Energy shakeup looming

by frog

The DomPost Business section leads with a discussion of what national is likely to do with the imminent shakeup of our energy sector. It amounts to privatisation by other means, and sets it for a complete government sell-off to foreign investors in 2011. (No-one else could afford the $12 billion asset!) Re-combining Mighty River Power, Genesis and Meridian would create a state owned powerhouse, if you will excuse the pun.

Selling off 20 percent now to private interests and the Super Fund would seem very harmless right now, but would be the slippery slope to a full sell-off in 2011. The irony here is that the arguments that are being put forward for reconstituting the heart of the ECNZ are the very same ones that were used to justify breaking up the world’s second most efficient electricity system back in 1992 – it would be more efficient and it will lower power bills. The arguments are even being put forward by the exact same people!

Once again we will watch a repackaging and re-branding exercise, done in the name of economic efficiency, which will transfer just a little bit more of the public’s asset to the private sector for the long term, while bleeding enormous transaction/marketing costs to the private sector in the short term.

There is some sense in putting the generation assets of our closed electricity market into one basket, as different generation types could then be used (as they used to be) to balance one another rather than to compete in an uneven manner. That was the valid argument for not breaking up ECNZ in the first place.

What I fear from this proposal, aside from the usual creeping privatisation, is that it’s not just generation assets that will be combined, but retail too. While there is an argument for putting all of Humpty Dumpty’s pieces back together again, doing only half the job is to strip our faux market of what little competition it has. This would be a disaster. Please choose. Either a true market based system or a monolithic government monopoly (or a public trust monopoly, heavily regulated), please, not some half baked nonsense just like last time.

It is for these reasons that I oppose what is being proposed. It is being done for the purposes of selling assets rather than improving the market or the outcomes for consumers, and for this it should be rejected out of hand.

The article is a classic case of double speak. Several times it insists that the moratorium on new baseload thermal generation must go, all the while stating categorically that new thermal generation is not economic. So why the rush to lift the moratorium? And while we are all being primed for the new-right paradigm shift, we have that iconoclast Brian Leyland throwing in a few climate change denying statements as well. (Sorry Brian, the warming trend continues.)

It is also very telling that Genesis is dead set against any merger. Their Rodney Station proposal is such an uneconomic fool’s errand that any new board would squash it like an ant. That would prove too embarrassing for the existing board and former CEO Murray Jackson.

A shakeup in the energy sector is certainly coming, and not entirely unwarranted. In typical National Party fashion, we’ll do the wrong things for the wrong reasons, and the little guys will pay.

frog says

Published in Economy, Work, & Welfare by frog on Tue, November 11th, 2008   

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