Bob wants higher power prices | The Jackal

23 Apr 2013

Bob wants higher power prices

It wasn't that long ago when New Zealand was one of the best places in the world to live, irrespective of a person's financial wealth. In fact financial wealth wasn't the be all and end all that it is now, with citizens enjoying full employment, a functioning state housing and welfare system amongst other socially beneficial provisions brought about by democracy.

How things have changed. Now we have high unemployment, low wages and expensive electricity so that many people on fixed incomes cannot afford to heat their homes properly in winter. We see the result of such energy poverty with increased hospitalisation and lower productivity, both of which cost the country dearly.

But the free-marketeer, let's call him Bob, doesn't care about any of that... Bob doesn't give a damn if a few thousand poor people each year become sick from cold damp housing because they cannot afford to pay for electricity. As long as Bob can make a few bucks from investing in power companies that had turnover of around $10 billion last year, Bob will be a happy little capitalist.

There's no doubt that increasing revenue from electricity sales comes at public and economic expense and that Kiwi households and businesses have been hit hard by a largely unregulated marketplace. No matter what the actual cost to generate electricity, the current system is designed to extract exorbitant amounts of money, and with the bulk of our electricity being generated at 1 cent per KWh from hydro dams that were built and paid for many years ago, most Kiwis understand that we're being ripped off big time.

Bob doesn't see it like that though... He thinks the rich having more money to invest balances out increased commodity prices and struggling businesses because of expensive electricity. It doesn't matter to Bob that he didn't invest in anything productive after the last round of tax cuts for the wealthy, and that's why New Zealands economy continues to stagnate. Bob doesn't seem to realise that investing in non-productive areas will detrimentally affect the economy, and therefore his long-term profit margins.

To justify the status quo of high power prices, the proponents of asset sales say that profits from that huge revenue stream are low, which averaged only 4.8% last year for the five main power companies. However that seemingly low return is because, along with top management being overly compensated and increased debt levels, National has demanded huge investment in the sector to build up infrastructure just before it's partially privatised. They're presently spending large amounts of public money to effectively increase future profits, 49% of which would then go to Bob under Nationals mixed ownership model.

There's no doubt that investors yield will increase faster with unchecked increases to your monthly bill, which is why people like Bob hate the concept of NZ Power so much. However the effect will be nominal, being that the policy only targets 7% of the $10 billion revenue stream, which grew by an average 18.6% last year.

Luckily, Bob and his neoliberal mates are in a very small minority group, with the majority of business owners and middle class workers wanting cheaper power prices. These people are more likely to vote for parties that actively work towards the social and economic benefits cheaper power prices (PDF) will bring, which will cause increased support for the Labour and Green's at the next election... Roll on November 2014.