Free market electricity ripoff

This week the Commerce Commission released a damming report on the so called 'electricity market' in New Zealand. Electricity companies have overcharged New Zealanders over $4.3 billion dollars in six years.

While the report found no breach of the Commerce Act - its conclusions were far more devastating for those who would argue for further privatisation and the maintenance of a 'lightly regulated' framework. The Commerce Commission concluded the electricity companies used their market power to maximise profits in a legitimate way within the current market structure and rules. These being rules created by free market minded politicians.

The Otago Daily Times editorial puts the blame right where it ought to be - the National Government of the late 1990s and the Labour-led Government between 1999 and 2008. While Labour introduced the Electricity Commission, and appointed an old Rogernome to run it, their actions effectively embedded the infamous reforms of Max Bradford. I don't think I will be revealing any state secrets when I say the Alliance at the time was very uncomfortable in being asked to support the Electricity Amendment Act in 2001 - an Alliance Parliamentary adviser working on these issues told me it was so bad we should not have supported it at all. But Labour had light-handed regulation as a religion - and lack of regulation is one of the key problems identified by the Commission this week.

If Labour really had the will to fix things up they could have bought back Contact in 2004 when its parent company Edison Mission Energy was in need of cash. With the main four in Government control, Labour could have made the significant changes to the sector that are required, without the interference of the rent seeking privateers.

Our regulatory regime is so pathetic it doesn't even mandate the provision and collection of the data required for the calculation of competitive benchmark prices. Most other countries do. Professor Wolak, who crunched some of the numbers for the Commission said it took him more time to compile and clean the datasets on the New Zealand electricity supply industry than it did for all his previous projects put together - this includes an analysis of market outcome data from California, England, Wales, Columbia, Australia and Spain (p. 25).

It sounds very much like National and Labour have effectively allowed the electricity industry to design the system to suit themselves. Electricity companies do not even have to participate in the collation of meaningful data. Gee, in whose interests might that be?

A couple of comments from the Commission are worth highlighting. "The experience of countries that have liberalised wholesale electricity markets has shown that the assumption that markets will naturally produce a competitive result is not always justified....[T]he economics of electricity has specific attributes, which makes competition in this sector significantly different from that for most other products." These include very high market entry costs and the fact that demand is largely unaffected by changes in the wholesale price, as consumers do not immediately face price increases as scarcity increases. This companies gain substantial market power.

And before some clown points to the fact three of the major electricity companies are State Owned Enterprises (SOEs) and attempts to argue that government ownership is somehow the problem - I would remind them that the primary goal of SOEs is to make money*. So on this basis I would argue New Zealand already has an effectively privatised electricity system - it just so happens one of the robber barons is the government.

Sadly no SOE has ever gone Kiwibank and aimed to lower costs for consumers. Another model would see power companies run like non-profit trusts with the aim to produce power in the most socially responsible and environmentally sustainable way.

Dunedin blogger Chris Ford calls on the Government to order the electricity companies to pay back their ill gotten gains to consumers. While there is some justice in this proposal, this would effectively require the Government to pay out dividend money that now lives in the Crown accounts. I would sooner use a $4.3 billion pot to fix up the industry once and for all, and if nationalisation is the most effective means of achieving effective policy change, so be it.

The report by the Commerce Commission this week is a damming incitement on the current electricity system. Yet it also dams the agenda of those who want to further privatise the SOEs and maintain a lightly regulated market.

It is simply opportune nonsense for Energy Minister Gerry Brownlee to blame it all on the Electricity Commission - the problems go a lot deeper than that. The Commerce Commission have effectively demonstrated the difficulties in creating a functioning electricity market in a small place like New Zealand. Perhaps it would be better not to try.
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Cartoon credit: The cartoons in the above post are the work of a couple of creative Dunedin Alliance members (E. & H.). Thanks for giving me the ok to post them here.

* It could be argued the SOEs are failing to live up to a requirement in the State Owned Enterprises Act to exhibit a sense of social responsibility - unfortunately many other SOEs seem to ignore this too.

Cake stall for redundant LWR workers

Lane Walker Rudkin has been placed in receivership - a situation created by inept management and the short sighted and self serving actions of Westpac bank.

Tomorrow, outside Westpac House on Willis Street (Wellington), the National Distibution Union is holding a cake stall to support the redundant workers. If you are out for lunch between 12pm and 1pm a cake or a donation will be greatly appreciated.

Stalls in other centres are being cooked as we speak. If you are on facebook please join Bake a Cake for LWR workers for updates.

Last week the receivers announced 186 jobs will go. There is no guarantee the workers will see any of the holiday or redundancy pay. This is capped under the receivership laws at $16,420, and long serving employees face losing most of the money they are owed. As Westpac instigated the receivership they will have priority as a creditor.

As Laila Harre explains
"This is a dreadful situation and the workers and their union are very angry. How the bank allowed LWR to continue to trade and build up so much debt for so long is beyond belief. Yet today, that same bank, Westpac, washes its hands of its responsibility to the workers and refuses to even meet with the NDU and Council of Trade Unions to discuss the situation.

"We need both the Government and Westpac to come up with a mechanism that will guarantee the holiday and redundancy pay owed to the workers. And the Government also needs to come to the party to fund a worker-led redundancy support service"

Great to see some good blog support already for Bake a Cake from the Hand Mirror and The Standard.

Report from Mt Albert Byelection: The Transport Forum

Just got back from a fiery Mt Albert Transport Forum, where the Mt Albert by election candidates faced over 100 people crammed into small lecture theatre at Unitech.

The meeting had a fantastic atmosphere - it was as good as the famous Aro Street election meetings in Wellington.

The fact that National announced their preferred option for Waterview only a few hours before the meeting gave it greater urgency and passion. To many locals, not only had politics arrived at the front door of their house, politics threatened to take their house completely.

National candidate Melissa Lee spoke first. Her opening words were a demand for water. She describes Waterview as 'a difficult issue' and said she felt for those in the 365 houses that would be lost due to the project. Really - is this the same woman who threatened many more houses with her 'above ground for me' proposal earlier this week. Attempted to make some noises about integrated ticketing and improving public transport. Lee also attempted some nasty dog whistle politics when she said a lot of burglaries were [the result of] people coming from South Auckland.

A comrade of mine, Lynda Boyd put it like this - "A meeting full of passionate Waterview residents who don't want to lose their houses and community, and a national candidate who needs to do her homework and learn a bit more about how to be respectful towards the general public". Similarly, on National Radio on Monday Laila Harre thought Lee's appearance on Q&A on Sunday demonstrated a "rather shrill and almost slightly nasty streak in terms of her communication towards David Shearer and people don't like that sort of stuff and won't respond well to it".

Act candidate John Boscawen spoke next. Act handed out their own a leaflet with an alternative route for Waterview. This only sought to confuse many locals who were worried this was the official plan. Yet on their map Act mislabeled Unitech as AUT University. The whole room roared with laughter when this was pointed out.

To be fair to John, his best moment came when he questioned a commitment to integrated ticketing just given by Lee. He pointed out National opposed a transport amendment bill to enable integrated ticketing in the last parliament, while Act supported it. Good point John.

Labour candidate David Shearer spoke about how Mt Albert needs an MP that will stand up for communities. He also said this community was about to be destroyed. He still backed the completion of the motorway, but only the tunnel option that was previously proposed by Labour. In his most memorable line, David Shearer said "If this motorway was being built for Paritai Drive or Remuera, we wouldn't be having this meeting"

Work is not expected to get underway until 2011, which also happens to be an election year. Shearer promised Labour would revisit the project if they became the government.

Green party co-leader Russell Norman started with a few slogans about the debate being between a green future and a grey past. Thankfully he soon dispensed with the slogans and used his sound knowledge of transport issues to directly address residents questions in a way that wasn't matched by the other candidates. He cited NZTA figures to show the Waterview motorway will be congested on the day it opens in 2015.

He talked about the Michael Joseph Savage memorial on Bastion Point and what that meant to people, and compared this with the Skytower - a syringe that is 'acts as a memorial to the Rogernomes'. It struck a nerve - a young woman with an Act party rosette responded with a single finger salute.

Norman made a strong case for prioritising public transport. For the same money that was going to be ploughed into Waterview, Auckland could have both the Avondale to Southdown rail link, and a rail line to the airport. He said he was not against the tunnel in the future, however he wanted the public transport investment to happen first. In 10 years time he suspected the Waterview connection would not be needed, particularly given the expected rise in the cost of oil.

Libertarianz candidate Julian Pistorius was predictable - let the market decide everything. He believed it was not up to the government to decide where to build roads. Property rights were sacrosanct - roads could only be built where people were willing to sell their properties. Its fair to say Pistorius was not taken particularly seriously by the audience - his manner was a bit arrogant at times, such in the way he claimed the other candidates 'don't know what they are talking about'. Perhaps Pistorius' only function was to make the Act members uncomfortable at the enthusiasm of their candidate for running roadshot over the 'property rights' of residents losing their homes. A few Act members left early.

Act candidate John Boscawen said the Waterview project should have been completed 15 years ago. Norman said the only reason there is not a surface motorway through this community is because this community had risen up to stop it. He promised to help the community fight the proposed motorway, saying we need money, experts and lawyers. He thought many lawyers would work pro-bono as the proposal was so stupid. He also saw a role for civil disobedience and protests outside the offices of Auckland National MPs.

At the conclusion of the debate, someone bought up the issue of Melissa Lee's alleged use of taxpayers money to enable a National party political video. There were loud chants of 'pay it back' from the Labour crowd at the back, a little piece of utu as 'pay it back' was the favourite of National party hacks following Labour's alleged overspending during the 2005 election. The added presence of Boscawen could well have made it sweeter.

The back of the room was a sea of large National and Labour party placards. No doubt they were there for the TV, but they did nothing to gain the votes of the locals who complained they could not see past.

Most that I spoke to afterward thought Norman won the debate. I should point out none of these people were Green party members. As for the audience, Norman gained by far the most applause for both his opening and closing statement.

Perhaps Shearer was second - another friend of mine accurately described his performance as Green-lite. I have tried to be fair to the candidates here - but Melissa Lee is clearly not the candidate the National party hoped she would be.

Update: Radio NZ is reporting Lee said people drove to the electorate from South Auckland, and that the new motorway extension could divert some of that traffic and criminals from Mt Albert. This and Not PC's comments confirm Lee made similar comments more than once - I wrote down her comment about burglaries at the time. On Newstalk ZB this morning she claimed 'I didn't actually say South Auckland' - oh yes you did - and the Radio NZ audio proves it. Given she said it more than once it will not be credible for National party spinmisters to claim it was a one off gaff. Later on Radio NZ she apologised to South Auckland people who were offended by her comments. Not PC seems to agree that Russell Norman won the debate and was the most well informed candidate - even if he disagrees with what Norman said.

State Highway 20: A bit sneaky

Yesterday I took the opportunity to walk along the new section of State Highway 20 before it opens for traffic next Friday.

NZTA claim to have made provision for rail in the future as part of the SH20 project. Despite looking through a number of NZTA documents over the past few months I have found very little detail on what this means, besides leaving a little extra room under the bridges.

I couldn't see where the railway line would go, so I asked one of the representatives in the public NZTA information tent. He pointed to a narrow section of grass running alongside the eastern side of the new motorway, where "light rail" for passengers could run. He confirmed this ruled out heavy rail like the rest of the Auckland network, carrying both freight and passengers.

There is only room for a single track light rail - it seems NZTA planners are oblivious to the huge amount of recent double tracking work over the rest of the Auckland rail network. A passenger service that is single tracked over 4km is going to have limited service frequency.

The guy I spoke to was a good natured sort. He even ventured to say with a smile that building SH20 on a designated rail corridor was "a bit sneaky'. You could say that.

It sounds like top dogs in NZTA and the Government decided to do the minimum they thought would be required to build their road. Unfortunately it sounds like we have lost rail options for the future already.

So while NZTA claim they have left provision for rail, "including ARTA's promosed rail link to the airport", this does seem at odds with ARTA's draft 2009 Auckland Transport Plan which includes a Southdown to Avondale link for both freight and passengers, following the proposed route of SH20 to Waterview.

Its also worth noting that Onehunga residents lost their beach in 1984 when a motorway was rammed over the waterfront, despite a Government promise to fix up their mess when they next extended the motorway. Well that is now happening, and it looks like Onehunga will be given what NZTA believes is the bare minimum to make the problem go away. The Onehunga Enhancement Society is to launch a legal challenge.

These examples ought to be a warning to the residents of Mt Roskill as NZTA start the "consultations" about the extension of SH20 to Waterview.

As I was walking back I heard another couple asking those in uniform where the railway line was going to go. Good.

I predict a double tracked rail line will be needed at some point, but because of the decisions made over SH20, its likely to become a more expensive project. I fear that Auckland's transport problems will never be solved while there remains a focus on the ultimate sovereignty of the car and short term economic cost/benefit analysis. Particularly when such decisions limit options for the future.

PS: At least they let the kids draw on the Motorway for one day (see pic above). If Auckland City Council gave out free chalk - would there be such a graffiti problem?

This blog is now five years old

This blog is now five years old. I don't think I will be in trouble with the Ministry of Education if I do not enroll my blog at school, even though it has reached the age it should start compulsory education :)

Sitemeter Hits since May 2, 2004: 42876
Hits last month: 932

I know by the standards of some blogs these numbers are small, but I am happy being in the little leagues. I know I could get much higher traffic if I changed format to a high number of short postings, instead of blogged down long ones. I don't intend to, as I see no point in being a news service - there are plenty of websites that cater for that. Instead I saw more value in reflections and analysis after the immediacy of the news had died down, as I don't think this is something the mainstream media do particularly well. So I aim to write the kind of things I value myself, in the hope there a few more people in the world who value the same kind of thing.

Comments and feedback from readers is welcome :)

PS: This post is a little late as I had a fun weekend at the MayDay celebration at Blackball on the West Coast - 101 years since the famous miners strike. Yeah, I know, most people would head along to the 100th anniversary instead :)