Q+A: David Parker Interview 21/04/13

Sunday 21 April, 2013
 
Labour’s finance spokesman David Parker has told TV One’s Q+A programme that it and the Greens were right to announce their electricity policy ahead of the Government’s share float of 49 per cent of Mighty River Power.
 
Parker told political editor Corin Dann that power prices had gone up by 70 per cent more than inflation since National’s Max Bradford electricity industry reforms in 1998. “They’ve gone up over and above inflation by $700 for an average family in a year. It is out of control.”
 
“If we hadn't actually announced this now and we'd let these share floats go ahead and then we told people this, they would rightly have criticised us for actually not being explicit at the time when people had a choice to buy shares. People have a choice to buy shares. They don't have a choice about paying a power bill. So, you know, we're unapologetic. We think that this is wrong at the moment, that consumers are being overcharged, and we are going to fix it.”
 
Labour and the Greens announced the formation of a Pharmac-style single-buyer agency called NZ Power if they won the next election. NZ Power would buy electricity generated at wholesale level at what it deemed a fair price and pass on these savings to consumers through retailers.
 
The Greens say consumers would be given 300 kilowatt hours per month at a reduced rate, about two-thirds of the current price of a kilowatt, and anything over that would be at normal retail company prices. This would save most consumers between $230-330 per month on their power bill. The average household uses around 700 kilowatt hours per month.
 
David Parker told Q+A NZ Power would “average the price of some of our cheap electricity, like hydro, with the more expensive electricity from, say, gas into the market.”
 
Q+A, 9-10am Sundays on TV ONE and one hour later on TV ONE plus 1. Repeated Sunday evening at 11:30pm. Streamed live at www.tvnz.co.nz   
 
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Q+A
 
CORIN DANN INTERVIEWS DAVID PARKER
 
CORIN DANN
The Electricity Authority this week said in its report on the system that there was increased competition in the industry in generating and in retailers. So what is the problem here? Why do we need to change?
 
DAVID PARKER - Labour Finance Spokesman
NZ has some of the cheapest generation in the world in our hydro, and yet consumers don't see it. We've now got the highest differential, the difference between industrial and residential users. Residential people pay three times the price of industrial. Prices have increased by far higher than inflation, and so we-
 
CORIN            But do we have competition or not? Because we've got five big players here. They are competing, and there are others in the system. What's the problem?
 
DAVID            No, we've got very inadequate competition. It's very hard to make any electricity market competitive, and ours isn't sufficiently competitive, and that's why prices just keep going through the roof for consumers.
 
CORIN            So you want to set prices?
 
DAVID            We do at the wholesale level. We think that it's ridiculous that we price hydroelectricity at the same price as gas. What we're saying is those things should be averaged into the market, and then the central buyer - which won't make a profit or a loss - it'll pass all these costs on to consumers through retailers - and we will have a very competitive retail market, which we haven't got currently.
 
CORIN            This is a central buyer that you said in 2006 would lead to investment proposals being put on hold. Direct implementation costs could be huge.
 
DAVID            That’s right, and that's actually why we didn't do it at the time. It is true that during the period of reorganisation - and it takes two years - you have investment uncertainty, and so people don't invest in more generation. At the time, we had perilously thin generation margins. It was being reported to Cabinet every week, and so we couldn't do it then. We haven't never been satisfied, though, that National’s Bradford reforms ended up with fair prices.
 
CORIN            Isn’t the issue here that for many, many years under your government, when prices rose 72% under Labour, you were paying-?
 
DAVID            Under the Bradford model, yeah.
 
CORIN            But you were paying for a lack of investment in infrastructure from years gone by. There was a catch-up. We've reached that now, and if we look at the last couple of years, prices are starting to level off. The Electricity Authority is saying we've got competition.
 
DAVID            They’re still going up at twice the rate of inflation. You tell me another market where you have to have a government agency going out and telling people through ‘What’s my Number?’ or whatever the campaign is that you're being boned for your prices. You should change to someone else. I mean, isn't that evidence of lack of competition rather than evidence of competition?
 
CORIN            But we've also got a system where we are seeing lots of investment. We're seeing investment in clean energy, the likes of Mighty River Power, geothermal, all those sorts of things, all those incentives. The market is incentivising all those companies to invest, so we don't have any security of supply issues.
 
DAVID            Actually, the single-buyer model rates really well under security of supply once you've made the transition. Actually better than the current model. So I think that's not a big issue. The reality is at the moment we've got all this cheap power in NZ, and the value of it is capitalised into the generators’ balance sheets, and New Zealanders who should be paying less don't. Now, we've said that we are going to change this. People will be $230 to $330 per annum better off as a consequence, because their power bills will be lower, and we think that's fairer.
 
CORIN            So essentially you're saying there's a transfer of wealth here from those people who have invested in those energy companies, and the government included, who are making those profits. You're going to take that money and give it to the consumers.
 
DAVID            Just because people got away with charging excessive prices yesterday is no excuse for allowing them to do it tomorrow. We heard the same excuses with Telecom until they were brought to heel for their excessive pricing in the telecommunications space. Look, the Americans don't put up with this nonsense. People say markets are good. Actually, that's shorthand for ‘competitive markets are good.’  Uncompetitive markets are bad because they are predatory of the people who pay the bills, and they actually misallocate resources within the economy and your economy doesn't go as well.
 
CORIN            I’m going to pick you up on that, because you guys were quoting Professor Wolak, who was saying super profits, $4.1 billion, were gouged out of New Zealanders. But he's also said on Radio NZ this week that high-level regulation stipulating the price of electricity was tried in the United States and were found wanting. He was saying it didn't work.
 
DAVID            Yeah, well, we're actually not regulating the retail price, and that's one of the things that the government’s been asserting which is incorrect. We are averaging the price of some of our cheap electricity, like hydro, with the more expensive electricity from, say, gas into the market and then creating-
 
CORIN            But you've still got to rely on bureaucrats setting the price, though, don't you?
 
DAVID            Separating the retail arm from the generators and having genuine competition in retail. So the idea that we're not going to have a competitive market at all levels is a nonsense.
 
CORIN            But you do have to rely on a new organisation having the nous, being clever enough to predict those price signals. What evidence is there to suggest that they will be able to do that?
 
DAVID            Look, it would be very hard to have something worse for consumers than the current model. You know, these prices have gone up by 70 per cent more than inflation since Max Bradford said power prices would go down. They've gone up over and above inflation by $700 for an average family in a year. It is out of control. If National has its way, it'll continue to go out of control. They're telling us this is Stalinism. If we hadn't actually announced this now and we'd let these share floats go ahead and then we told people this, they would rightly have criticised us for actually not being explicit at the time when people had a choice to buy shares. People have a choice to buy shares. They don't have a choice about paying a power bill. So, you know, we're unapologetic. We think that this is wrong at the moment, that consumers are being overcharged, and we are going to fix it.
 
CORIN            All right, David Parker.
 
ENDS