“Slowing down” asset sales not enough


Kia Ora

The Government is being warned by the Treasury that if it fails to slow down it’s proposed asset sales programme, more harm than good may be the outcome. It plans to sell the Mighty River Power, Meridian Energy and Solid Energy assets, in order to raise funding for other Government spending and to help with its plan to have the Treasury accounts back in black ink by 2014/15. But the warnings there might be greater than intended consequences does not go far enough in highlighting the problems that are raised by the proposal to sell these and other assets.

During 1998-1999, under the then Minister of Energy, Max Bradford, the previous National-led Government broke up Electricity Corporation New Zealand which was responsible for all electricity generation in the country. Whilst on one hand this allowed the public options of who to get their electricity supply from, as Mr Bradford enthusiastically promoted, it ignored a number of socio-economic issues. The issues that were ignored or were not adequately addressed are:

  1. Contrary to the popular claim that pricing would be competitive in the free market environment, the average electricity bill has gone up about 100% since 1998. Some of the annual rises in rates have been 8-10% .
  2. Accountability of the individual generators as well as the lines companies and their responsibility to the communities they supply has been significantly reduced in recent legislation changes.
  3. Responsibility for resource management issues pertaining to the operation of power stations and their associated infrastructure have caused issues.

When Mr Bradford announced the break up of E.C.N.Z. in 1998, he embarked on a promotional campaign touting the value of a deregulated electricity market. Among the claims that were made was that competition would be significantly enhanced by E.C.N.Z.’s break up, as E.C.N.Z. was allegedly an inefficient asset that suffered from poor management that was not challenged by market accountability.

When E.C.N.Z. was broken up, the responsibility for managing the electricity grid also changed. Trust Power claimed in 2010 that the logical option would have been to nationalise the grid and merge the companies into Trans Power. Nationalising the grid would have ensured Trans Power would be held accountable to the New Zealand Government. In that same year, the Christchurch City Council made sure that Orion, which is responsible for the power grid in Christchurch stayed in the hands of the City. This would prove its worth in the days and weeks after 22 February 2011 when the city needed reassurance and leadership on restoring electricity.

The sales showed that there was a disconnect in terms of who took responsibility for things like mitigating flooding below hydroelectric power dams. This was evidenced by unnecessary flood damage to Alexandra township by the nearby Clyde Dam during significant spring floods in 1999. Prior to the dismantling of E.C.N.Z. it had been responsible as the operator on behalf of the New Zealand Crown, of all of the major hydro-electric power stations. The previous year during prolonged heavy rainfall in the Waikato River catchment, the owner of the eight power stations on the river struggled to handle the discharge requirements of the dams, as well as the input of the Waipa River, a major tributary whose catchment functions in a different manner to the Waikato River.

I fail to see how partial or full asset sales are going to assist New Zealanders if the botched history of the electricity sector is anything to go by. Does this really a better functioning market or does it just mean more price hikes, reduced accountability and long term damage to New Zealand’s infrastructure?

You be the judge.

Take Care,

Rob

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