Labour on power prices

Andrea Vance in the Dom Post reports:

State-owned power companies will be “lost forever” if they are sold to private buyers, Labour leader Phil Goff says.

Launching the party’s “Say No to Asset Sales” campaign in Auckland last night, Mr Goff attacked National for the proposed part-sale of Mighty River Power, Meridian, Genesis and Solid Energy.

In January, Prime Minister John Key floated the idea of a selloff if National won a second term.

At last night’s public meeting, Mr Goff said power prices would “skyrocket” if the energy giants fell into private hands. “The last thing struggling middle and low-income Kiwis need is for their power prices to go up at an even faster rate. That is exactly what will happen when new private and foreign owners of our electricity companies demand better returns on their investment.”

So many targets to shoot at, where do I start.

First of all it is Labour Party policy to have power prices go up by an extra 3% (on top of any other increases) through their amended Emissions Trading Scheme. Labour has campaigned on removing the current subsidies from the ETS, which will immediately put power prices up by 3%. So they are campaigning on lower power prices, with a policy which will do exactly the opposite.

Secondly their record in office is appalling. According to Stats NZ CPI index, the cost of electricity increased by 63.7% over their nine years in office. No that is not a typo – 63.7%. In the previous nine years the increase was 47.5%.

If you divide the total increase by the number of years (I know that ignores the compounding effect but let’s keep it simple) that is an average 5.3% annually in the evil 1990s and an average 7.1% under the lovely kind nine years of Labour.

And since Labour got booted out? The electricity index has gone up 8.0% over two years or 4.0% a year.

And is Goff correct in his claim private owners will demand higher returns than public owners? Well apart from the fact minority owners can’t set the price, this claim is disagreed with by the Consumers Institute:

Consumer NZ chief executive Sue Chetwin agreed with Mr Key’s assessment that electricity prices would not increase with partial privatisation.

“The power companies over the past 10 years have been rapacious in putting up their prices and I don’t see that making part of the company available for the public to invest in will make much difference there.”

However, Ms Chetwin said companies would become more transparent and would have to explain their actions to the public.

So remember whenever you hear Labour talk about power prices:

  1. Their ETS policy will increase power prices by a further 3%
  2. Power prices increased by 64% during their last stint in Government
  3. They took in over $3 billion of dividends from the state owned power companies, despite it being a time of record surpluses
  4. Consumers Institute says allowing minority private shareholders will not increase prices, but will increase transparency

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