LabGreen power plan would be worse

The LabourGreen power plan would be worse for consumers than the current system.

The electricity market in New Zealand is extremely competitive, with consumers able to switch retailers to gain lower prices, and more consumers using metering and home energy management systems to save more. But the electricity proposals of the Labour and Greens parties would be less able than the current market to meet consumer needs.

These are among the key findings of an analysis of the electricity market commissioned by BusinessNZ and undertaken by Sapere Research Group.

BusinessNZ Chief Executive Phil O’Reilly says it is valuable to get rigorous analysis on a sector that is complex and sometimes poorly understood.

“The electricity market was established in 1996 and has operated under changing rules since then. The research makes it clear that under the current 2010 rules, the electricity market is developing towards a highly competitive, well-functioning market.

“The electricity market’s greatest problem has been a lack of transparency around prices. Energy companies have not explained price changes clearly enough, and this has led to doubts about whether prices have been unnecessarily high in the past. BusinessNZ is recommending that energy companies ensure that the reasons for future price changes are meticulously itemised. We also recommend investigating whether we should have rules for information disclosure around price setting.

“The Sapere research also notes that a segment of the market may be experiencing energy hardship in having to spend too great a proportion of their income on house heating. BusinessNZ recommends investigating options for policies within the market and the social welfare system to help alleviate this,” Mr O’Reilly said.

Sapere found the electricity market is achieving positive outcomes against five key criteria:
1. Secure supply of electricity
2. Efficient operation and market transactions
3. Efficient investment in assets
4. Social requirements
5. Environmental requirements

Sapere also analysed NZ Power proposals (Labour and Greens policies) against the same criteria. Sapere concluded that these policies would be less able than the current market to meet the five criteria, and would not resolve transparency or energy hardship problems. . .

The Labour Green power plan would make the electricity supply less secure, lead to less efficiency in operation and market transactions, less efficiency in investment, poorer social requirements and poorer environmental requirements.

Rather than fixing any problems, real or perceived, it would exacerbate them and the people who would be most disadvantaged by the added costs and poorer efficiency would be those least able to afford them.

That isn’t unusual when ideology comes before practical considerations.

Key findings of the report are:

• Outcomes under all of the public policy goals are for the most part positive but there are some areas where more effort should be applied
• Security of supply has improved under the market, and investment in generation, transmission, and distribution assets is keeping ahead of demand without government subsidy or direction
• Retail electricity price increases have not been transparent enough
• There appears to be insufficient action to address energy hardship experienced by some consumers who live in houses that are too cold and damp
• The NZ Power proposal would be less able than the current market to deliver against the five goals, and would not resolve transparency or energy hardship problems

BusinessNZ recommendations:
• Retain current electricity market framework as superior to the alternatives across a range of desirable policy objectives

• Aggressively pursue net-benefit positive improvements to the efficiency of the current market arrangements by improving price transparency:
i. Investigate rules for information disclosure around price setting
ii. Fast-track Electricity Authority and MBIE workstreams on price transparency

• Confirm the nature and size of the issue of energy hardship, acknowledging that efforts by the electricity market will benefit those affected only marginally

• Implement options to aid those experiencing energy hardship, in a systematic, whole of-government way (including the appointment of a lead agency), such as:
i. Requiring landlords who receive state money to make their houses available for social housing to submit their houses to a ‘warrant of fitness’
ii. Replacing the poorly targeted Low Fixed User Charge with a better initiative
iii. Reviewing initiatives in health and welfare that can help address energy hardship

The full report is here.

11 Responses to LabGreen power plan would be worse

  1. robertguyton says:

    Nonsense. The report is politically interfered-with and skewed to protect those who benefit from excessive power prices for New Zealanders, and who are frightened by the Labour/Green proposals for cheaper power for everyone.
    Seems you’ve swallowed it hook, line and sinker, Ele, as expected.
    The report has been panned across the media.


  2. Paranormal says:

    Oh rilly RG? The fact is that socialist power purchasing programmes lead to underinvestment, less efficiency, uncertainty in supply, and ultimately more expensive power.


  3. J Bloggs says:

    The one thing everyone overlooks is that just because someone WANTS to sell to their product, it doesn’t mean that they HAVE to…

    This whole “single buyer” plan of Lab-Greens won’t deliver the outcomes they say it will, because it is based on one very flawed assumption:

    Namely, that the power companies will agree to sell power to the government at a loss/minimal profit, rather than mothballing power stations and making the workers redundant.

    Based on your understanding of how big business works – which do you think is the more likely outcome?


  4. Quintin Hogg says:

    Nice to see a grown up a debate about the issue. This report adds to that.

    I am going to read the material that has been produced and make my own mind up about what is better for the electricity market.

    Instead of a measured response there is the typical knee jerk reaction from the representative of the left. i.e RG runs around shrieking it’s bad, it’s bad.


  5. Mr E says:

    Robert believes in conspiracy.

    So does Colin Craig.


  6. TraceyS says:

    I’m sure there is a clever plan for that. It will no doubt involve increasing the cost, or introducing penalties, for companies to downsize their business. Industry standard employment agreements, with excessive redundancy provisions, for example.


  7. robertguyton says:

    Lots of H,L&S swallowers here today. Lucky National, to have such complacent supporters. They’ll be able to put anything they like past you (It’s okay to make throat-slitting gestures in the House, it’s Prime Ministerial to call other MPs, “idiot”).
    The Labour/Green proposals for cheaper and more fair power prices for New Zealanders are excellent and will be implemented once they become Government later this year.


  8. J Bloggs says:

    Robert, How is paying for the same product twice cheaper and more fair?


  9. jabba says:

    bOb is confused yet again .. a Green/Labour/Mana Govt will need Zillions of dollars to pay for all their pledges .. to reduce the tax take from power prices will mean getting it from elsewhere .. the carbon tax will be a killer (as would fuel taxes and all the others they will dream up).


  10. robertguyton says:

    JBloggs – you mean like buying shares in power companies that were already public owned?
    I see what you mean, that is unfair!


  11. J Bloggs says:

    Don’t try changing the debate, Robert. Explain how NZPOWER spending my money, in the form of collected taxes, buying electricity from the Powerco’s, then selling that power to me for more of my money is cheaper and fairer than the current model.


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