First, let me say that back in the day, we had the second most efficient electricity system in the world. Power was cheap and abundant. We got away with being one of the least energy efficient economies in the OECD because of this wealth. Not long after the market reforms, prices rose sharply and Jeanette explained what was happening. Her words are just as valid today as they were in May 1996, when she wrote:

“That act corporatised power companies, required them to make a profit, forced them to compete … and required them to charge separately for the use of their lines”, Fitzsimons said.

“The government has deliberately unleashed a pack of wild dogs into a fenced paddock. No-one should be surprised that they are now eating the lambs.

“The issue is not whether prices have gone up or down overall, but who is paying more, for what and to whom. Domestic users are paying too much because they are the only captive market, and companies are forced to use them to subsidise competitive business consumers.”

The sad drama is still playing out, despite the efforts of successive National and Labour governments tweaking around the edges of the market, both hounded by a fear of the free market ideologues. (For the record, if we had a truly free electricity market, it might work better than the horrible hybrid we have today. But I do not believe that with its size and isolation that NZ could ever have a proper free electricity market.) A BNZ economist wrote last year:

Figures showing the cost of domestic electricity has gone up five percent faster than inflation come as no surprise to a leading economist.

The Government’s Energy Data File shows residential users have had to fork out for an average 4.8% price increase, every year since 2000.’

That’s well ahead of the 1.4% increase for commercial users each year, and 2.8% for industrial users.

The reasons for the continued price rises were the same ones that Jeanette outlined above. So has anything really changed since the reforms, except that we are paying more?

I contend that there is one more significant change. Reliability. It’s gone to the dogs. Ever since we “deliberately unleashed a pack of wild dogs into a fenced paddock”, as Jeanette said, the corporate hierarchies that replaced the ECNZ bureaucracy have been eating up the lambs of our infrastructure investment.

Instead of one government department, staffed mainly with engineers with a mandate to provide safe and secure electricity to all, (paid at public service salaries), we now have five boards, CEO’s and corporate bureaucrats, mostly overpaid business people with a mandate to wring as much cash as they can out of our public assets, customers be damned.  At the risk of high-jacking my own thread, is this any way to run a railroad?

Ever since the so called reforms we have had virtually no investment in our infrastructure; neither transmission nor generation. The overpaid corporocrats were too busy stripping the gold plate off of all our existing assets, admittedly giving most of it back to the taxpayer in the form of dividends, but much of it lining the pockets of the bloated management structure of the electricity market.

The stripping out of our public assets has had a devastating affect on the reliability of our electricity system, as evidenced by the failures we have experienced continually since the reforms took place. The Herald’s article on Auckland’s current power crisis catalogues just a few of the problems we’ve had over time. There have been many more.

Isn’t it time we admit that the market reforms of the 1990s were not reforms at all but were a complete, unadulterated cock-up? I would need to see a proper case made before I call for the reconstitution of ECNZ, but I will say that further tinkering just won’t do.

Some good honest engineering, not ideologically driven reform, is definitely in order.

It’s time to put the gold plate back into our electricity system.

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.