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The power to rort

10 February 2012

New Zealand is blessed in having an abundance of natural, renewable energy sources it can (and does) tap to provide cheap, environmentally benign electricity.

Not for us, the exploding fission reactors of Fukishima.

Not for us, the CO2 belching coal-fired generators used by most Western nations.

Instead, we have hydro, geothermal and wind power to cover the majority of our electricity generation requirements.

So you'd think, in an era when carbon-offsetting is a very expensive burden on power generation in other countries, NZ's power prices would be stable -- ensuring that consumers and industry were able to fully utilise this resource for best effect.

Alas, that seems not to be the case.

The lines company Transpower has said it'll be hiking its charges by around 20% to cover maintenance and expansion work on its grid -- and those price hikes will be passed on to consumers.

Now there's a giant rort going on here from two directions...

Firstly, Transpower is an SOE and as such, it pays a very healthy dividend to the government by way of profits earned each year.

That dividend is effectively taxation -- the silent taxation that we often fail to consider when calculating the total rate of tax levied on Kiwis.

The government says that as an SOE, Transpower operates just like a private company and has an imperative to produce a profit for its shareholders (the government) -- which sounds fair enough.

However, every private company I know of also has an imperative to set aside some of its profits to cover future costs -- so why hasn't Transpower?

Instead of behaving like a private company, Transpower has instead paid the money it should have been setting aside in dividends to government and now, when it needs that money, it simply hikes its prices. That could never happen in private industry and thus makes a mockery of the claims that an SOE is just like any other business.

Transpower has a monopoly on the provision of transmission lines in NZ and, as a monopoly, it can charge whatever it wants, with consumers just having to suck it up. In effect, the increase in line-charges constitutes a tax-hike by stealth and that's not right.

But then we ought to look at the power retailers who are taking the increase in line charges and passing them on -- with an additional margin of their own.


Clearly, many power retailers have seen the proposed hike in line-charges to be a great chance to lift their own profits while blaming Transpower for the increases. I cry foul on this one too!

Of course this situation will only get worse when the government sells-down state ownership of SOEs in the power sector. At least under the current ownership, the profits from all this gouging goes into the state's coffers where it is of benefit to all Kiwis -- by way of funding roads, schools, education, healthcare etc. Once those assets are partially privatised, huge chunks of those profits will end up in private bank accounts or be sent offshore -- effectively making NZ a poorer country.

I think it's time we remembered that just because someone has been elected to parliament doesn't make them smarter, more ethical or more astute than the average Kiwi. In fact, I would argue that it means the opposite.

Government has been leveraging its own position within the power oligopoly to rort the public and impose a nasty stealth-tax. Now it's preparing to privatise that "right to rort".

How long can this continue?

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