Campbell: Power on energy prices & TVNZ Job Losses

Obviously, any Minister will try to dodge getting involved in a no win situation if they can help it, and the old ‘that’s an operational matter’ excuse is a useful tool of avoidance. It even carries an aura of virtue as well. It suggests ‘I would if could get involved’ but alas, the separation of powers between the executive and the Ministry means that I must pass by this train wreck, with my eyes averted.

This morning provided a good example: there was Simon Power, Minister of SOEs, saying that he really couldn’t get involved in the issue of whether state owned power companies will be allowed to gouge even higher electricity bills out of consumers during the coming winter. Power’s responsibility allegedly, began and ended with ensuring that those SOEs deliver sturdy returns – recession or no recession – on the taxpayer funds invested in them.

No matter that the same taxpayers and their children may fall ill due to cold and unheated homes, and thus impose even higher costs on the health system that taxpayers also happen to fund. That’s not Simon Power’s problem of course, that’s up to ther bureaucrats … or is Health Minister Tony Ryall’s patch. And in January, Ryall showed he was just as adept at the
old ministerial side step.

Was the costly English language test for nurses driving highly qualified foreign trained nurses – including some who came from England – to seek jobs in Australia instead? That, Ryall’s spokesman told the NZ Herald, was an operational matter.

Of course, when it suits Ministers, they’re in boots and all. ACC Minister Nick Smith for instance, showed up at the select committee grilling of ACC chief Jan White, and interrupted to answer questions on her behalf – even though she was the person meant to be answering, and even though Smith didn’t have ministerial responsibility during much of the 2007-08 period under review. Similarly, Foreign Affairs Minister Murray McCully has shown no ministerial restraint when intervening in the content and structure of the foreign aid programme, which is supposed to function as a semi-independent unit within the Ministry of Foreign Affairs and Trade.

In other words, Simon Power can hardly say his hands are tied when it comes to protecting the public from ever-escalating power prices. Currently, most of the state-owned energy companies – Meridian temporarily excepted - seem to be
in fine shape. North Island state owned power company Genesis for instance, has enjoyed a 58 % rise in half year profits to the end of December 2008 of $48 million, on the back of a 14% rise in electricity revenues to $960 million.

State-owned Mighty River Power had similarly happy numbers to report during the same six month period to December : operating profits of $234.5 million, up more than $59 million - although Mighty River CEO Doug Heffernan claims that the added rise in retail prices of 4.7 % by its retail arm, Mercury Energy, accounted for only a small fraction of that hike in profits. Most of the rise in profits were said to accrue from the new Kawerau geothermal power plant – though the current retail levels certainly provide a solid bedrock for capital investment in greater generating capacity.

Instead of moving to cap retail electricity prices in any way, Power has signaled that he expects higher returns from them in future – which, the vagaries of weather aside, would seem to require higher retail prices. This is not a good time for Power to abandon consumers to the mercies of the market. Winter. Electricity price hikes. Higher unemployment, as the recession hits. The related health implications. The need for emergency relief via social welfare for families having trouble paying their power bills. A programme for retro-fitting homes to create jobs, conserve power, and gain better health outcomes.

All of this amounts a perfect storm. The health risks alone should be motivating Power to convene a meeting with Health Minister Tony Ryall, Social Development Minister Paula Bennett and Environment Minister Nick Smith to co-ordinate a response to the challenge that energy costs will impose on families during the winter,

Yes, that does mean dealing in operational matters. It is also called leadership.

TVNZ’s job losses

In the government’s hands, the global recession has become a ‘now you see it, now you don’t’ kind of bogeyman, to be shuttled on and off stage to serve its own ideological agenda. Want to invoke the recession to create subsidies for major corporates ? Hold a jobs summit to underline the peril we all face. Want to shrink the public service, and punish the SOE’s you don’t like ? Then act as if the recession doesn’t exist, and expect business as usual.

TVNZ definitely falls into the latter camp. Recession or no recession – what recession, Broadcasting Minister Jonathan Coleman seems to be saying – the government will still be expecting a dividend this year as usual from the state broadcaster. Even if, job summit or no job summit – this demand will mean that jobs will inevitably have to be axed. This afternoon we will hear the scale of the carnage, likely to see some 10% of the entire TVNZ work force lose their jobs. Why? Mainly because the government is requiring its dividend as usual. Very few private companies are being expected to deliver the same, in current economic conditions.

It is not as if TVNZ is badly run these days. Current CEO Rick Ellis had just restored TVNZ’s finances to health, significantly reduced operating costs and delivered a sizeable dividend last year that amounted to an 8.3% return on investment. Then the recession came along and knocked advertising revenues for six – and job cuts will now ensue, given the insistence on a dividend in August.

Eventually, this selective use of the global recession will rebound on the government - because it is plainly delivering such an inept response. How is it good governance to devote more money to a cycle way than to the nine day working fortnight, which had been touted as the main idea for saving jobs to emerge from the jobs summit.

Now we find that even that paltry $20 million allocated for the nine day working fortnight scheme will impose even less of a cost burden on the government than it seemed – in that superannuation payments will go down, because of the impact the nine day working fortnight will have on the average earnings on which superannuation payments are calculated.

Essentially, the government is fiddling, while the fires of the recession burn ever closer. Soon, it will no longer be able to blame the bureaucrats, or the Clark administration, for its shortcomings.

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