All about power

Stuff reports:

Labour is defending the release of its plan to regulate power prices on the eve of the Government’s sell-off of power company assets.

Yesterday, Federated Farmers accused Labour and the Greens of trying to sabotage the sharefloat.

“There is suspicion this policy may be a tactical response to the Government’s asset sales programme,” Federated Farmers spokesman Anders Crofoot said.

However, Labour finance spokesman David Parker said if Labour had waited till after the shares in Mighty River Power and the other state-owned power companies had been sold it would have been criticised.

Of course it is sabotage. If it was not sabotage, they would have announced the policy months ago before the float document was released. To wait until the offer document is out in the marketplace is a calculated act of economic sabotage.

If their policy was to buy back MRP, then there might be a case for saying they had to wait to see the float details before announcing their policy. But there is nothing in the details of the MRP float that necessitated them waiting until after the float document was out, to announce their policy.

Here’s the good thing for investors. Their policy will probably see the share price set at the lower end of the range, however I don’t think it will ever be implemented which means that actually investors will get shares at a discount. Note this is not financial advice. So the real victim of the policy announcement will be taxpayers.

On the topic of the electricity policy, some must reads:

  • An open letter from Seamus Hogan to David Shearer and Parker. He has 10 questions for them, including if they have even read the Wolak report they cite.
  • A lengthy article by Lance Wiggs at NBR on the electricity industry and some more sensible alternatives to the Labour/Greens proposal.
  • A column by Brian Gaynor on how the Labour/Greens policy would be a “major backward step for the economy” and saying “The best way to keep prices down is to ensure there is a competitive market rather than heavy-handed price regulation that is more reminiscent of the Muldoon era
  • A column by Liam Dann. Some extracts:

We’d all like lower power prices. It’s a clever election bribe. But if a government bludgeons down the returns available to international investors they simply won’t invest, they’ll go elsewhere.

New Zealand taxpayers in the future – my kids – will have to earn or borrow the money to pay for new power generation as the population grows.

 Capital is mobile.

If Labour wants to gain votes from swinging voters who still trust capitalism – rather than just appeasing those on the left that joined the Russel Norman party – then Shearer is going to have to do a very good job of convincing them that Labour is not a destroyer of wealth.

Shearer needs to distance himself from the gleeful schadenfreude of those who celebrated the $600 million value destruction suffered by Contact, Infratil and Trustpower in the day and a half after the new policy was announced.

As the policy was designed to sabotage the float of MRP, and destroy wealth, I can’t see any distancing.

He will need to communicate clearly how this policy ensures we have enough foreign capital investment to grow power supply as GDP grows. Presumably Labour still hopes it will grow. The Greens, remember, aren’t so wedded to GDP growth as a concept.

Despite Norman’s efforts to normalise the Greens by talking more about economics than core policy, this is still a party living in a hippie fantasy world. It is a party that “envisions an organic nation” in its policy on food production. Good luck with that. New Zealand owes its first-world status to a world-class, technologically-driven machine of a farming economy. We don’t put that on the tourist posters but let’s be realistic.

People don’t realise how extreme the Green policies are. Now Labour is buying into them, their joint policies are looking to be the an extremely radical policy change – at a time of huge global uncertainty.

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