Yes, Yes, Yes, No Crisis

11/06/2008

Is this the Clayton’s crisis – the one we have when we’re not having one?

 

Energy Minister David Parker  says we’re not having one:

 But Transpower CE Patrick Strange  says there is.

We as an industry are very concerned. We are risk averse, so things concern us….it is serious when we call on New Zealanders to be prudent with their [power] use. For the electricity industry, we call that serious.”

 

At a meet the candidates meeting when he was first seeking election in Otago in 2002 Parker said one of the reasons he was standing for Labour was because of Max Bradford’s power reforms.

 

When questioned at another meeting when he was an MP about why he hadn’t done anything to change the system he was so opposed to he said something to the effect that once something was entrenched it was too hard to change.

 

 He has a point there, sometimes when a policy is embedded it is difficult – for practical or political reasons – to do much about it and it becomes one of those dead rats MPs and their parties have to swallow. That is the reasoning National is giving for agreeing to continue with interest-free student loans – there would be no real practical impediment to changing the policy but it would do too much harm politically to even contemplate it.

 

 The power system is different – it was a very unpopular policy when it was introduced and if anything it’s even more unpopular now.

 

 The idea of competition might offer consumers choice in theory, but in practice it’s too much hassle to exercise that choice and change your energy supplier unless you’re really, really unhappy. Even there what do you gain when you get six from one and half a dozen from the other?

 

 The other flaw is that the companies are businesses which need to make profits which they do by selling power. There is nothing wrong with profits and a profit motive but power companies make a profit more easily when demand is high because the price goes up so there is absolutely no incentive for them to encourage conservation or alternative generation. The more profit they make, the better the dividend the Government receives from its SOEs so its desire to avoid the political consequences of power shortages conflicts with its desire/need to receive more money.

 

 And let’s not forget there’s an election soon.

 

The Government is understood to be concerned that the elderly in particular may panic and try to conserve power at the expense of their health. It also does not want to be responsible for telling voters in an election year that they must cut their consumption.

Parker yesterday denied downplaying the situation, saying the Government had been “absolutely transparent” about the hydro-lake levels.

He admitted politics did play a part. “I suppose politics is involved in everything in an election year.”

[Update: Truthseekernz opines that the marekt model isn’t working and points to energy consultant Bryan Leyland saying the market system has cost consumers $7b over 10 years.

 

And Keeping Stock comments on the irony of power companies campaigning for power savings.]


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