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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.”
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.
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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– 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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The Vote, Electricity, and Sex! (That’ll grab your attention!)
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Question: How would it feel to be pregnant?
Answer: No idea. I’m not a woman.
Question: How would it feel to be a billionaire?
Answer: No idea. I’ve never had that kind of wealth.
Question: How would it feel to be intellectually handicapped through foetal alcohol syndrome.
Answer: No idea. I’m not intellectually handicapped, nor affected by foetal alcohol syndrome.
Question: How would it feel to be in a warzone, as a combatant, killing people?
Answer: No idea. I’ve never been in a warzone, as a combatant, killing people.
Yet, TV3 is asking viewers – many of whom are reasonably well-off, comfortable, secure, well-fed, warm, middle class families – to understand the effects that long-term, ingrained poverty has on families?
The question tomorrow (19 June) will be;
Our kids – The problem’s not poverty, it’s parenting. Do you agree?
It a ludicrous question, of course. Those who’ve never experienced poverty have little idea what it’s really like.
What is even more stomach-turning is that the debating team that supports the Question – that The problem’s not poverty, it’s parenting – are these following characters,
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Bob McCoskrie
Bob McCoskrie has a background in teaching and accounting, having graduated from Auckland University in 1986 with a Masters of Commerce with Honours, and a Diploma in Teaching from the Auckland College of Education. He lectured in accounting, taxation, and commercial law at Manukau Polytechnic for four years, before becoming Director of Youth for Christ (YFC) South Auckland in 1990. In 1994, he set up the Papatoetoe Adolescent Christian Trust (PACT) working with at-risk youth and their families in schools and the South Auckland community. In 1996 he was appointed a Justice of the Peace. In 2002, he joined the Rhema Broadcasting Group as Breakfast / Talkback Host on their nationwide programme, and Television presenter on their Current Affairs show “NZone Focus”.In 2006 he left RBG to establish the advocacy and research organization Family First (NZ) and is its National Director. Bob is married to Tina, and they have three children.
Hannah Tamaki
Hannah is the co-founder of Destiny Churches New Zealand with her husband, Bishop Brian Tamaki. The church movement possesses one of the largest Maori memberships in the country. In addition to being a grandmother of 10 adoring grandchildren, Hannah’s role involves senior level leadership as well as ground-floor mentoring and counselling with families requirement spiritual and practical input and guidance. Besides running a very successful and well attended women’s ministry, Hannah founded Healing Hands Trust which assists women and their whanau with acute medical conditions requiring urgent surgery, and she has played a lead role in establishing a school and early childhood centre. Hannah’s unwavering passion for people is evident in everything she puts her hands to.
Christine Rankin
Christine Rankin is a former Families Commissioner, CEO of the ‘For Sake of Our Children Trust’ and has recently taken up the position of CEO of the Conservative Party. Christine was on a Domestic Purposes Benefit and had no University Degree before taking on a temporary job with the Department of Social Welfare in 1978. By 1998 she had worked her way to the top, becoming the youngest director in the country. She was later appointed General Manager and then Chief Executive of Work and Income New Zealand, responsible for around 5500 staff. Christine is committed to the well-being of children and is renowned as a speaker on leadership, culture change and political/social issues, as well as sharing her own story of making it against the odds.
Acknowledegment: TV3 – The Vote
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Why are three middle class, affluent, well-resourced, high-income earning individuals pontificating about the effects of poverty on this country’s poorest people? What the hell would they know?
It’s like having men debating the effects of pregnancy and/or abortion on women’s bodies and minds.
It’s like having white anglo-saxons denying the existance of racism.
And really, none of those three are in any position to moralise.
One is an advocate of beating children and is openly homophobic.
Another has grown bloated-rich on the backs of her poor (often Maori) congregation.
And the last – well, I’ll keep my knowledge of the “Ear-ringed One’s” past proclivities to myself.
The question is utterly meaningless in the wider context, and the “Yes/No” nature denies the complexities of the problem (I refuse to call it an “issue”).
For what it’s worth (admittedlynot much), we’ll be voting a firm,
‘No’
Text 3665.
Or, vote on-line.
If only to show that there is more to this than playing the ‘blame-game’.
As for Rankin, Tamaki, and McCoskie – I don’t expect much from them except tediously-repeated prejudice, rhetoric, and stereotyping.
Prove me wrong, you three.
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Electricity Authority Chairman, Brent Layton, was a National Party appointment, in October 2010.
Hardly surprising then, that the Nats would prompt him to try to condemn Labour-Greens “NZ Power” single buyer desk.
Unfortunately, Layton cannot ignore the fact the electricity prices have soared since Max Bradford’s “reforms” – by over 75% – and he has done nothing to alleviate price rises.
Ministry of Economic Development (MED) statistics show average power prices rose from 13.9 cents per kilowatt-hour on average in May 2001 to 26 cents in May 2011.
Acknowledgement: NZ Herald – Power prices double over decade
Low and middle-income families have been the ones paying higher and higher prices – whilst industry and commercial users have had cheaper tariffs. The reality is that, we, the public, have been subsidising business. (On top of which, electricity costs for business are tax-deductible – unlike for residential users.)
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Acknowledgement: Ministry of Economic Development (MED) – Prices
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The MED graph above is fairly crystal clear.
So much for Layton’s scare-mongering bullshit – some of which was published on the right-wing publication, the NBR (National Business Review).
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Brent Layton – scare-mongering for his National mates?
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Grey Power is 100% when they state;
“We can argue about the reports and validity of the data but everyone knows electricity prices have continued to rise at an alarming rate over the last decade, and the profits of the electricity sector have been far in excess of what is reasonable and in some cases quite obscene.”
As such Layton, as a government mouth-piece and cadre for the “market”, is part of the problem.
This consumer can hardly wait for NZ Power to come online. It can be funded by getting rid of the useless Electricity Authority – and sacking Layton.
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Acknowledgement: NZ Herald – Sex report slams Kiwi lessons
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On the issue of Bob McCroskie and his ultra-conservative, right-wing group, Family First, they have released a report called “R18: Sexuality Education in New Zealand – A Critical Review”.
The report criticises sex education in New Zealand, with the author, United States psychiatrist Dr Miriam Grossman, stating,
“A premise of modern sex education is that young people have the right to make their own decisions about sexual activity, and no judging is allowed. Risky behaviours are normalised and even celebrated. Children and adolescents are introduced to sexual activities their parents would prefer they not even know about, let alone practice. It’s reasonable to ask: is the ‘comprehensive sexuality education’ foisted on young people all over the world about sexual health, or sexual licence?
While most of these resources claim to promote sexual health, we find, overall, little encouragement of restraint or self-discipline. Instead, students are informed that at any age, sexual freedom is a ‘right.
The information is not accurate, comprehensive, or up-to-date. Sex is seen as risky only when it’s ‘unprotected’. The efficacy of condoms is overstated, in some cases vastly so. The quantitative data about their use is absent. The vulnerability of the immature cervix and the hazards of anal intercourse are omitted. Chlamydia is incorrectly described as ‘easily cured’. Young people are led to believe that sex is easily divorced from emotional attachment. Worst of all, critical life and death information is distorted or ignored.
Students are left misinformed, and with a false sense of security. Surely this is the last thing parents want.”
Acknowledgement: Scoop – Sex Ed Preaches Sexual Licence, Not Sexual Health
The Scoop press release issued by Family First describes Dr Miriam Grossman thusly,
“Miriam Grossman MD is known internationally for her courage in breaking ranks and calling foul on the sexuality education industry. She has lectured at the British House of Lords and the United Nations. Dr Grossman is board certified in psychiatry and in the sub-specialty of child and adolescent psychiatry. Dr Grossman visited New Zealand last year.”
Acknowledgement: IBID
So who is Dr Miriam Grossman? And why has she provided an anti-sex education report for the ultra-conservative Family First?
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Dr Miriam Grossman – anti-sex education, ultra-conservative
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Because Dr Miriam Grossman herself is an anti-sex education, ultra-conservative.
Without re-writing what has already been written about this person, instead I will quote from GayNZ. Their comments mirror mine precisely,
For a change, Grossman isn’t a fundamentalist Protestant or conservative Catholic- although she is a religious social conservative, namely an Orthodox Jew. It should be noted that not all Orthodox Jews subscribe to co-belligerency with the Christian Right, wary of the troubled fundamentalist and Catholic pasts insofar as anti-Semitism is concerned. However, Grosssman doesn’t fall into that category- she is a regular guest of US Christian Right organisations like Focus on the Family and participates within the World Congress of Families, a US Christian Right-centred international networking annual conference, to be held in Madrid in May 2012 this year.
And as one might guess, the “World Congress of Families” is fixated on a narrow range of religious social conservative obsessions- opposition to feminism, opposition to LGBT legislative reform, opposition to abortion rights, opposition to comprehensive sex education and nothing that really affects real families all that much. According to the March 2012, our own beloved Family First isn’t a ‘partner’ like notorious antigay organisations Americans for “Truth” about Homosexuality, Focus on the Family and Family Research Council (US), Christian Concern (UK), Endeavour Forum and the Australian Family Association (Australia), REAL Women (Canada), Human Life International and Tradition Family and Property.
Grossman’s forte is attacking comprehensive sexuality organisation as produced by mainstream evidence-based organisations like the International Planned Parenthood Federation and our own Family Planning Association. This involves indoctrinating young women with propaganda about STIs and psychological stresses involved with initiating and maintaining sexual relationships, while neglecting important correlates like self-esteem education and information about contraception. These ‘fear-based curricula’ don’t actually prevent teenagers from having sex, and they do lack information about how to protect oneself from HIV/AIDS and STI through condoms and other forms of contraception. Needless to say, Grossman toes the religious social conservative party line when it comes to homosexuality too- on the basis of extremely biased ‘evidence’ from the exgay NARTH organisation, she argues that sexual orientation can be easily modified. She herself is associated with the Clare Booth Luce Policy Institute, a US antifeminist research organisation. People For the American Way has excellent articles on insight into their agenda on their website, which provide useful rebuttals of the ‘science’ involved.
It’s easy to speculate what sort of ‘research’ will be cited at this event. We are supposed to be blinded by the fact that Grossman has professional qualifications without asking whether her particular opinion is congruent with evidence-based research and practise from mainstream professional opinion and practise. Whenever one encounters religious social conservative professionals, one is met with badly designed ‘research’ methods and practise, selective citation or distortion of others research if it contradicts religious social conservative dogma and ‘cherry picking’ of selective data sets compared to a wider body of research that shows some inconvenient conclusions that refute their case. In two words, junk ‘science’
No wonder Family First invited her to their Forum. I would also hazard a guess that her involvement suggests that Family First may be becoming increasingly dependent on the US Christian Right and its Canadian, British and Australian satellites for its survival in terms of propaganda, tactics and strategy. I could only count four fundamentalist small business donors for the Forum this year- Business and Tax Advisors, FetchALamp, Pharmabrokers and Leaning Options. Obviously, the recession is biting deep into their pool of available donors, judging from the meagre nature of this list. Family First is also actively involved in propagandising for one of her books, of which there are two, published by conservative US imprints Regnery and Sentinel.
How convenient to be so forewarned.
Acknowledgement: GayNZ – Who is Miriam Grossman?
Dr Miriam Grossman, Family First, and Bob McCoskrie – all advocating that when it comes to sex education, ignorance is bliss.
And McCoskrie is appearing on Third Degree The Vote, tomorrow night, debating against the concept of poverty’s affect on children?
More ignorance is bliss no doubt.
Other blogs
Ideologically Impure: Dr Miriam Grossman: when you want some fear-mongering in your sex ed
Frogblog: Family First gets it wrong on sexuality education also
Herstory: Dr Miriam Grossman, lies, bent truths, and irresponsible medicine
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The Politics of Power and a Very Clear Choice – Part Wha
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Continued from: The Politics of Power and a Very Clear Choice – Part Toru
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First NZ
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As Chris Trotter pointed out in his excellent blogpost just recently,
“ONLY STEVEN JOYCE could offer up JB Were, Woodward Partners, Milford Asset Management, First NZ Capital, and Forsyth Barr as credible critics of the Labour-Greens’ energy policy. As if these six financial institutions were ever likely to offer the Opposition parties their fulsome support!.”
Acknowledgement: The Daily Blog – No Dog In The Fight: Whatever happened To Academic Expertise?
We can add to the above list; AMP Capital, Morningstar Research, BusinessNZ, and Federated Farmers – all of which appear to be the front-line foot-mercenary-soldiers in National’s counter-attack to the Labour-Green’s NZ Power.
Minister of the Known Universe, Steven Joyce’s actual comment was,
“Financial analysts including JB Were, Woodward Partners, Milford Asset Management, First NZ Capital, Devon Funds Management and Forsyth Barr are unanimous in their condemnation. One has labelled it a ‘hand grenade’ to the New Zealand economy, while others have said it will cut the value of every New Zealanders’ KiwiSaver account and lead to rolling blackouts. ”
Acknowledgement: Scoop – Labour-Greens Power ‘Plan’ Economic Sabotage
“Rolling blackouts“?!
He left out a plague of locusts and rivers turning into blood (though with farm run-offs, these days it’s more like Rivers of Excrement).
We’ve had power black-outs in the past, due to dry weather; equipment failure; shut-downs for maintenance; human error; etc. And we will continue to have unavoidable power cuts, in the future;
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Acknowledgement: NZ Radio – Damaging gales forecast for north
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Joyce added,
“Kiwis are deeply suspicious about the Labour-Greens announcement and its timing. It’s simply economic sabotage. ”
Hmmm, considering the high value of the New Zealand dollar’s destructive effects on our manufacturing/export sector and the 40,000 jobs that’s been lost in the last four years – if I were Joyce, I would not be too keen to bandy about charges of “economic sabotage”. National’s policies in the last few years have been more than effective in that regard,
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Acknowledgement: Radio NZ – Exporters tell inquiry of threat from high dollar
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It’s hardly surprising that most of the negative response has been from the financial markets and commercial firms. They are the ones with the naked vested interests.
To date, the following fear-threats have been thrown at the New Zealand public – because make no mistake, these doomsday scenarios are directed at voters, and not Labour or the Greens.
Acknowledgement: First NZ – Contact Energy – If it ain’t broke don’t fix it
Hold on.
Is First NZ is really telling the public that power prices have only risen 2.6% since 2000?!?! Well, they do qualify that with “net of line charges and after allowing for inflation”. Though why they would omit line charges seems pointless; the public are still paying at the end. “Clipping the ticket” seems the norm and impacts on the end-consumer regardless of how it is done.
Which also raises a question in my mind; why is First NZ making this assertion only now? Why did they not make the effort to rebut National’s claims when Dear Leader issued public statements like this, on 27 January, 2011,
“In the nine years Labour was in government, power prices went up 72 per cent and the Government owned 100 per cent of the assets.”
Acknowledgement: NZ Herald – Power price fears if Govt stakes go
Why did First NZ not issue public statements ‘correcting’ National’s “misrepresentations” at the time?
Why have they left it only till now, to counter the assertion that “power prices went up 72%”?
Why is a single-buyer desk for electricity sending brokerage firms into a panic? Especially, considering, that we already have single buyer-desk’s in the form of Fonterra, Zespri, PHARMAC, etc.
The answer, I submit, is fairly obvious. First NZ’s fanciful statements and assertions are part of an orchestrated litany of bullshit to scare Joe & Jane Public to run back into the cold, dead arms of Nanny Neoliberal.
The Financial Money Men, with their Federated Farmers allies, are propping up their neo-liberal stooges in Parliament. The rats are out of the woodwork, and we can see who is lined up against the best interests of the public.
Because, in the final analysis, this all boils down to money – who makes it and who gets to keep it. And because so much money is at stake, we are told that rising power bills is the price for living in a “free” market.
We’re also promised that power prices will drop. Sometime. In the future.
We just have to be patient.
Maybe another thirty years?
It will be interesting if people buy into this propaganda BS. Will voters believe the fear-mongering campaign from the money-pushers?
Or will they realise that share brokers and merchant bankers are interested only in seeing that power prices remain at stratospheric levels, to provide maximum returns for their shareholders?
Because one thing is as certain as the sun rising tomorrow; these firms are not remotely interested in our welfare. Nor in the welfare of Kiwi families being gouged with higher and higher power bills.
I’m struck senseless that so many National supporters believe that siding with the likes of JB Were, Woodward Partners, Milford Asset Management, First NZ Capital, Devon Funds Management, Forsyth Barr, Business NZ, Federated Farmers, et al, will somehow gain them some kind of ‘benefit’. Are National supporters so masochistic and blinded by their faith in the “free market” that they are willing to tolerate paying higher and higher prices for electricity?
I hope they realise that JB Were, Woodward Partners, Milford Asset Management, First NZ Capital, Devon Funds Management, Forsyth Barr, Business NZ, Federated Farmers, et al, will not pay the power bills for National supporters.
Good luck with that!
The Labour-Green coalition should welcome these attacks as an opportunity. Every time one of these money-pushing firms launches a critical attack on NZ Power – the Labour-Greens should counter with press conferences where facts, stats, and more details are presented for the public and nice, big, colourful graphic-charts presented.
Like this one, from the Ministry of Economic Development/Business, Innovation, and Employment;
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Acknowledgement: Ministry of Economic Development/Business, Innovation, and Employment – Power Prices
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(Note price drop around 1999. Whilst Industrial and Commercial prices fell, residential prices continued to rise. There is more to explain the 1998/99 price fall here; Statistic NZ – Electricity consumption. It had little to do with Bradford’s reforms, and more to do with competing retailers changing their methods of calculation for the CPI electricity price index and building extra generation capacity. The cost of the latter had shifted from the State and onto domestic consumers.)
Where possible, David Parker and Russell Norman should speak at engagements around the country at public meetings. (Community newspapers and other local media should be engaged, as they love anything that happens within their community.)
Invite others such as the Salvation Army, and experts such as energy-sector expert, Molly Melhuish, and Victoria University researcher Geoff Bertram, should be invited to address media events.
Invite members of the public; families, etc, to present their power bills as evidence of skyrocketing prices.
Build a Broad Front of support. Show the country that there is support for NZ Power.
People want reassurance. We need to give it to them. And we need to show them why the National and the finance sector are working in cahoots.
Because ain’t it funny that no community organisation has come out, demanding that the electricity sector remain unregulated and welcoming higher and higher prices?
And if the media aren’t presenting the full story, use progressive blogs to publish the information. We, too, can be “foot soldiers” in this struggle. (Because surprise, surprise, we too, use electricity.)
This is a war between the Neo Liberal Establishment and Progressive forces fighting to roll back thirty years of a failed experiment.
That war began on 18 April.
There is no reason on Earth why we should not win.
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NZ First
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I find it hard to trust NZ First. Or, to be more precise; I find it hard to trust it’s leader, Winston Peters.
His parliamentary colleagues; party members; and supporters – I have no problem with. They are people who, generally, want the best for this country and dislike the false religion of neo-liberalism as deeply as those on the Left do.
But Peters…
Peters has ‘form’. He has changed direction on numerous occassions, and I find it hard to take him at his word.
Some examples…
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In 1996, Winston Peters campaigned to defeat the National Government and remove it from power. His campaign statements at that time seemed unequivocal;
“Jim Anderton: Is the member going into a coalition with National?
Winston Peters: Oh no we are not.” – Parliamentary Hansards, P14147, 20 August 1996
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“There is only one party that can beat National in this election that that is New Zealand First.” – Winston Peters, 69 & 85 minutes into First Holmes Leaders Debate, TVNZ, 10 September 1996
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“Of course I am not keen on National. Who is?
… This is a government bereft of economic and social performance [so] that they are now arguing for stability.” – Winston Peters, Evening Post, 25 June 1996
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“The prospects are that National will not win this election, that they will not form part of any post-election coalition.” – Winston Peters, The Dominion, 5 October 1996
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“It is clear that this National government will use every means at its disposal to secure power… Come October 12… Two months ago I warned that the National Party would use every trick and device at their command to to retain their Treasury seats.” – Winston Peters speech to Invercargill Grey Power, 26 August 1996
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“The Prime Minister [Jim Bolger] is not fit for the job and come 12 October he will be out. He should not get on his phone and call me like he did last time, because we are not interested in political, quisling behaviour. We are not into State treachery.” – Winston Peters, Parliamentary Hansards, P14146, 20 August 1996
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“We believe the kind of politician depicted by Bolger, Birch, and Shipley is not to be promoted into Cabinet. As a consequence we will not have any truck with these three people.” – Winston Peters, NZ Herald, 22 July 1996
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“We are a party that says what we mean and mean what we say, regardless of the political consequences.” – Winston Peters, Speech to public meeting, 9 October 1996
Despite Peters’ assurances, on 11 December 1996 the public woke up to this nightmare,
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In 1996, one of the biggest election issues was the sale of Forestry Corporation of New Zealand Ltd (cutting rights only, not the land). In 1996, the then Bolger-led National government had announced it’s intention to privatise the SOE,
In 1996, the Minister of Finance announced the government’s intention to sell its shares in the Forestry Corporation of New Zealand (formerly Timberlands Bay of Plenty). The corporation’s assets were Crown Forestry Licences to planted forests, which had expanded to 188 000 ha in the central region of North Island, processing plants in various locations, a nursery and a seed orchard.
A handful of large forestry companies and consortia submitted bids. The sole criterion was price. However, as the strength of the bids was not as great as hoped, bidders were asked to resubmit their bids. In August 1996, it was announced that the Forestry Corporation of New Zealand had been sold to a consortium led by Fletcher Challenge in a deal that valued the assets at $NZ 2 026 million.
Acknowledgement: Devolving forest ownership through privatization in New Zealand
The sale went ahead and the final sale-price was $1,600,000, to a consortium made up of Fletcher Challenge Forests (37.5%), Brierley Investments Ltd (25%) and Citifor Inc (37.5%).
Acknowledgement: Treasury – Income from State Asset Sales as at 30 September 1999
Throughout 1996, Winston Peters engaged in an election campaign to “hand back the cheque” should he and his Party be elected into a position of power,
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Acknowledgement: (hard copy only): Evening Post, 13 August 1996
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Acknowledgement: (hard copy only): Evening Post, 2 October 1996
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To quote Peters, who said on 13 August 1996,
“I ask both the Labour and Alliance parties – putting politics aside for this one day – to join New Zealand First in it’s post-election pledge to reverse the sales process“.
As many who lived through the times will recall, Peters pledged to “hand back the cheque”. It was a powerful message.
But it never happened.
Peters joined in coalition with National (consigning Labour and The Alliance into Opposition) and the pledge to buy back the forests was dropped – much to the disgust of people at the time..
Sixteen years later, and Peters has made the same promise all over again. On TV3′s The Nation, on 24 June 2012, Winston Peters stated,
“The market needs to know that Winston Peters and a future government is going to take back those assets. By that I mean pay no greater price than their first offering price. This is, if they transfer to seven or eight people, it doesn’t matter, we’ll pay the first price or less. ”
Acknowledgement: TV 3 – The Nation
On 4 March this year (2013), Peters announced,
“New Zealand First will use its influence on the next coalition Government to buy back our state-owned power companies which are being flogged off by National and we are committed to buying back the shares at no greater price than paid by the first purchaser.”
Acknowledgement: Scoop – One More Quisling Moment from Key
Another quote from Winston Peters, who said in a speech to the NZ First Conference, in 1999,
“All the policies and manifestos in the world are meaningless when you cannot trust the leadership. That is what leadership is about – trust. Nobody expects leadership to be infallible. But you have a right to expect it to be trustworthy.”
Acknowledgement: (hard copy only): Speech by Rt Hon Winston Peters to the New Zealand First Conference, 18 July 1999, at the Eden Park Conference Centre
Indeed; “All the policies and manifestos in the world are meaningless when you cannot trust the leadership.”
If Peters and NZ First hold the balance of power in 2014 and choose to enter into a coalition arrangement with National – will he carry out his pledge this time?
Or will that promise be dropped and buried for political expediency and some babbled, weak excuse?
It’s happened once, before. And not too long ago.
Can he be trusted for a second time?
I am of the belief that folks can learn from their mistakes. God knows I’m made a few in my early adulthood.
Has Winston Peters learned to honour his electoral pledges and not to treat the voting public as fools? Has he learned that he betrays voters at his peril? I hope so.
Because the public exacted a fitting response to his behaviour in 2008, as he and his Party were punished and spent three years in the political wilderness (see; New Zealand general election, 2008).
More than ever, the future of this country – and the power – is in our hands,
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Don’t screw up this time, Mr Peters.
This blogpost was first published on The Daily Blog on 6 May 2013.
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Previous Related Blogposts
History Lesson – Tahi – Electricity Sector “reforms” (4 March 2012)
John Key: Man of Many Principles (28 Sept 2012)
Labour, Greens, NZ First, & Mana – A Bright Idea with electricity! (10 March 2013)
Additional Sources
Statistics New Zealand: The history of electricity reform
Ministry of Economic Development: Electricity Prices
NZ History Online: Dancing Cossacks political TV ad
The Treasury: Income from State Asset Sales as at 30 September 1999
References
NZPA: Splitting up ECNZ expected to cut wholesale power price (16 Dec 1998)
NZPA: Reforms aimed at business – Luxton (21 April 1999)
Otago Daily Times: Power Prices Set To Soar (12 May 1999)
Otago Daily Times: No case for regulation (24 May 1999)
Otago Daily Times: Lower power prices coming says Bradford (3 June 1999)
Otago Daily Times: Power prices to rise by up to 15.1% (29 June 1999)
Otago Daily Times: Reforms blamed for hike (13 July 1999)
Scoop: Alliance to hold Winston Peters accountable (8 Oct 1999)
NZ Herald: Peters ‘forgets’ NZ First support for power reforms (13 Aug 2008)
Fairfax: Government to seek inquiry into power price rise (30 September 2008)
NZ Herald: Put prices on hold, Brownlee tells power companies (21 May 2009)
NZ Herald: Mighty River directors’ 73pc pay rise realistic – Key (5 April 2013)
Scoop: Labour-Greens to rip up the book on electricity pricing (18 April 2013)
NZ Herald: Labour-Greens plan could work, says Vector CEO (19 April 2013)
NZ Herald: National gobsmacked at Labour idea (19 April 2013)
NZ Herald: Power plan likened to Soviet era (19 April 2013)
NZ Herald: MRP chief slams socialist’ plan (21 April 2013)
TVNZ: Q+A – Transcript of Steven Joyce interview (21 April 2013)
NZ Herald: Bernard Hickey: Power barons fail to fool the public this time around (21 April 2013)
Radio NZ: Power prices nearly double since 2000 (21 April 2013)
Other blogs
Kiwiblog: Electricity Prices
Tumeke: MANA threaten overseas investors not to buy assets – Bloomberg pick up on the story
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The Politics of Power and a Very Clear Choice – Part Toru
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Continued from: The Politics of Power and a Very Clear Choice – Part Rua
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On a more Positive Note
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With all the scare-mongering from some quarters (National, right wing blogs, conservative media commentators), and naked threats of economic sabotage (JB Weir, Brian Gaynor, etc), there have been commentators with a more positive, up-beat assessment of the Green-Labour proposal for NZ Power.
Bernard Hickey wrote,
“But sometimes the sheer size of the profits becomes so obvious that it invites a backlash. The National Government realised the power-consuming public was nearing the end of its tether in 2008, so it acted to force more competition with its 2009 sector review and the very successful “Whatsmynumber”. It helped increase the switching rate over the past couple of years towards 20 per cent. Annual residential power price inflation halved from 8 per cent in the decade from 1998 to 2008 to 4 per cent since then.
But it is still running at quadruple the general inflation rate and it’s clear that “competition” hasn’t worked to reduce or even restrain power prices for voters, as opposed to businesses.
[…]
The SOE sales programme changed all that. It proposed handing those super profits to the richest New Zealanders in the form of shares and dividends.
That was the moment the Government and the industry crossed that red line and triggered the regulatory backlash promised this week by Labour and the Greens.”
Acknowledgement: NZ Herald – Bernard Hickey: Power barons fail to fool the public this time around
Vector chief executive, Simon Mackenzie, seemed to agree,
The electricity policy announced by the Labour and Green parties could be made to work and the current debate is overly emotive, says the chief executive of the regulated monopoly electricity and gas network owner, Vector.
Simon Mackenzie told BusinessDesk he was encouraged by the fact the proposed central purchaser system would incentivise commercially rational investment in energy efficiency, and that the Opposition parties were not pursuing direct subsidies.
He also welcomed the fact Labour was proposing to simplify regulation of lines companies, which has become enmeshed in the courts after policies Labour implemented was “not tracking as was intended,” Mackenzie said.
There was “no perfect model” for electricity systems, and other countries used similar methods to set prices and to procure investment in new power plants as demand rises. At present, new generation is procured by competing generators identifying the “next least-cost” of new generation and deciding to build it.
[…]
“The model is used in other jurisdictions. It has its pros and cons. It’s made to work.”
Acknowledgement: NZ Herald – Labour-Greens plan could work, says Vector CEO
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Inevitable Conclusions
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1. The term “Government-in-Waiting” is well known.
But there is a corollary to this concept.
The Green-Labour policy has not only put National on the “back foot” with the audacious nature of the plan – but has placed National Ministers – from John Key up – into a ‘No Man’s Land’ of a Government-in-Opposition role.
National finds itself faced with a policy that is so novel; so unforeseen; that their initial reactions were indignant splutterings of “North Korean school of politics”; candles; brown-outs; “United Soviet Socialist Republic of New Zealand” [sic]; threats of economic collapse; economic “sabotage”, and other doomsday scenarios.
The responses could be likened to the indignant temper-tantrums of a teenager who has been used to getting things all his/her life – and was suddenly being brought to heel by exasperated parents.
Key has said he never wants to be in Opposition again,
“I don’t think it suits me as a person. I’m not a negative person and a lot of Opposition is negative.”
Acknowledgement: NZ Herald – Key says he’ll quit politics if National loses election
Well, that is precisely where he now finds himself: the new quasi-Opposition in Parliament. The Green-Labour coalition is setting the agenda, and National can only react,
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Acknowledgement: Sharechat – Labour-Greens plan forces government to suspend MightyRiverPower offer, amend documents
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2. On 20 April, Labour finance spokesperson, David Parker, told TV3′s The Nation,
“It’s not like the money disappears from the economy, just that people have more money in their pockets. Instead of spending it on inflated power prices, they’re spending it somewhere else in the economy.”
Which is pretty much the rationale that National used to justify it’s fiscally irresponsible tax cuts in 2009 and 2010,
“In the short term, National’s tax package will give households confidence and some cash in their back pockets to keep the economy going and to pay down debt.”
Acknowledgement: National – Economy/Tax Policy
3. If New Zealanders could tick National in 2008 for their promised tax cuts (in 2009 and 2010, despite being unaffordable and demanding massive borrowings to fund) – then I’m sure as hell confident they’ll be ticking Labour and/or Green in 2014 (if not earlier) for cheaper electricity.
There is nothing as easy to sell to voters than giving them what was theirs in the first place. That applies equally, whether tax dollars or electricity.
Unlike the academic nature of who owns our State Assets – which for the poor underclasses means very little – everyone can understand a very simple concept of cheaper power.
Consider if those 800,000 missing-in-action, non-voters were asked the simple question; do you want cheaper electricity?
If the answer is “yes” – they need only tick the box for Labour and/or Greens.
For the Nats: game over.
Continued at: The Politics of Power and a Very Clear Choice – Part Wha
This blogpost was first published on The Daily Blog on 26 April 2013.
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Previous Related Blogposts
History Lesson – Tahi – Electricity Sector “reforms” (4 March 2012)
John Key: Man of Many Principles (28 Sept 2012)
Labour, Greens, NZ First, & Mana – A Bright Idea with electricity! (10 March 2013)
References
NZ History Online: Dancing Cossacks political TV ad
NZPA: Splitting up ECNZ expected to cut wholesale power price (16 Dec 1998)
NZPA: Reforms aimed at business – Luxton (21 April 1999)
Otago Daily Times: Power Prices Set To Soar (12 May 1999)
Otago Daily Times: No case for regulation (24 May 1999)
Otago Daily Times: Lower power prices coming says Bradford (3 June 1999)
Otago Daily Times: Power prices to rise by up to 15.1% (29 June 1999)
Otago Daily Times: Reforms blamed for hike (13 July 1999)
Scoop: Alliance to hold Winston Peters accountable (8 Oct 1999)
NZ Herald: Peters ‘forgets’ NZ First support for power reforms (13 Aug 2008)
Fairfax: Government to seek inquiry into power price rise (30 September 2008)
NZ Herald: Put prices on hold, Brownlee tells power companies (21 May 2009)
NZ Herald: Mighty River directors’ 73pc pay rise realistic – Key (5 April 2013)
Scoop: Labour-Greens to rip up the book on electricity pricing (18 April 2013)
NZ Herald: Labour-Greens plan could work, says Vector CEO (19 April 2013)
NZ Herald: National gobsmacked at Labour idea (19 April 2013)
NZ Herald: Power plan likened to Soviet era (19 April 2013)
NZ Herald: MRP chief slams socialist’ plan (21 April 2013)
TVNZ: Q+A – Transcript of Steven Joyce interview (21 April 2013)
NZ Herald: Bernard Hickey: Power barons fail to fool the public this time around (21 April 2013)
Radio NZ: Power prices nearly double since 2000 (21 April 2013)
Other blogs
Robert Guyton: Murray Kerr on MRP
Kiwiblog: Electricity Prices
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The Politics of Power and a Very Clear Choice – Part Rua
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Continued from: The Politics of Power and a Very Clear Choice – Part Tahi
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Evidently, the sky will fall if New Zealand proceeds with Labour-Green’s NZ Power proposal…
The four Donkeys of the Fiscal Apocalypse
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- Lack of New Infra-structure – The argument goes that without massive profits, state owned powercos will not have sufficient funds to pay for new power production or to maintain transmission lines. Really?! In which case, how on earth did we ever build up this country’s energy infra-struction in the first place???
- Brown Outs – We’ve been told we’ll have brown outs (see Collin’s Tweet above). Really?! It beggars belief how we ever got out of bed in the mornings and tied our shoelaces, prior to to introduction of neo-liberalism. What a hopeless lot we must’ve been.
- Share Falls – Yes, the sharemarket will fall if the NZ Power propopsal goes ahead. In fact, they’ve already dropped (see: Power shares keep falling). So what people like Nick Lewis, an analyst at Wellington-based brokers Woodward Partners, is telling us is that the sharemarket is dependent on the New Zealand public held to ransom by way of exorbitant power pricing? We’re subsiding the sharemarket? I wonder what reaction the share market might have if competition really worked, and drove down power prices???
- Investors abandoning NZ – Yes, for a while, the jittery bastards at Boston, Beijing, or Berlin might panic and withdraw investment funds. For about half-a-f*****g second. Then they will get over themselves and return to invest elsewhere in our economy. Such as green technology in power production – technology which can be exported overseas for a tidy profit.
The fear-mongering from National, business, conservative media commentators, and other assorted right-wing nutjobs, assumes that New Zealanders are little children who are easily frightened by shadows.
We are not (much).
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Max Bradford and That ‘Dip’
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After Bradford’s reforms, power prices went north, skyrocketing by a jaw-dropping 87% since 2000. If food had increased that much since 2000, there’d be wide-spread starvation in this country. And wide-spread rioting that would make the 2010 London riots pale by comparison.
Bradford, though, has insisted that his “reforms” would have worked, had the new Labour government not ‘tinkered’ with them in the early 2000s. On TV3′s “The Nation“, on 21 April, Bradford stated,
“When the competive market was allowed to work, prices fell. And, ah, between 1998 and 2002, before Labour started fiddling with the market, prices did fall. So if you let the competitive market work, then prices will either rise more slowly than otherise they would, or they fall. ”
Acknowledgement: TV3 – The Nation
On Kiwiblog, David Farrar kindly provided a graph, attempting to support Bradford’s claims,
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Acknowledgement: Kiwiblog/Stats NZ
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The graph is even helpfully marked with a black line and labelled “Bradford Reforms”, between 1997 and 1998.
Unfortunately, this in itself is not quite correct. Despite Bradford’s Electricity Industry Reform Act 1998 taking effect in mid-1998, the electricity sector reforms did not fully take effect until April 1999, when Contact Energy was privatised and ECNZ was split in three; Mighty River Power, Meridian, and Genesis.
In the same year – 1999 – power prices surged (see: Power prices to rise by up to 15.1%, see; Reforms blamed for hike), as Farrar’s own graph shows with crystal clarity.
But then, curiously, there is a considerable dip in 2000 and 2001, followed by a sharp, massive series of rises thereafter.
So, what happened in 2000 and 2001?
The Asian Crisis is what happened, folks.
As then-governor of the RBNZ, Don Brash reported,
“In July 1997 the Thai baht fell sharply, triggering a period of turbulence in the financial markets of East Asia. Many currencies declined p re c i p i t o u s l y, along with share markets and real estate prices.
The banking sectors of the countries most affected were severely damaged, and real economic activity fell, in some cases sharply, for the first time in decades. The direct effect on the New Zealand economy was adverse and substantial, and looks likely to continue for some time. The indirect effect, through business and household sector confidence, was also significant. The impact of the Asian situation reduced inflationary p re s s u res in New Zealand markedly.
[…]
Inflationary pressures had been slowing for some time previously, so that as far back as December 1996 monetary policy began to ease in response. Then late in 1997 and into 1998 the Asian financial crisis added to the slow-down, as growth prospects in many Asian economies, including Japan, deteriorated (see box 2). In December 1997, when easing monetary policy further, the Bank cited the likely impact of the Asian crisis on the New Zealand economy, and noted that the disinflationary impact of that crisis could become markedly worse. During 1998, this happened, and in response monetary policy was eased more aggressively still.
[…]
For New Zealand, reduced exports to the region, which previously accounted for 36% of our merchandise exports, had a negative impact on economic activity. The likely effects of the crisis were a particular focus in each of the Bank’s quarterly Monetary Policy Statements from December 1997 onwards. In the Reserve Bank’s March 1998 projections, we judged that the severity of the crisis was being underestimated by many observers. As a result the Reserve Bank eased monetary policy by more than New Zealand markets had expected.”
Acknowledgement: – Don Brash, Reserve Bank of New Zealand Annual Report 1997-1998
Here is the NZ Reserve Bank chart of economic growth, measuring Real Gross Domestic Product (GDP), from 1990 to 2012,
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Reserve Bank of New Zealand – Real Gross Domestic Product, 8 January 2013
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Note the RBNZ statement, from the above January 2013 report,
Following the 1998 “Asian crisis” New Zealand’s Gross Domestic Product (“GDP”) recovered strongly. Annual GDP growth from 2001 through to 2004 (on average) exceeded that of its major trading partners, partly as a result of strong net inward migration and associated population growth.
Acknowledgement: IBID
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Now let’s compare the period from 1997 to 2002, on both graphs,
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A closer look at the 1997 – 2002 period,
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Acknowledgement: Trading Economics/Stats NZ – New Zealand GDP Growth Rate
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Aside from a “dead cat” bounce in the Third Quarter of 1999, the correlation between economic activity and power prices is self-evident. The drop in electricity prices in 2000 and 2001 followed a slump in economic activity in Asia, and it’s subsequent global flow-on effects.
As PBS Frontline reported,
The Asian financial crisis that was triggered in July 1997 was a shocker. Even two years after it ended, anxiety still loomed over global financial markets. What was at the time perceived to be a localized currency and financial crisis in Thailand, soon spread to other Southeast Asian countries–including Malaysia, Indonesia and the Philippines.
By the fall of 1997, the contagion extended its reach to South Korea, Hong Kong and China. A global financial meltdown had been ignited. In 1998, Russia and Brazil saw their economies enter a free-fall, and international stock markets, from New York to Tokyo, hit record lows as investors’ confidence was shaken by the volatility and unpredictability in the world’s financial markets.
Acknowledgement: PBS – Timeline of the Crash
As the Reserve Bank stated above, “annual GDP growth from 2001 through to 2004 (on average) exceeded that of its major trading partners” – and 2001 is when power prices started to rise again.
Also worthy of attention is that the electricity CPI also drops in 2009 and 2011, during the latest Global Financial Crisis and resulting Great Recession.
Unfortunately, for reasons of their own (but which we can guess at), Mr Farrar and his National Party friends fail to point out this salient fact. The Right will mis-represent facts and re-write history to suit their own narrowly-defined ideological agenda.
Labour-Green’s NZ Power is a threat to that ideologically-based agenda.
Continued at: The Politics of Power and a Very Clear Choice – Part Toru
This blogpost was first published on The Daily Blog on 25 April 2013.
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Previous Related Blogposts
History Lesson – Tahi – Electricity Sector “reforms” (4 March 2012)
John Key: Man of Many Principles (28 Sept 2012)
Labour, Greens, NZ First, & Mana – A Bright Idea with electricity! (10 March 2013)
References
NZ History Online: Dancing Cossacks political TV ad
NZPA: Splitting up ECNZ expected to cut wholesale power price (16 Dec 1998)
NZPA: Reforms aimed at business – Luxton (21 April 1999)
Otago Daily Times: Power Prices Set To Soar (12 May 1999)
Otago Daily Times: No case for regulation (24 May 1999)
Otago Daily Times: Lower power prices coming says Bradford (3 June 1999)
Otago Daily Times: Power prices to rise by up to 15.1% (29 June 1999)
Otago Daily Times: Reforms blamed for hike (13 July 1999)
Scoop: Alliance to hold Winston Peters accountable (8 Oct 1999)
NZ Herald: Peters ‘forgets’ NZ First support for power reforms (13 Aug 2008)
Fairfax: Government to seek inquiry into power price rise (30 September 2008)
NZ Herald: Put prices on hold, Brownlee tells power companies (21 May 2009)
NZ Herald: Mighty River directors’ 73pc pay rise realistic – Key (5 April 2013)
Scoop: Labour-Greens to rip up the book on electricity pricing (18 April 2013)
NZ Herald: Labour-Greens plan could work, says Vector CEO (19 April 2013)
NZ Herald: National gobsmacked at Labour idea (19 April 2013)
NZ Herald: Power plan likened to Soviet era (19 April 2013)
NZ Herald: MRP chief slams socialist’ plan (21 April 2013)
TVNZ: Q+A – Transcript of Steven Joyce interview (21 April 2013)
NZ Herald: Bernard Hickey: Power barons fail to fool the public this time around (21 April 2013)
Radio NZ: Power prices nearly double since 2000 (21 April 2013)
Other blogs
Kiwiblog: Electricity Prices
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The Politics of Power and a Very Clear Choice – Part Tahi
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Historical Background
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New Zealanders, by and large, are not stupid.
We can recognise a rort when we see it. And in the case of electricity prices, we see it on a regular basis in our power bills and media headlines,
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2008
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Acknowledgement: Fairfax: Government to seek inquiry into power price rise
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2009
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Acknowledgement: NBR – More profit than power for state-owned energy companies
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2010
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Acknowledgement: Fairfax Media – High spot prices hint at power price rise
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2011
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Acknowledgement: NZ Herald- Power bills set to rise up to 8pc from March
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2012
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Acknowledgement: Fairfax Media – Electricity prices tipped to rise steeply
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2013
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Acknowledgement: TVNZ – Power prices rise by average $120 nationwide
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We all know the facts and figures by now,
- National Minister Max Bradford “reformed” the electricity sector in 1999 (see: Splitting up ECNZ expected to cut wholesale power price)
- We were promised cheaper power due to Bradford’s reforms (see: Lower power prices coming says Bradford)
- Power prices have continued to rise, increasing by 87% since 2000 (see: Power prices nearly double since 2000)
- Consumer power prices rose by 72%between 2000 and 2008 whilst inflation went up only 29% (Put prices on hold, Brownlee tells power companies)
None of Bradford’s promises came to fruition and on 27 November 1999, Bradford lost his Rotorua seat to Labour’s Stephanie Chadwick (see: Rotorua – New Zealand electorate).
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A Bold New Plan
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On 18 April, Labour and the Greens announced a bold new policy initiative to reign in escalating power price rises. Called NZ Power, the reform would work thusly,
Key to the proposals is the creation of a central buying and electricity system planning agency, dubbed NZ Power, which would drive down power prices because of its market power and would not be required to make a profit.
It would also be the market regulator.
“It will not just supervise the market, it will be actively involved,” said Labour’s finance spokesman David Parker, a Minister of Energy in the 1999 to 2008 Labour-led administration.
It would tender for new electricity generation, or potentially energy efficiency measures, rather than the current crop of generators competing to identify the next least costly unit of new generation when demand rises.
In some cases, industrial users would be able to contract directly with NZ Power.
Power prices would be set not by reference to the cost of the next new unit of generation, but by average costs that include the anticipated price of new generation. However, there would still be a traded market in wholesale electricity, which could reflect regional variations.
Acknowledgement: Scoop – Labour-Greens to rip up the book on electricity pricing
This new plan was the confirmation (if any was needed) that National’s grand experiment in privatisation and “competition” in the electricity sector was not working. Only fools (mostly those posting on right-wing, pro-National Kiwiblog) could possibly argue that the current system was “succeeding”.
In fact, even as far back as May 2009, National Minister Gerry Brownlee demanded that power generators put price rises on hold. He stated,
“There is something fundamentally wrong in the way in which we’re marketing electricity in New Zealand.“
Acknowledgement: NZ Herald – Put prices on hold, Brownlee tells power companies
And even the architect of this ill-conceived “reform”, Max Bradford, was reported in May 1999 in the media as planning to regulate electricity line charges,
Enterprise and Commerce minister Max Bradford is to press ahead with regulations to control electricity line charges, but sees no reason to implement regulation in the competitive end of the market.
Acknowledgement: Otago Daily Times – No case for regulation
So even National ministers reluctantly concede that the electricity sector cannot work in an unregulated “freemarket” model, and is unable to deliver the ‘golden fruits’ of de-regulation and so-called competition.
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Carping & Criticisms
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After the press conference on 18 April, criticism flew thick and fast from National ministers; right wing bloggers; pro-National sycophantic elements of the media, and their ideologically-wedded fellow-travellers.
On Steven Joyce’s twitter account,
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Source: Twitter/Steven Joyce
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Judith “Crusher” Collins added this bit of gratuitous fantasy-fear mongering,
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Source: Twitter/IBID
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From Simon Bridges, this little bit of muppetry,
“They may want to return to sort of United Soviet Socialist Republic of New Zealand days but National certainly doesn’t.”
Acknowledgement: NZ Herald – Power plan likened to Soviet era
It was actually the Union of Soviet Socialist Republics, Mr Bridges, not “United” Soviet Socialist Republic. Get your Evil Empires right, mate.
And anyway, most of New Zealand’s centralised planning occurred during National’s administration, from 1975 to 1984, under the late Robert Muldoon. Remember the price/wage freeze?
Mighty River Power chief executive Doug Heffernan, also called the plan “socialist” (by the way, is that a bad thing?) He declared,
“What you’ve just described is a socialist consumer model.”
Acknowledgement: NZ Herald – MRP chief slams socialist’ plan
To which I would point out to the reader,
- Heffernan benefits from a $1.49 million p.a. salary – whilst Mighty River Power keeps raising it’s power prices. So the gentleman has a vested interest in this issue.
- In February this year, Heffernan announced that Mighty River Power’s half-yearly profit has quadrupled; prices had risen by 2%; despite demand “being flat”. (see: Mighty River Power profit quadruples )
- Saying that “Mighty River Power would not have made the $1billion investment into geothermal energy that we’ve made in the last five years … The risks would have been too high” – insults our intelligence. Mighty River Power was built up by the State, with taxpayers’ money. Heffernan forgets himself; MRP is not a private company.
- And anyway, is it the role of SOE chief executives to be promoting privatisation?
Steven Joyce added to the “red menace scare”on TVNZ’s Q+A on 21 April,
“By definition, it’s socialism.
“They are not just talking about the price, they’re talking about telling the generators when they can generate, which generating assets they can use, which ones they can introduce to the markets.”
The Minister said the proposed plan would also scare off investors, with evidence of this seen late last week when the market dropped.
“On Thursday and Friday, the market dropped nearly $600 million across three companies because they said, ‘Jeez, we’re not interested in this’.”
Which is rather strange… Joyce, Bridges, Collins, Key, et al, are likening Labour-Green’s plans to “North Korean economics” or “Soviet style socialism”.
But when did the former USSR or the current North Korea ever have a share market or multi-party Parliamentaty democracy?!?!
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Could it possibly be that National ministers have no intellectual, rational response to the proposed NZ Power scheme?
Could it be that they must rely on fear-mongering? Which reminds me of this,
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Acknowledgement: NZ History Online: Dancing Cossacks political TV ad
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Could it possibly be that National ministers are placing their faith in free market economics – vis-a-vis the partial sale of state powercos – to get prices to drop? (Which, after 14 years is yet to happen for the domestic consumer.)
Could it be that National ministers are… panicking?!
Because as NZ Herald columnist, John Armstrong wrote on 19 April,
“There may be good reasons for the seemingly constant above-inflation hikes in retail prices. But politicians have given up explaining because consumers long ago stopped listening.
All this would suggest there is fertile ground for Labour and the Greens, who yesterday foreshadowed plans to slash power prices by setting up a new agency, NZ Power, to act as a single buyer of wholesale electricity.
National was truly gobsmacked. It accused Labour of “Muldoonism”, “loony tunes” policy making and “North Korean economics”.
National accepts that at the outset there might be lower prices. But it argues the policy would distort price signals that are so vital to matching supply and demand. That could lead to power shortages. The policy would distort and even discourage investment in power generation.”
Acknowledgement: NZ Herald: National gobsmacked at Labour idea
“Gobsmacked” is about right.
And ironically enough, “Muldoonism” was a product of the National Party – not Labour. Hilarious stuff, indeed!
This is nothing less than a full-scale retreat from market-driven political orthodoxy. In effect, Labour has done the unthinkable; it has publicly announced that neo-liberalism and it’s supposed “free” market economics does not, and cannot, deliver all of society’s needs.
We get a glimpse of what it must have been like in 1989 when Mikhail Gorbachev sat down with his colleagues in the Soviet Politburo and announced to a stunned meeting,
“Comrades, our communist ideology and centralised economic system has failed.”
Mark 18 April 2013 on your calendar as the day that one of our two main Parties (or, two out of our three main Parties, if Green political support keeps increasing) renounced neo-liberal free market ideology as a failure.
There is now a clear, unequivocal difference between an increasingly right wing, ideologically-driven National, and a decidely more-leftist – but pragmatic – Labour.
And the public now has a clear choice as well, for whom to vote;
Option A (for the Blue Team): maintain the neo-liberal status quo; proceed with privatisation; and hope-like-hell that Max Bradford’s promises eventually, maybe, one day, will come true.
Option B (for the Red Team): vote for change; abandon our slavish adherence to neo-liberal dogma; and, as a side-effect, enjoy cheaper power bills.
Continued at: The Politics of Power and a Very Clear Choice – Part Rua
This blogpost was first published on The Daily Blog on 24 April 2013.
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Previous Related Blogposts
History Lesson – Tahi – Electricity Sector “reforms” (4 March 2012)
John Key: Man of Many Principles (28 Sept 2012)
Labour, Greens, NZ First, & Mana – A Bright Idea with electricity! (10 March 2013)
References
NZ History Online: Dancing Cossacks political TV ad
NZPA: Splitting up ECNZ expected to cut wholesale power price (16 Dec 1998)
NZPA: Reforms aimed at business – Luxton (21 April 1999)
Otago Daily Times: Power Prices Set To Soar (12 May 1999)
Otago Daily Times: No case for regulation (24 May 1999)
Otago Daily Times: Lower power prices coming says Bradford (3 June 1999)
Otago Daily Times: Power prices to rise by up to 15.1% (29 June 1999)
Otago Daily Times: Reforms blamed for hike (13 July 1999)
Scoop: Alliance to hold Winston Peters accountable (8 Oct 1999)
NZ Herald: Peters ‘forgets’ NZ First support for power reforms (13 Aug 2008)
Fairfax: Government to seek inquiry into power price rise (30 September 2008)
NZ Herald: Put prices on hold, Brownlee tells power companies (21 May 2009)
NZ Herald: Mighty River directors’ 73pc pay rise realistic – Key (5 April 2013)
Scoop: Labour-Greens to rip up the book on electricity pricing (18 April 2013)
NZ Herald: Labour-Greens plan could work, says Vector CEO (19 April 2013)
NZ Herald: National gobsmacked at Labour idea (19 April 2013)
NZ Herald: Power plan likened to Soviet era (19 April 2013)
NZ Herald: MRP chief slams socialist’ plan (21 April 2013)
TVNZ: Q+A – Transcript of Steven Joyce interview (21 April 2013)
NZ Herald: Bernard Hickey: Power barons fail to fool the public this time around (21 April 2013)
Radio NZ: Power prices nearly double since 2000 (21 April 2013)
Other blogs
Kiwiblog: Electricity Prices
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History Lesson – Tahi – Electricity Sector “reforms”
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"Those who cannot remember the past are condemned to repeat it" - George Santayana, 1863 - 1952
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With the current National government on course to partially privatise Mighty River Power, Meridian Energy, Genesis, Solid Energy, and further down-sell of Air New Zealand, it may be an appropriate time to look back at our recent history and remind ourselves of a previous National Government’s blunders…
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In 1999, Jane Kelsey wrote,
“The privatisatisation of local electricity supply companies and state-owned generators was also very lucrative and open to abuse to market power by transnationals. Driven by theory, governments had progressively dismantled the integrated state electricity system since 1986. This involved separating transmission from generation, splitting the state-owned generator into competing companies, and converting the elected non-profit power boards into profit-driven electricity supply companies. The Labour government began the process by corporatising the electricity department in 1986.
The local power boards were transformed into electric power companies in 1990, and into commercial electricity supply companies with diverse ownership structures in 1993.
A rash of hostile takeover bids and friendly mergers followed; during this time, supplying electricity seemed almost a sideline.
The main foreign-owned players were Alberta-based TransAlta and Utilicorp from Kansas. The companies raised their electricity prices to cover debt servicing and profit requirements. [My emphasis – FM]
The government expressed concern that electricity companies were abusing their monopoly over the power-lines and supply contracts to block the entry of competitors. The Electricity Industry Reform Act 1998, passed in July under urgency, prohibited any company from owning both electricity line businesses and retail or generation businesses from 1 May 1999.
Labour opposed the move, claiming the government had taken “an electricity industry that was working pretty well in practice and ripped it to bits, because it was not working well in theory”. The existing companies, supported by ACT, complained that the split reduced their value and amounted to expropriation. TransAlta threatened to pull out of the country if the government proceeded with the plan.
At the same time, the change created new opportunities for mergers and takeovers (at grossly inflated prices), consolidating control of electricity into fewer, and increasingly transnational, hands.
The government also split the state-owned generator into two companies, Contact Energy and ECNZ; ECNZ was later split into three companies.Contact Energy was publicly floated in March 1999. Some 175,000 local investors applied for priority registration. But the government had decided there had to be a 40 percent ‘cornerstone’ shareholder. Only two companies were in the final bidding – TransAlta and US-based Edison Mission Energy. TransAlta was already the country’s largest energy retailer, with 530,000 customers, and was returning a dividend of around 6 percent. In October 1998 the Ministry of Consumer Affairs condemned its customer contracts as ‘onerous and harsh on consumers’.
The Commerce Commission cleared TransAlta to take up to 50 percent of shares in Contact Energy. That would have given the company one million of the country’s 1.6 million electricity customers, control over two-fifths of New Zealand’s generating capacity, and rights to nearly half its gas production.
The strategic stake went instead to Edison, for $1.21 billion…
[abridged]
… Contact Energy ended up nearly 62 percent overseas-owned. In addition to Edison’s 40 percent, another 18 percent of shares were reserved for offshore institutions, 14.4 percent for New Zealand/Australian institutions and 27.6 percent for the New Zealand public. Investment anlyst Brian Gaynor calculated that half the shares issued to offshore institutions were sold for instant profit in the first three days. He partly attributed the priority given to offshore buyers to “broker self-interest”, estimating that they earned $7.6 million on the 109 million shares issued to northern hemisphrere institutions (much higher than the proportionate income from Australasian sales).
Gaynor questioned why government officials put so much effort into selling the country’s assets to foreign interests , thus worsening the balance of payments , instead of working to stimulate export growth. [My emphasis – FM]
The government insisted that the changes would lower electricity prices to consumers (although Commerce Minister John Luxton said ‘it was not promised that householders would necessarily get cheaper power’). But they failed to do so, as the companies sought to recoup their excessive spending. [My emphasis – FM]
In anticipation of winning the Contact Energy bid, TransAlta had paid $171 million for the retail business of Orion, owned by the Christchurch City Council; the operation was independently valued in 1997 at around $13 million. In March 1999 TransAlta announced price rises of between 5 and 15 percent for it’s 530,000 customers. Energy Minister Max Bradford blamed the line companies for abusing their monopoly and not passing on savings from the transfer of metering costs to the retail companies.Orion backed off its suggested price increase. TransAlta did not. Bradford insisted that competition among the supply companies would eventually force prices down, so only the monopoly line businesses needed regulation.
Back in 1998, Bradford had proposed only light-handed regulation: ‘to enhance the credibility of the threat of price control’, the Commerce Commissionwould be given powerto limit prices, where it was efficient to do so, and after a lengthy period of review. By May 1999 he had been forced to introduce legislation that could regulate monopolies generally, with specific provisions for line companies. The Commerce Commission would be required to authorise a price for line company charges by 31 December 1999 for the largest companies, and dates in 2000 for the rest.” – “Reclaiming the Future“, August 1999
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There are many lessons to be learnt from the de-regulation and privatisation of the electricity industry in this country…
- In buying up companies, the new owners raised electricity prices for consumers so as to re-coup the costs of their multi-million dollar investments.
- Many of the electricity companies wound up in overseas investors’ control. As Brian Gaynor said, this made our Balance of Payments much, much worse – for no discerible, logical gain.
- Competition did not bring “cheaper power prices”. There simply was no competition.
It probably occurs to many people that, thirteen years later, another National Government is on-course to repeat the same mistakes.
“Those who cannot remember the past are condemned to repeat it”
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Politics through a crystal ball, palmistry, or chicken entrails?
In a somewhat weak attempt to allay fears over National’s stated intention to partially-privatise several state assets, Bill English has stated that he “believes only 10 to 15 per cent will initially go to overseas buyers”.
However, tellingly, National refuses to actually pass any legislation to prevent this from happening;
National says it will “cap” single investor’s holding to 10%.
But National refuses to explain how it will engineer this “cap”.
It doesn’t take a rocket scientist to figure out that a corporation could easily employ five “shelf companies“, each buying a block of 10% of the shares. These “dummy” companies would each own a block of shares – in name only. The parent company – owning each dummy company – would be the real owner.
Result: a foreign corporation owning a sizeable chunk of each SOE.
Case in point: Contact Energy.
In 1996, Contact Energy was split of from it’s parent SOE, Electricity Corporation of New Zealand and fully privatised in 1999 as part of the then-National Government’s plan to “reform” the energy sector and make it more “competitive”. Energy Minister, Max Bradford,. assured New Zealand that the splitting up of ECNZ, and privatisation of Contact Energy, would introduce competition and drive prices down.
The opposite actually occurred and power prices doubled during the following decade.
When Contact Energy was privatised in 1999, 40% of the publicly offered shares were purchased by Edison Mission Energy. That 40% was subsequently increased to 51%. Edison Mission started with a minority shareholding – which was soon increased to a majority sharehold. (Starting to sound familiar?)
In 2004, Edison Mission sold it’s 51% stake to Australian company, Origin Energy.
Furthermore,
“The terms of this float were such that sharebrokers earned a greater commission from issuing shares to overseas shareholders than they did from issuing them to local shareholders. Many of the shares went to shareholders overseas (Gaynor, 1999). After the float, Gaynor assessed Contact as about 62% overseas owned.” Source
In reality, despite “assuring noises” made by Bill English and John Key, there is no way to prevent much of the proposed 49% sell-off of the SOEs, from falling into foreign ownership. This will not help New Zealand’s balance of payments, as profits are repatriated overseas, to offshore investors. It will mean that our most critically strategic assets will have owners who have no interest in New Zealand, except as a source of profits.
And importantly, we will lose approximately half of the profits made by these SOEs.
In 1999, Max Bradford promised New Zealanders that power prices would be “driven down” by competition.
That promise failed to materialise.
Garrick Tremain cartoon, Otago Daily Times, circa 1998/99
This year, English and Key promise that “only 10% to 15%” of shares will go to overseas investors.
Do we believe them sufficiently to “tick National” at this year’s general election?
I certainly will not.
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Further Reading:
New Zealand Electricity Authority
Energy and Resources (New Zealand Government, portfolio website)
Electricity sector in New Zealand
News Archives
Crony Watch
Keeping an eye on dodgy government appointees, crony-by-crony!
Frankly Speaking... 
