Hard News by Russell Brown

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Hard News: A week being a long time in politics

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  • merc, in reply to hamishm,

    "Interesting reports about the lack of Nats talking to media."

    Never complain, never explain.
    Henry Ford

    Since Dec 2006 • 2471 posts Report Reply

  • Hebe, in reply to hamishm,

    Interesting reports about the lack of Nats talking to media.

    It's the old campaign game of "Hide the Weasel".

    Christchurch • Since May 2011 • 2899 posts Report Reply

  • Kyle Matthews,

    And then you go and spoil it all by saying something like "and have two or three private ones for competition." thus repeating the failed mantra that the private sector and the magic beans of "competition" will make power companies "efficient".

    I never said it made them more efficient, just that I'm happy with such a large market as electricity in NZ, for there to be some competition. I don't believe that unfettered market capitalism is a good model, but nor would I be in favour of a government monopoly where you could only get your electricity from one supplier. Hence if there was a govt owned option and a private option, that would be a good mix for me. I like to be able to choose between a few options as to where I get my services from - I just switched to powershop from meridian electricity just last week.

    My only proviso is that the market be sufficiently regulated to ensure that we move to sustainable generation, that supply be sufficiently guaranteed, and that the companies not be assholes to us.

    If private companies can't invest sufficiently to provide sufficient service and make a reasonable profit, tough bikkies for them, but I doubt very much that capitalism can't find a good middle ground to deliver electricity to us and make money.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson,

    I don't believe that unfettered market capitalism is a good model, but nor would I be in favour of a government monopoly where you could only get your electricity from one supplier.

    I'm not sure how happily the two can co-exist, given that government suppliers can leverage government support to give them a colossal advantage over private. Private electricity supply is not illegal in this country, so there must be a reason that it doesn't just spontaneously form - the main one I see is that such projects are highly risky, with low return, for long periods of time, so investors just aren't to be found. Once they are built, and have a proven revenue stream, like our current ones, of course plenty of people are happy to privatize those profits.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • merc, in reply to BenWilson,

    Once they are built, and have a proven revenue stream, like our current ones, of course plenty of people are happy to privatize those profits.

    There is the nub. It's about initial investment, who carries the can and who profits from it. Privatise the profit, publicise the debt. Clyde is a very good example http://en.wikipedia.org/wiki/Clyde_Dam owned by Contact Energy now, Origin Energy (Au) has a 51% holding. Now take a look at all those power stations it owns in NZ (9).
    Read how much money the NZ tax payer put into developing those power stations. Read National's involvement.
    Follow the money ;-)
    History
    Contact Energy was incorporated on 8 November 1995 and became a state owned enterprise on 18 November 1995.[4] Contact commenced operations on 1 February 1996, acquiring assets from ECNZ with a payment of $1.6 billion.[4] As the founding chief executive, Paul Anthony was instrumental in establishing the corporation distinct from ECNZ.
    In 1999, the company was sold in a public offering of shares, with 40% purchased by Edison Mission Energy (EME) as cornerstone shareholder. EME subsequently increased its shareholding to 51%.
    Following financial difficulties elsewhere in its business, EME onsold its shareholding to Origin Energy in 2004.
    During the 2008 financial crisis, Contact decided to increase prices by up to 12%, while doubling its directors' fees. As a result, it lost more than 40000 customers in six months - 10% of the total. Its profit was halved. Contact calls this the worst blow to its reputation in the company's history.[5][6] http://en.wikipedia.org/wiki/Contact_Energy
    Deja voodoo.

    Since Dec 2006 • 2471 posts Report Reply

  • Sacha, in reply to BenWilson,

    Once they are built, and have a proven revenue stream, like our current ones, of course plenty of people are happy to privatize those profits.

    Gordon Campbell's latest article says the energy SOEs just had a big surge in capital investment - the profits of which will now be privatised after the costs were socialised. Textbook.

    Too bad the taxpayer will now be losing out once those assets are sold down, because they’ve just paid for the capital investment that will be driving those even higher returns – and which the private investors will begin to reap.

    The evidence is clear on this point. The $1.7 billion return over the last three years from the four energy companies would have been even higher, as Greens Co-Leader Russel Norman pointed out yesterday, if the SOEs in question hadn’t chosen to double their investment in new plant and machinery, in order to deliver even higher returns in future. As Norman says:

    Now that the earning potential of our SOEs has been enhanced through this capital investment, the Crown can expect to see considerable growth in dividend streams from this point on. Treasury makes this point explicit in their last 2010 Annual Portfolio Report. They say the Crown should now expect to receive higher returns.

    We have seen this before. Like our energy SOEs, Telecom had invested significant amounts of capital in building a modern telecommunications network in the years before privatisation. In the years following Telecom’s privatisation, dividend streams for its new private owners doubled, then tripled within six years. History now seems to be repeating itself with our energy SOEs. National has allowed the taxpayer to build up the asset, only to then on-sell it to the benefit of others.

    More than anything, those current 17.5% returns on average over the past five years are an astonishing testament to the efficiency of the SOEs. Despite the election campaign propaganda that asset sales will bring private sector disciplines to bear on the SOEs, the reality is the exact opposite. The SOEs are at serious risk of being reduced to the same general levels of incompetence as the private sector.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Ian Dalziel, in reply to ,

    Clyde dame project

    aaarh! But it's a Bonnie lake...

    Christchurch • Since Dec 2006 • 7953 posts Report Reply

  • Rich of Observationz,

    nor would I be in favour of a government monopoly where you could only get your electricity from one supplier

    You do already, more or less.

    To start with there is (and can only be) one distribution network. At any given time, there is an optimal set of power stations that should be in use. That varys depending on whether one is trying to minimise cost or carbon emissions (and fuel use) but it's a calculable value. Power generation is a mature technology where there is limited scope for operational innovation, so one operator of the same asset would have the same costs as another.

    The current system of pricing is a pseudo-market with an artificial, fluctuating price and a system of middle men. (Powershop is an example of what's wrong with 21st century capitalism - a completely unproductive and useless business).

    The best way to deliver electricity would be to choose power stations with a carbon-emission optimising model and price the electricity on a fair and transparent cost+margin basis.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

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