Home > Dollars & Sense, The Body Politic > Employers and Manufacturers Association – wishing for cheaper power is not enough

Employers and Manufacturers Association – wishing for cheaper power is not enough

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Recently, EMA CEO, Kim Campbell, issued a media statement condemning the current high power prices and promises of a “price freeze” by Mighty River Power as inadequate. Campbell’s own words were that the so-called price freeze is  “simply not enough”.

By the way, I refer to MRP’s price freeze as “so called” because, as CEO,  Doug Heffernan stated,

We are now confirming that for our customers there will be no increase in our energy prices for a further 15 months. However, there will likely be changes in customer pricing from April 1 due to variables over which we have no control that we pass through on our bills – such as transmission and distribution charges and any increases in metering costs due to regulatory requirements.”

Source

Unfortunately, the Employers and Manufacturers Association – whilst calling for a drop in power prices – offers nothing constructive in making it happen.

Indeed, in May 2013, soon after the combined LabourGreen announcement on the creation of a single-buyer desk called NZ Power, the EMA (and others) roundly condemned the move.

The EMA was a co-signatory to an open letter  on 2 May, from BusinessNZ and the heads of several chambers of commerce. The letter said, that the policy would harm jobs, growth and investment, causing interest rates to rise, reducing KiwiSaver retirement savings and making people less well off (source).

The associated media release stated,

The signatories to the letter offer to work with the Labour and Green parties to help increase public understanding of the operation of the electricity market and in ensuring consumers have better choice as the electricity market becomes more competitive.”

IBID

BusinessNZ Chief Executive Phil O’Reilly, stated,

More price competition – rather than damaging price controls – is needed to drive down electricity prices.”

IBID

Well, that “price competition” has worked so amazingly well that seven and a half months later, on 16 December, one of the signatories to that letter condemning NZ Power wrote,

With power supply clearly outstripping demand, electricity prices are now too high and should come down, the Employers and Manufacturers Association says.

“New Zealand clearly now has an excess of installed electricity capacity,” said Kim Campbell, EMA’s chief executive.

“Demand for power is well below the country’s generation capacity and its price should reduce to help stimulate New Zealand’s economic recovery and offset inflationary pressures forecast in other parts of the economy.

“At present projections the savings available to business and residential consumers would be at least $67 million a year, but we suspect it could be much more.

“Stating as Mighty River Power has, that they will not increase the electricity price for three years is simply not enough.

“The Major Electricity Users Group notes the futures price for wholesale power for the year from 1st April 2014 is 7.14 c/kWh, down 0.17 c/kWh for the year. In a competitive market this reduction would be reflected in wholesale costs which would be passed through to retail customers.

“MEUG calculates that an average household using 8,000 kWh per year would save at least $13.80 per year or $23 million for all households.

“For all businesses and residences the potential cost reductions amount to $67 million in 2014/15.

“To maximise competitiveness our electricity market structures need to ensure the lowest possible power price while signalling the right time to invest in future generation and transmission.

Source

Unfortunately, Campbell then shoots himself in the proverbial foot by adding,

The Labour/Greens electricity proposal to underprice our existing power assets is no answer.

“To spur on market competition businesses should seek out the best power deals at www.whatsmynumber.org.nz/mybusiness

As I said, hasn’t that worked out well?!

So, if I understand Campbell’s stance on this problem; the LabourGreen proposal for NZ Power “is no answer“.

Instead, begging the power companies to drop their prices is Campbell’s only solution?!

Pathetic.

His “solution” is a do-nothing, beg-for-the-best, whilst New Zealanders are having to pay for higher and higher power prices.

To remind Campbell and his fellow businessmen and women; the more that we consumers pay for electricity –

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MED Prices-httpwww.med.govt.nzsectors-industriesenergyenergy-modellingdataprices

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the less disposable income we consumers have to spend on their goods and services.

Without drawing a bright, pretty, picture with crayons, I can’t make that simple truism any clearer to understand.

Which is why, when the EMA joined BusinessNZ in an ideological vendetta against the LabourGreen proposal, they were not only doing consumers a grave disservice – but also slitting their own financial throats.

The. More. We. Spend. On. Power, The. Less. We. Have. To. Spend. On. Other. Goods. And. Services.

Perhaps Campbell and his supposedly astute business colleagues should re-visit their position on NZ Power?

Who knows – it might actually be good for business!

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This blogpost was first published on The Daily Blog on 25 December 2013.

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References

Otago Daily Times: Lower power prices coming says Bradford (3 June 1999)

MoBIE: Power prices

Statistics New Zealand: The history of electricity reform

NZ Herald: Labour, Greens make power promise

Scoop media: Open Letter to Labour, Greens: Please Withdraw Your Policy

TV3: Mighty River Power promises price freeze until April 2015

Scoop media: Electricity prices should come down

Fairfax media: Business urges Opposition to dump power plans

Previous related blogposts

The Politics of Power and a Very Clear Choice – Part Tahi

The Politics of Power and a Very Clear Choice – Part Rua

The Politics of Power and a Very Clear Choice – Part Toru

The Politics of Power and a Very Clear Choice – Part Wha

It’s Official, The Sky Will Fall – Phil O’Reilly

Labour, Greens, NZ First, & Mana – A Bright Idea with electricity!

History Lesson – Tahi – Electricity Sector “reforms”

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  1. Peter Kennedy
    1 January 2014 at 12:43 pm

    Thanks Frank, and thanks for the clipping from the ODT. Like many,after reading Max Bradford’s propaganda piece, I simply bent over and kissed the moon good-bye.

  2. Mooloo magic
    1 January 2014 at 1:27 pm

    What disappoints me after fifteen years of Bradford’s lunacy we still have the same flawed model for Electricity distribution and retail. The Clarke government failed to address this and we are not going to see progressive changes that will benefit domestic consumers under this Laissez-faire government that only subscribes to corporate welfare.
    The proposed Greens/Labour Power shop proposal although a step in the right direction will not go far enough for low income households.
    Electricity charges in the country have become unreasonably expensive and a burden for most households. We need Labour and Greens to totally reform the Electricity sector do away with the current situation that only benefits the CEOs of the power companies who are more than generously reimbursed whilst the majority of Kiwis struggle to pay their power bills especially in winter.
    We should not be held to ransom by greedy cooperates but unfortunately that’s seem to be the way this country has become as the inequality gap increases significantly each year and people become more demoralised and hope disappears meanwhile Key and English fail to deliver the much vaunted ‘Better future’ and yet the PM remain so popular!!

  3. 1 January 2014 at 6:54 pm

    I heartily concur, Mooloo.

    Clark’s administration did very little (if anhything) to reduce or even contain power prices. I suspect that the powercos were used by Cullen to help pay down the massive sovereign debt that Labour inherited in late 1999.

    Be that as it may, and as important as fiscal common sense is necessary, rising power prices and increased dividends did nothing to assist low and middle income families. It made life much harder for them.

    And it could be said that turning Mighty River Power, Meridian, and Genesis into profitable “cash cows” simply made them attractive to the neo-liberal ideologues to semi-privatise them.

    Had Labour taken all three powercos; reformed them into a new Electricity Department entity; and reduced the profit-taking, that may have made it harder for Key and English to easily privatise them.

    As a libertarian associate of mine remarked; why did we have three state owned powercos, with three sets of CEOs and management; three sets of associated bureacracy; and everything else triplicated? Wasn’t that a waste of money? Having one electricity SOE would have made more sense; reduced costs; and still returned profits to the government.

    He’s one of the few libertarians who makes sense in his observations.

    I hope a Labour-led government does re-nationalise Mighty River Power and Meridian and reformed into a single entity. I hope the commercial SOE model is dismantled; the profit motive is eliminated; and the new entity is returned to it’s formal role as a government department.

    I hope the price of power reduces significantly to give relief to low, middle, and fixed income families. (With those National/ACT voters who support the free market system allowed to opt to pay higher, “market” prices with Contact Energy.)

    And lastly, that a Labour-led government find ways to entrench this system to make it harder for any future right wing government to undo all this.

    Perhaps every New Zealander should be issued with one non-transferable “Kiwi Share”, making up 75% “ownership” of any new electricity entity, thereby taking control from the government-of-the-day? Such a move would democratise one of our most important state assets and place it firmly in the hands of the people.

  4. Priss
    4 January 2014 at 10:25 pm

    I wonder if Campbell understands the maxim “cutting of your nose to spite your own face”?

    If these people, supposedly astute businessmen/women, don’t understand that high power prices hurt their businesses, then there’s no hope for them. It tells me they’re more fixated on following ideological correctness rather than pragmatic policies that will benefit us all.

    Wake up Mr Campbell!!

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