Hartwich on the power plans

April 29th, 2013 at 12:00 pm by David Farrar

A must read column on the Greens and Labour power policy is by Oliver Hartwich. He cuts through the rhetoric to focus on some key issues.

Leaving the emotive language aside, will the opposition’s plans actually work? Will they achieve the stated goals of providing secure and more affordable energy to New Zealanders? And what are the potential side effects?

Good questions.

It should be noted that the power proposals are not quite as outlandish as they may first appear. A number of Eastern European countries have also implemented single-buyer schemes where all wholesale is purchased by a government authority before being sold on to distributors. However, in the Eastern European cases this market arrangement followed from a completely nationalised energy sector as a step towards liberalisation. In New Zealand’s case, however, it is a move in the opposite direction.

This is a important point. In assessing the desirability of a policy, you need to look at what the current arrangements are. A single seller policy may well be sensible when you are moving from a point of the Government owning all the generators. But less so when you have 14 different generator companies already operating.

If you were designing the NZ power market from scratch, I think you could have a reasonable debate about the pros and cons of a single buyer model. Personally I’d still be skeptical  but there are pros and cons. But we already have 14 companies who have invested in NZ power generation, and the impact on not just them, but also investor confidence more generally by unilaterally imposing a monopoly government buyer on them is huge and bad.

On the plus side, a single buyer can more easily match physical electricity generation to demand. Such schemes also allow governments to regulate markets effectively because they have direct control over both prices and capacity. After all, this is why the Greens and are proposing their scheme.
 
But it is precisely this strict control by the government over the market that is the greatest disadvantage of the single-buyer model. The core problem, as with other centrally planned regimes, is that it decouples economic incentives from decision makers. This means that the proposed new Crown entity tasked with deciding on the right capacity for electricity generation does not itself bear the consequences of over- or underinvestment in the industry. This may in turn lead to an unprofitable energy sector – or to blackouts. Older New Zealanders may still remember the experience of electricity rationing when the state controlled the market in the 1970s. 
It is also worth recalling that we have a single buyer model in the 1970s, and as this report shows (page 19) prices increased 58% from 1975 to 1979.
Despite some appealing theoretical advantages of a single-buyer model, ultimately the government could achieve far more by facilitating effective competition at the generation and distribution stages. Nationalising the wholesale market, on the other hand, is likely to create more problems than it might solve, beginning with decisions on capacity.
Improving competition is where the focus should be. Regulation can and should be part of that. But removing competition and having a government mandated price for wholesale electricity is a very bad way to try and get lower prices.
In any case, if the intention is to support low-income earners with their power bills, wholesale is a sledgehammer to crack a nut. It would be much more straightforward to provide direct support to affected households instead of playing havoc with the structure of the market.
Again a key point. This is absolute overkill. It’s like nationalising supermarkets to reduce the price of milk and bread.  They claim that this will save a household $6 a week. Would be far better to give low income households a tax cut or subsidy of $6 a week, than nationalising a $6 billion a year industry.
Even if the Greens/Labour plan actually achieves what both parties promise, which is dubious, it is still an example of how not to make policy. This is not because of its alleged economic merits but because of the way it was announced.
 
The strong public reactions to the proposal, as well as the substantial losses for energy companies listed on the NZX, show what a bombshell of an announcement it was. Practically from one second to the next, and with no previous warning, let alone any kind of meaningful stakeholder consultation, the rules of the energy market were called into question.
This is a point worth reflecting on. Important rule changes are consulted on. Unilaterally announcing the rules will change, regardless of evidence or arguments, is very scary for investors. The Commerce Commission normally will put out a discussion document, a draft determination and then a final determination. That allows affected parties input.
A responsible Labour Party would have set out an options paper, listing maybe three options for energy regulation. One of them might be the sole buyer model. Then one could have a debate on pros and cons, and power companies could understand where Labour’s thinking was going. If they eventually came out with a sole buyer model, then at least the industry would have had time to consider it.
But to announce a final policy on the hoof, 18 months before an election, with no warning or consultation strongly suggests that it was a half baked idea dreamt up to sabotage the MRP float, and with no regard for the consequences on the wider investor confidence.
Small parties can get away with announcing radical policies on the hop, because people know they won’t be Government. But the two major parties need to be more less reckless.
International investors looking at New Zealand can only draw one conclusion from this episode: that their investments here are not as secure as they previously believed.
 
For an economy reliant on international capital markets, this loss of investor confidence is significant. As First NZ Capital’s chief executive Scott St John says, the intended $300 reduction in household power bills could be easily offset if the Greens/Labour power plans led to a perception of greater sovereign risk. Indeed, if capital funding costs increase, households will directly feel the effects in their mortgage payments. This is almost certainly an unintended consequence – but a negative consequence it is.
The potential consequences of the policy range from power blackouts to investment dropping off to power prices actually ending up higher as the Government can use its position as both monopoly buyer and seller to fund other spending.
As economists are aware, regulating network industries is fiendishly difficult. No matter where you stand on the single-buyer model and whether it could be made to work, shocking markets and investors with populist proposals (provoking equally populist responses) is not the way to go about it.
Again this is key. Even if you think the policy has merit, you should condemn Labour for the way they just announced it with no warning – in a deliberate move to sabotage MRP float with no concern about the wide consequences.
Tags: , , , ,

46 Responses to “Hartwich on the power plans”

  1. toms (299 comments) says:

    “…This is a point worth reflecting on. Important rule changes are consulted on…”

    The government, as you constantly whine, is given mandate to govern called the general election. If this government followed the self-serving advice you and your mate Oliver Hartwich suggest it wouldn’t be selling Mighty River power at all.

    Sure, Labour and Green can consult – then tell the neo-lib excuse makers to get an early night because they start in the morning.

    Vote: Thumb up 1 Thumb down 21 You need to be logged in to vote
  2. pollywog (1,153 comments) says:

    Heaven forbid that governments act in the best interests of the majority of its citizens eh?

    Vote: Thumb up 1 Thumb down 17 You need to be logged in to vote
  3. Pete George (23,567 comments) says:

    “the intended $300 reduction” and “$6 a week”

    They are often quoted, but they’re not what has been suggested. Labour’s policy is $230-$330 per year ($4.42-$6.35) for an average household.

    It’s unlikely a solo pensioner would get even the $230, or $4.42 per week. I’m not in an average household, I’m a low power user, so presumably wouldn’t get that much either.

    Vote: Thumb up 12 Thumb down 1 You need to be logged in to vote
  4. jaba (2,142 comments) says:

    I have asked elsewhere .. if the 4 headed monster gets into power next year, when will I see the UP TO $320 a year saving and far more importantly, how will I know I have saved UP TO $320?

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  5. Sam Buchanan (501 comments) says:

    “But to announce a final policy on the hoof, 18 months before an election, with no warning or consultation strongly suggests that it was a half baked idea dreamt up to sabotage the MRP float, and with no regard for the consequences on the wider investor confidence.”

    Policy management isn’t one of the Labour Party’s stronger points – if indeed it actually has stronger points. But I wonder if there would have been any less blame and gnashing of teeth if the Labour party had waited until after investors had bought shares, then casually released an options paper saying they might go to a single buyer model? I’d imagine there would then have been cries of “how despicable, they should have released this before people bought shares”.

    Vote: Thumb up 7 Thumb down 2 You need to be logged in to vote
  6. jaba (2,142 comments) says:

    the biggest financial relief I have experience in the past 35 years is the reduction in my mortgage rate .. if the monster gets in and my mortgage goes up a single %, then this so-called power saving will be meaningless

    Vote: Thumb up 15 Thumb down 0 You need to be logged in to vote
  7. pq (728 comments) says:

    I think the fundamental argument comes down to whether this country should own assets or not.
    We have seen clearly what happened when National Assets were flogged off in 1984 onward.
    Railways, Ministry of Works. Post offices, Telecom, especially Telecom remember the ludicrous people that were CEO Telecom, rip off .Everything got more expensive.
    Why do we have to be the melting pot for the failed America global corporate. Die in the ditch.
    I will do everything to make sure Winston Peters understands that devaluing our currency is not good,
    but I will vote for him, and Denis O’Rourke my local , and here in Christchurch there are a lot of votes

    Vote: Thumb up 2 Thumb down 15 You need to be logged in to vote
  8. rangitoto (247 comments) says:

    When they slap the increased ETS charge on is there any actual reduction at all?

    Vote: Thumb up 12 Thumb down 0 You need to be logged in to vote
  9. pq (728 comments) says:

    jaba (1,897) Says:
    April 29th, 2013 at 12:31 pm
    the biggest financial relief I have experience in the past 35 years is the reduction in my mortgage rate .. if the monster gets in and my mortgage goes up a single %, then this so-called power saving will be meaningless

    pq says ,.. jaba , who is the monster. All we agree with low inflation, are you saying that little NZ will have less credibility with an idiot PM, Green, and that our currency will crash, and interest go up , I agree with you, sell anything you can off shore , the loss will be small if we return NZ Nat Govt

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  10. Pete George (23,567 comments) says:

    Sam, if Labour had given their policies the attention they instead gave to a futile petition they should have been ready to plan a responsible roll-out of their policy months ago.

    From what Shearer said it seems obvious they hoped the Maori Council action would hold up the sale until the mostly Green driven referendum could be confirmed and take place.

    When the court overruled the Maori Council Labour did a rush job, on the policy and on the announcement, and the followup was inept, passing the hot potato from one hapless MP to another, with Robertson huffing and fluffing around in Shearer’s absence.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  11. freedom101 (504 comments) says:

    It’s actually very good that Greebour have announced this policy. It’s now all on for the next election. It’s a clear choice between state control and economic freedom. Following the passage of the gay marriage act there’s now no wedge between the parties on social freedoms, so the debate will be about the economy. Greebour will come totally unstuck. Game on.

    Vote: Thumb up 16 Thumb down 0 You need to be logged in to vote
  12. lastmanstanding (1,297 comments) says:

    Even Labour and the Greens have admitted it would take up to 5 years to implement their policy so almost 2 election cycles. JK has said that a re elected Nat government would reverse the policy.

    The real point is that IF Labour/Green/Mana/NZ First form the next government and they proceed with this policy the international credit agencies would down grade NZ credit rating as they will see a significant shift to a centralised command control government and that means borrowing costs would increase. Go ask the agencies and they will tell you this.

    So if borrowing costs increase then mortgage rates would increase. Say a 2% increase. Now if you have say a $250K mortgage that an extra $5K interest a year.

    Doesn’t really help that you have got a $300 reduction in your power bill.

    Vote: Thumb up 13 Thumb down 0 You need to be logged in to vote
  13. In Vino Veritas (139 comments) says:

    The careerist politicians have no feel for what this announcement could do. If markets were manipulated like this by say, a merchant bank, their principals would be put in jail. Yet Labour and the Greens can do and say pretty much whatever they like, no matter what the consequences on savers and investors in NZ.

    Vote: Thumb up 13 Thumb down 1 You need to be logged in to vote
  14. toad (3,674 comments) says:

    @rangitoto 12:41 pm

    When they slap the increased ETS charge on is there any actual reduction at all?

    The ETS will impact significantly only on coal, gas and oil fired generation. Phase them out and/or use them only as emergency backup (which is the market signal that an ETS is meant to send) and move to renewables and the ETS impact on electricity prices will be minimal.

    At the moment it is the taxpayer who is paying for the carbon emissions of the likes of Huntly.

    Vote: Thumb up 1 Thumb down 17 You need to be logged in to vote
  15. pq (728 comments) says:

    In Vino Veritas (47) Says:
    April 29th, 2013 at 1:02 pm
    The careerist politicians have no feel for what this announcement could do. If markets were manipulated like this by say, a merchant bank, their principals would be put in jail. Yet Labour and the Greens can do and say pretty much whatever they like, no matter what the consequences on savers and investors in NZ.

    pq says .. it would be good if the market merchant thieves were in jail, but they are not In Vito Veritas, speak the truth, where is your Veritas

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  16. Sam Buchanan (501 comments) says:

    “if Labour had given their policies the attention they instead gave to a futile petition they should have been ready to plan a responsible roll-out of their policy months ago”

    Yes, but speculating on what the political situation would be if Labour was competent is like discussing how nice my garden would look if there were fairies at the bottom of it.

    I’m just saying that its a bit rich to attack Labour for sabotaging the share float by announcing their policy prior to it given how upset people would be if they waited for people to buy shares and then announced that they were devaluing those shares by looking at a single buyer model.

    Vote: Thumb up 3 Thumb down 2 You need to be logged in to vote
  17. pq (728 comments) says:

    lastmanstanding (1,018) Says:
    April 29th, 2013 at 12:54 pm
    Even Labour and the Greens have admitted it would take up to 5 years to implement their policy so almost 2 election cycles. JK has said that a re elected Nat government would reverse the policy.
    The real point is that IF Labour/Green/Mana/NZ First form the next government and they proceed with this policy the international credit agencies would down grade NZ credit rating as they will see a significant shift to a centralised command control government and that means borrowing costs would increase. Go ask the agencies and they will tell you this.
    So if borrowing costs increase then mortgage rates would increase. Say a 2% increase. Now if you have say a $250K mortgage that an extra $5K interest a year.

    pq says .., I don’t think Winston Peters will align with a losing coalition. It will not happen. He does need to screw Key for what happened and he will, and a bloody good show it will be

    Vote: Thumb up 2 Thumb down 4 You need to be logged in to vote
  18. Kimble (4,440 comments) says:

    Phase them out

    Translates into: the increased costs will be transitory, but it may take a decade or more to transition.

    and/or use them only as emergency backup

    Translates into: the increased costs will then only come from maintaining the ‘retired’ generators.

    (which is the market signal that an ETS is meant to send)

    Translates into: I don’t know what a market signal is.

    move to renewables

    Translates into: expend capital to build new generation capability that wouldn’t have been required and wasn’t economically viable without arbitrary government intervention in the market.

    and the ETS impact on electricity prices will be minimal.

    You know, after a long transition, a shit-tonne of capital expenditure, and replacing operating costs with maintenance costs.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  19. PaulL (5,981 comments) says:

    Toad, a substantial portion of our power is still fuelled by fossil fuels. Let’s assume that the Greens continue their resistance to new large hydro or any nuclear, so there are no new high volume and reliable supplies coming on tap. What are our options?

    1. Govt just doesn’t buy power from the power plants they don’t like – Huntly etc. They’re single buyer, they can do this.
    1a. The companies owning those plants aren’t making money any more, they shut them down
    1b. The govt works out that they need those plants for peaking power, but that means they have to pay very high per unit rates for that power – kind of like the current market
    1c. The govt works out that they need those plants, but in order to get a “policy win” they fund the standby cost of those plants, and then pay lower rates for the power when they actually need it. Risk transferred to the govt, corporate has guaranteed profits, taxes go up, govt claims success. Hmmm.

    2. Govt decides to shut down the smelter instead so as to get power. Balance of payments gets worse. Mortgages go up. Significant capital expenditure to get that power north to where it’s needed. Single points of failure in that system. Blackouts and wastage.

    3. Govt decides to use “renewables” instead. (In quotes because whilst the power source is renewable, the building of the capture device isn’t – cement has significant environmental costs for example).
    3a. Fossil fuel plants shut down. Power supply becomes less reliable, blackouts and rationing at times of peak demand when sun isn’t shining / wind isn’t blowing. Power becomes more expensive – power bills go up, and/or govt subsidises by buying power for more than it sells it for. Taxes go up.
    3b. Fossil fuel plants kept in parallel. Expensive

    4. Under all scenarios, large new govt bureaucracy created that grows without regard to actual work. Taxes go up, some people get reduced power prices (funded by taxes going up), other people get substantially increased power prices. Crazy rules for income testing, family size verification and other intrusive rules are introduced to attempt to ensure that “deserving” people get a reduction whilst “undeserving” people pay more – progressive power pricing is introduced.

    5. Under all scenarios, this exact same end consumer outcome (assuming anyone wanted this outcome) could have been achieved much more cheaply by putting up benefits and increasing WFF (assuming the poor and those with kids are the targets of the policy). Better still, the govt that still owns the majority of generators, could just reduce the wholesale price of power without creating a single buyer.

    Vote: Thumb up 14 Thumb down 0 You need to be logged in to vote
  20. edd (157 comments) says:

    We have a non-competitive electricity market. You on the right have no solutions, just denials, so you will have to live with the Labor/Green solution now wont you…

    Democracy really is a left wing institution now isn’t it…

    Vote: Thumb up 0 Thumb down 16 You need to be logged in to vote
  21. rangitoto (247 comments) says:

    @Toad. Phasing out coal, oil, gas gen will be replaced by what exactly. New hydro, wind and other generation schemes are already facing massive opposition from an alliance of nimbys and greens. The only thing on the horizon might be the Manapouri power if Tiwai goes but there will be a significant capital cost getting that efficiently into the national grid.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  22. bhudson (4,740 comments) says:

    At the moment it is the taxpayer who is paying for the carbon emissions of the likes of Huntly.

    Well that makes it very clear that the ETS increase will just kill profitability for the coal and gas generators.

    @toad, you say retain these for emergency use, but that overlooks a couple of key points:

    1. The lack of storage and no new consents for hydro means that we rely on coal and gas generation to secure supply for our baseload
    2. Low profit = no investment – we will be lucky to have any coal or gas generation if there is no return. There goes our baseload supply.

    The NZ Power policy is commercially naive at best.

    Of course, the Greens could actually agree to consent some more hydro. That would help. Or some nuclear perhaps? That would also address the baseload challenge (albeit at quite an initial cost.)

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  23. Rightandleft (663 comments) says:

    I find it very concerning that many of my more left-leaning friends seem to be quite gleeful about the destruction of wealth the policy announcement unleashed. They don’t seem to understand that this is bad for all of us, not just the wealthy. National needs to do a good job of explaining to the public what the Labour/Green policy would really mean for them.

    Toad, There is one country reducing its carbon emissions through less use of coal and oil. That country is the USA and it is doing so by using nuclear and fracking. Since the Greens also oppose both those alternatives I’m not sure how they think we’ll get lower power bills in the near future by transitioning to the more expensive renewables and to renewables that will require significant capital investment to be developed to a level where they could actually replace coal. And since this policy would tend to scare off investors, and since the Greens seem sceptical about foreign investors in general, how will the burden on the taxpayer actually be lowered?

    Vote: Thumb up 12 Thumb down 0 You need to be logged in to vote
  24. cha (4,019 comments) says:

    Tiwai goes but there will be a significant capital cost getting that efficiently into the national grid.

    sigh… the uninformed trotting out the usual claptrap…

    http://www.nbr.co.nz/article/if-tiwai-point-smelter-shuts-no-problem-getting-power-auckland-ck-138278

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. F E Smith (3,305 comments) says:

    Come on, Sam, it was economic sabotage, pure and simple. The plan was to derail as much as possible the share float and it has had its intended effect. The only result is that the NZ taxpayer will not make as much from the sale is it might have.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  26. bhudson (4,740 comments) says:

    They don’t seem to understand that this is bad for all of us, not just the wealthy.

    Not bad for the wealthy at all – they will be buying MRP shares at a discount price thanks to Labour and Greens policy announcement. In the absence of a change of government those shares will rebound in value and the purchasers will have made some tidy windfall profits.

    Nice of Labour and the Greens to redistribute wealth to the wealthy. How does that sit with their professed values?

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  27. andyscrase (89 comments) says:

    In every country except NZ, wind power is heavily subsidised to make it “competitive” with conventional generation

    Presumably the NZ generators internally subsidise wind energy. I don’t really see any reason why they should, but presumably it adds to our bills one way or another.

    Given that the Greens are obsessed with these useless and expensive bird choppers, I find it hard to reconcile this with lower power bills.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  28. rangitoto (247 comments) says:

    @Cha. Good to see that there appears to be some forward planning from Transpower. Seems like Mr Strange has learned his lesson from the Auckland blackout debacle.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  29. Sam Buchanan (501 comments) says:

    “The plan was to derail as much as possible the share float and it has had its intended effect.”

    Possibly. Given Labour’s record of hopelessness I wouldn’t be at all surprised if that were just an unintended consequence. I don’t give Labour much credit for cunning. But would you rather they had waited to announce after you’d bought shares?

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  30. burt (8,272 comments) says:

    pollywog

    Heaven forbid that governments act in the best interests of the majority of its citizens eh?

    Novel approach… Teach Labour how to do that rather than act only in the best interests of getting elected by being dishonest about their intentions and possible outcomes. Funny they didn’t state that their 1970’s new model allows successive governments a monopoly stranglehold on all electricity pricing and usage. Guess they just want to be loved enough to be holding the levers of power – so why would they consider or advise people on the potential consequences.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  31. lastmanstanding (1,297 comments) says:

    I was going to buy 3 lots of MRP shares in my own name my wifes and the family trust. Now going to wait until the dust settles. IMHO price could be below the indication and could fall further if low take up by retail shareholders.

    Net result will pick up more shares of my dollars and when Labour/Greens/Mana defeated in 2014 will see nice increase in share price.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  32. edd (157 comments) says:

    @ F E Smith

    Economic sabotage would be to let the sale go through at the high price of $2.80. Change the fundamentals under investors before the next election. Then when the shares crash in price buy them back at $1.10….

    The way Labor announced it means we all know what is going to happen. The risk is entirely dependent on who wins the next election… Democracy is a bitch aint it…

    Vote: Thumb up 3 Thumb down 4 You need to be logged in to vote
  33. PaulL (5,981 comments) says:

    @edd: actually the policy overall is stupid and probably won’t work. The consequence of that policy is that MRP will be sold at a lower price than it otherwise would have, which transfers money from taxpayers to the wealthy. When some on the left turn up in a few months to bleat about assets being sold at fire sale prices, I’m going to be pointing out that the price was artificially pushed down by the left.

    Vote: Thumb up 9 Thumb down 2 You need to be logged in to vote
  34. Akld Commercial Lawyer (165 comments) says:

    With respect, you are underselling the extent of the calamity – as the most likely scenario of the Labour/Greens stunt both supressing demand and price expectations is that financial institutions, not Mums & Dads, will get more shares (at lower entry cost) as the retail pool is still limited as a proprtion of the total offer. As a result, they are most likely to have handed a windfall gain to the very people they profess to despise at the expense of the taxpayer. Please read the offer document carefully.

    Its back to that great quote from Kerry Packer that you only get one Alan Bond in your lifetime….if you are an insto and thinking you would not get up to portfolio weighting, at least until the loyalty bonus expires, the Greens / Labour combo are the stuff of dreams.

    And from where I sit, 3 years of construction and $300m+ and then only if you exclude the cost of Pole 3 to get the power to the North Island (probably fair enough as Pole 1 had to be replaced anyway) is not petty cash. Still, I managed to read the rest of the Transpower Annual Planning Report and find myself much better informed.

    It is a stunt. As stunts go, it is likely to prove an expensive one – especially if it costs Labour both their economic spokesman and their leader. In the latter case, the Saturday Herald commentary was more likely to be just spin – Robertson has trained with the best and is now moving to distance himself from the fallout (rather than run a dual-track strategy).

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  35. Ross12 (1,428 comments) says:

    Lets remind Toad that the first power company to increase its charges when the ETS came in was Mighty River Power –the one with all those hydro plants on the Waikato. ( Genesis owns / operates ) Huntly.
    Also FYI Toad there are currently 1200 coal fired power stations under construction world wide. Japan has recently announced it going back to coal after closing down some of their nuclear plants.

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  36. freedom101 (504 comments) says:

    Kerry Packer might have said that you only get one Alan Bond in a lifetime, but unfortunately we have our own Alan Bond reappearing at irregular intervals. Comet Greebour last appeared when Toll was vastly enriched at taxpayer expense (Dr Cullen bought the trains back of an incredulous vendor), and before that there was interest-free student loans.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  37. bc (1,367 comments) says:

    Ye gods, yet another blog post about this. We get it – Labour/Green policy is bad. Talk about preaching to the converted.

    National must be seriously worried.

    Vote: Thumb up 3 Thumb down 6 You need to be logged in to vote
  38. odysseus (26 comments) says:

    That’s Hartwich from the outfit that’s taken over from the Business Roundtable right? The guy who believes there is no austerity in Britain. Oh dear…

    Vote: Thumb up 4 Thumb down 2 You need to be logged in to vote
  39. simian (29 comments) says:

    Quote David Farrar : “but there are pros and cons”

    Glad to see you are warming to the idea Labour would be very happy!

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  40. jaba (2,142 comments) says:

    if I had some lazy dollars tucked away in the bank and it was obvious that we would have a Gween/Labour Govt elected next year, I would hedge my bets in where I would place the money:
    1/ MRP shares will be reduced from what they should because of the treachery shown by the opposition so I would buy 1/2 as many as I could have.
    2/ the other 1/2 would be spent on Carbon Credits. That way I would share the gains that all Green MP’s will get once they screw us all with their mindless ETS/Carbon Trading scheme. Remember, every time a Gweenie hops on a plane they neutralise (FFS) their carbon footprint by buying carbon credits so they are sitting on a nice little earner

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  41. rouppe (971 comments) says:

    Going back to the price of power… The way power is proced at the moment, every supplier gets paid the most expensive price for the period. To me that does seem stupid. Putting it in real world terms…

    If I have a renovation project, I get several quotes, and choose the one that best value to me. Imagine if I was forced to pay the most expensive price for that week.

    Imagine if everyone had to pay the price of a Rolls Royce no matter what car they bought?

    Imagine if everyone had to pay the price of the most expensive home no matter what and where they were buying their house?

    We wouldn’t accept that in all the other examples, but we do for power. Why is that? If PowerShop could buy units of power from MRP at their very cheap rate and on-sell it to users, then that would drive down the price. However they have to buy it at the most expensive price.

    There must be ways to bring the price of power down generally without resorting to a goverment department central buying agency…

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  42. wat dabney (3,769 comments) says:

    Heaven forbid that governments act in the best interests of the majority of its citizens eh?

    Confidence tricksters refer to people like Polly as “the mark.”

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  43. HC (154 comments) says:

    Well, we have companies like the so far SOEs Mighty River Power and Genesis – for instance, that control a large share both of generation and retail of electricity. Also privatised Contact Energy controls generation and retail.

    There is the Electricity Authority that manages a kind of system, where a Code is applied to generators and retailers.

    NZX runs a market, where generators and retailers “meet” and where bids are made and taken, and where purchase deals are made daily, every so often. See following links for details:

    http://www.ea.govt.nz/industry/market/about-the-market/
    http://www.nzxgroup.com/energy
    http://en.wikipedia.org/wiki/Mighty_River_Power
    http://en.wikipedia.org/wiki/Genesis_Power
    http://en.wikipedia.org/wiki/Contact_Energy

    In all fair question, while I respect Hartwich and others taking a critical view at the NZ Power proposal by Labour and Greens, where is the detailed proof, that this “market” as it has been set up here in NZ, where companies own both generating and retail operations as sub businesses, is actually “functioning” as a truly “competitive” system?

    That “market”, is it truly a “free and competitive market”, while bidders and buyers are largely owned by the same businesses?

    This is what is at issue, here, and whether the deals made are actually delivering as they should. Hartwich may put his “free market” views on this out, but hey, if retailers were not owned by generators, perhaps it would be a kind of “free market”, but that is NOT the case.

    Prices increased, admittedly also while SOEs operated (like ordinary businesses) and delivered good dividends to governments, throughout the years. If the increases were lower as of recent, was it not also due to lower business demand and so, given the fall out from the GFC? So increasing prices was easier during the “boom” years while Labour was in government from 1999 to 2008. NO surprise that prices grew slower during the lowest economic growth period for decades.

    And why did “competition” under above scenario not deliver affordable power to the low income earners? They could not care less, as they were focused on maximising gains. Why has this government not offered help for those not coping to afford power to heat homes in winter, why was nothing done there?

    Many answers are unanswered, and that is why National and their little allies are not getting paranoic and throw around the North Korea comparisons and the likes. Maybe NZ is as a “market” also simply too small to have a functioning market for power? And did we not, just while the drought was on, under the supposedly better present arrangement not get such warnings that lights may have to go off, had the rain not arrived over the last month?

    Get real, thanks!

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  44. HC (154 comments) says:

    Re above comment, it should read further down:
    “Many answers are unanswered, and that is why National and their little allies are NOW getting paranoic and throw around the North Korea comparisons and the likes.”

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  45. HC (154 comments) says:

    And what is to be raised also is the fact: If the SOEs will get sold to 49 per cent, the dividends will go into the pockets of shareholders, those better off “mum and dads”, or perhaps rather greedy non mum and dads, who just want to have additional, higher incomes to use for discretional spending on buying more real estate down the line. That they can then rent out, to generate more diversified rental income, to perhaps also invest in a neat yacht down in the harbour, to spend on overseas trips to see another Rugby World Cup, and whatever, rather than have that dividend flow into better electricity generation infrastructure, or other useful investments.

    That is the real worry that many have, so I see NZ Power perhaps as a chance to ensure that more efficient generation will offer cheaper power to end users, be they private or business consumers. Dividends will also be lost there for the government, but the cheaper electricity may actually stimulate some economic activity to establish more business here, that may actually add value and lead to more and qualitative better exports.

    The debate so far is too blinkered, and any economic move, this NZ Power agency setting up, or whatever else, will always have side effects, positive and also negative. I do not pity those that have a large bank account with dosh they want to invest to generate yet more wealth for themselves, on the backs of those working and struggling to make ends meet.

    More fairness and balance was once the standard in NZ, somehow it got badly tilted since the late 1980s, especially since the early to mid 1990s. Time for a game changer, perhaps.

    Vote: Thumb up 0 Thumb down 3 You need to be logged in to vote
  46. Akld Commercial Lawyer (165 comments) says:

    For those still pondering whether the smouldering wreckage of the Green/Labour attempt to derail MRP still amounts to good policy – may I suggest that the numbers don’t lie. The correction the left want is for the rest of the market to subsidise domestic consumption. This is the back to the future vision that NZ had pre-Bradford and it has been demonstrated not to work. What’s more it is hardly likely to engender those consumers towards the sort of (sensible) efficiencies that the Greens espouse – because there is no longer any incentive (in terms of a price signal) to do so.

    As for the knock-on impacts – that is just Robin Hood style social engineering. It will be more expensive electricity for businesses – they’re the ones that this funny little economy needs to grow and continue creating employment. What’s more, by putting the dividends flows in private hands, the risk of that money being used for more inefficient social engineering is minimised.

    The fairness argument is that which is blinkered, and depends on the left’s overriding philosophy that labour (not capital) deserves the biggest slice of the cake. For those of us who are parents, the message is a simple one – keep telling your kids to get the best education they possibly can because they are going to earn far more leveraging their brainpower and capital than they ever will as a return on hours worked at the coalface.

    In sum, this is why the numbers simply don’t stack up and the Labour economic spokesman is in hiding – its transparently poor policy. Labour voters deserve better and the rest of us need a credible opposition instead of jam jar economics and tidal wave of nonsense.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote