce
October 20th, 2009 at 1:47 pm
Repton – I agree with you to a point. But in case you noticed, the increase in power prices this year, pro-rata’d out to a full year (2.3% x 1.33 = 3.059% ) makes it the smallest increase in power prices over the period reported (2002 to 2009). I’m no mathematician, but it would seem to me to be something of an accomplishment, and not really an issue that the government can be lambasted for by the opposition, who presided over annual rises of up to 200% higher.
Methinks Mr Robertson and his collegues doth protest too much!
October 20th, 2009 at 1:47 pm
attention RRM.
No I do not believe that Clark and Cullen pocketed 3.1 billion. But I do know Cullen bought a train set.
October 20th, 2009 at 1:49 pm
I think it’s a good illustration of the current irrelevancy of Labour. Many posts like this over at Red Alert, especially from the new and the keen, but their (lack of) effectiveness is aptly highlighted in Labour’s poll ratings.
PS My God, it’s bliss when baby’s asleep!!
October 20th, 2009 at 2:03 pm
yeah but such a joy when they fall asleep on you and you don’t want to move!
have you ignored the phone yet when that happens?
October 20th, 2009 at 2:09 pm
MikeNZ 1:16 pm,
I’m with you on this too, Mike.
I see it as entirely counterproductive and inappropriate to apply the ‘Free Market’ approach to essential infrastructural assets – such as energy, rail, telecommunications, etc.
These things were set up to ‘serve the people’ and this should (should have) remain[ed] the philosophy behind running them. Once they become nothing more than a business with the sole aim of maximising profits back to the ‘shareholders’ then the general populace become little more than a means by which to generate profit.
Government should minimise their demand for such high returns, as these become no more than further means of essentially taxing the man in the street. Government needs to realise they exist to serve the people. Contemporary governments, though, tend to think it is rather the people that exist to serve government.
When did we allow this role reversal to happen?
October 20th, 2009 at 2:15 pm
About once every three years.
October 20th, 2009 at 2:15 pm
When we elected people/parties on their Ability not their Character.
(puff not Skeleton).
It’s the same problem with women & marriage/Live in, they marry based on their perception of the man’s ability not his Character.
October 20th, 2009 at 2:17 pm
KrisK
I’d love to vote based on policies as I could take the best from National, ACT, Labour, Greens
October 20th, 2009 at 2:29 pm
Surely there is some correlation between the economic recession and the lower increase in power prices?
I wouldn’t be too quick to attribute the lower increase to the change in government DPF, which seems to be where your headed with the last few sentences of this post.
October 20th, 2009 at 2:29 pm
Effectively the dividends from power companies owned by the government are a form of tax. A tax paid by all NZers, but disproportionately paid by those with large houses / energy expensive lifestyles, so in effect a progressive tax (in the vernacular – I personally don’t like that phrase).
So, Labour are saying one of two things:
1. We’d like to reduce a very progressive tax, giving money back to the wealthy, and we’d like to borrow money to achieve that; or
2. We’d like to reduce a very progressive tax, giving money back to the wealthy, and we’d like to raise some other tax to achieve that.
Fundamentally this policy would be a very poorly targeted tax cut.
Remember also that we’re planning to reduce our carbon emissions through an ETS. The result of that will be an increase in energy prices – otherwise the thing won’t work.
So we’d like to reduce a very progressive tax on the wealthy that goes into the government coffers, knowing that in a couple of years we’re going to try to increase the price of electricity, but that price increase should instead go to multinational traders speculating on the carbon futures market.
Right, and that is core Labour policy is it? And you wonder why people think Labour have lost their way.
For me, I’d say:
1. If we have people in need, deal with it directly through the tax and transfer system
2. If we wanted to help people in need, a time of surplus is when you do that, not a time of deficit
3. Is there any evidence at all that this is a significant problem for those in need, v’s say transport costs, or food costs, or any of a host of other costs. Maybe rates are significant as well?
October 20th, 2009 at 2:43 pm
Agree with me about what? I didn’t offer an opinion on the issue (but if you want to know, I think I’m inclined to agree with MikeNZ that electricity generation, at least, should be in public hands).
I’m just annoyed because there’s a discussion we could be having here, and DPF could use his contacts to tell us what the government thinks, but instead we’re being encouraged to point and laugh at Labour. All that tells us is that Labour in government are different from Labour in opposition — but I think we knew that already (and the same is true of National). Labour won’t be in government for another two years at least (and that looks pretty unlikely), so who cares?
October 20th, 2009 at 2:47 pm
MikeNZ 2:17 pm,
And I’d love government to keep to their pre-election promises and stay true to the platform upon which they were voted in.
National’s pre-election stance on the Bradford Bill anyone? 86% anyone?
Bastards!
And Pete George 2:15 pm,
The trouble is ‘nothin’ changes every three years – just more broken promises.
I mean if ‘government’ was your ‘wife’ you’d divorce her after about two months of the ‘marriage’.
October 20th, 2009 at 3:01 pm
Most of the comments here, Bryce,starboard,burt and paulL excepted, are just obfuscating. When socialists are in power they need every dollar they can get their grubby hands on to BUILD a better NZ. When they are out on their arse the bloody Tories can just tax the wealth providers to the point where they either bugger off or retire early (but we didn’t think they would do that the bloody traitors) and then call minimal returns on capital a raid on r piggy banks such as SOEs to be unfair on the poor. Thats just how the simple thieving mind of a Liarbor supporter works, when we do it fine when they do it not fine and so many stupid peasants believe it.
October 20th, 2009 at 3:16 pm
Repton – I agreed (to a point) about your observations regarding DPF
October 20th, 2009 at 3:24 pm
Yeah but who changed the energy market?
National.
So did Labour – http://www.kiwiblog.co.nz/wp-content/uploads/2009/08/powerprices.JPG
October 20th, 2009 at 7:22 pm
Starboard – Greed? Do you think Clark & Cullen personally pocketed the $3.1B?
..sorry? where/when the fuck did I say that rpm? Please elaborate.
October 20th, 2009 at 8:23 pm
stephen, cheers for the graph.
Look at that, the prices come down in the first term of a govt, then they go steadily up from there once the Govt are into bonus time. As for 2011, by then Labour supporters will have forgotten how Labour fleeced them and they will still be blaming the failed policies of the 90′s for high prices during their last dear leaders golden decade.
Hey I’ve got a good idea, stop building fossil fuel power generation plants so that we can be ‘green’. Meanwhile we can still extract as much fossil fuel as ever and sell it to countries with no emission standards and certainly no trading taxes.
Great way to pretend we are looking after the planet while making a profit from increased unit prices. While unleashing more damage than if we had burnt the fuels at home with less transport miles and tighter air pollution standards.
October 20th, 2009 at 9:51 pm
Can’t say I know what Labour’s reforms actually DID, all I know is that they did’em.
Repton did attempt to offer an explanation in the relevant KB thread:
How about this as an explanation: after the reforms, power companies decided to defer infrastructure investment in favour of making short-term profits.
The consequences of this aren’t felt for a number of years, until the demand growth has “used up” the supply headroom.
With something like electricity, long-term planning _isn’t_ necessarily good for business. Short-term, if you save money you can lower your prices and attract more customers. So, your competors feel forced to copy. Long term, a shortage of supply means you can raise your prices — and people _need_ electricity, so they’ll find a way to pay, somehow. It’s a win-win for the powercos..
http://www.kiwiblog.co.nz/2009/08/power_prices-2.html