Loosing Our Power | The Jackal

14 Jun 2011

Loosing Our Power

Hekia Parata took up parliamentary time today to promote a website that is meant to help people choose the cheapest power supplier.

She was asked a patsy question by National MP Jonathan Young to allow her to go on about how great our power companies are and that National is increasing competition.

There's one thing that she missed out though; privatisation hasn’t delivered cheaper power to the masses at all. Contact Energy which was partially privatised in 1996 is by far the most expensive power company around, as these Consumer price trend graph's show. The only other company that charges more is TrustPower in the Earthquake devastated Christchurch area.
Parata's little rant was designed to make the Government appear to give a fuck about poor people who can’t afford to pay their power bills. The poor continue to go without proper heating in their homes this winter because the Government’s deregulation pushed power prices through the roof. But it's not just deregulation that is to blame... Privatisation has played a large part in making power unaffordable for many New Zealander's.

Contact Energy was established out of assets from ECNZ. In 1999, the company was then 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 then onsold its shareholding to Australian owned Origin Energy in 2004.

During the 2008 financial crisis, Contact decided to increase prices by up to 12%, while doubling its directors' fees. This pushed up energy prices accross the board. As a result, it lost more than 40000 customers in six months, 10% of the total. Its profit was halved as a result, but that didn't stop the company from charging excessive rates and continuing to be the the front runner in the New Zealand energy supply business.

Yet again we have a mismanaged SOE that was partially privatised. Not only that, Contact Energy charges it's customers more than any other power company doing business in New Zealand today.

So where does that leave National's claims that partial privatisation is going to create more competition thus reducing the cost of power bills? 

It's a blatant lie for National to promote further asset sales in consideration of the previous privatisation disaster that has disproportionately punished the poor of New Zealand.

It's important not to get caught up in all National's rhetoric and stick with the facts. Power prices did increase by over 72% under Labour, but much of this was due to Contact Energy's dramatic increase in charges driving up the price. National likes to blame Labour while they had little control over the private companies price gauging.

Hekia Parata says that power prices have increased by 14% under their governance since 2008, but isn't releasing these figures. If a similar increase continues over (god forbid) another two terms of a National Government, the increase would be around 50%. However I don't trust Parata's figures at all. Nor do I trust Nationals "mum's and dad's investors" bullshit after reading this article. Even the spiel on the Contact Energy website is misleading:
Contact Energy is one of New Zealand’s leading energy generators and retailers, providing electricity, natural gas and LPG to around 600,000 customers nationwide.
We all know Contact Energy is not a New Zealand power company, it's owned by Origin Energy, which has a majority shareholding of the some 604,934,976 shares held by around 81,000 shareholders. According to the yearly statement (PDF), Contact's profit for 2010 was NZ$154,668,000 the vast majority of which went offshore. As a partial privatised SOE, it's a dismal failure in terms of delivering affordable power or increasing competition.

The graph below shows the cost of electricity paid by various sectors in real terms from 1974 to 2008. While Residential costs have been systematically increasing, the charges and thus tax benefits for Commercial use have been declining. The cost for industrial use has not increased at all from 1979 to 2007. It's basically corporate welfare in effect at our expense.
You can read more about New Zealand's energy in the New Zealand Energy Data File 2010 (PDF).

Parata's promotion with the What's My Number and Consumer Powerswitch websites will cost $15 million over three years. Of that, $10.5m (around $3.5m per year) will be used by the Electricity Authority to run programmes to aid switching and familiarise consumers with the benefits of comparing and switching. However much of this is being obfuscated to promote National's privatisation plans. The new What's My number website has only had 146,000 hits making it unsuccessful as a commercial site.

The remaining $4.5m (around $1.5m a year) will be applied by the Ministry of Consumer Affairs to upgrade and promote the Consumer Powerswitch website. Not exactly value for money as there were already online websites available undertaking energy company switching. It's blatant self promotion by National at our expense.

Another problem with the scheme in other countries has been new companies offering good prices and when people move over they put their prices up.

The public justification for the privatisation of power companies was that market "efficiencies" and competition would lead to cheaper electricity. This has been proven to be false. Contact Energy is the most expensive energy provider and shows that National is promoting a failed example. In fact National would be hard pressed to find any example to show where privatisation has been beneficial to New Zealand.

While researching this article I found that much of the required information did not extend into Nationals current term in power. This is a typical ploy by National to try and hide relevant data. Their Ministry of Disinformation has obviously been hard at work.