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Why power prices are rising

To fatten SOE energy companies for privatisation

While the Prime Minister thinks part-privatisation of SOE energy companies would not push power prices up, consider these points.

Free of the "fairness" constraint, generators have been happy to maximise their profits

  • Generators made $48 million of profits in 3 weeks in December, by withholding hydro generation.
  • Genesis hiked the spot (wholesale) price to $20 per kilowatt-hour on 26 March – exploiting a transmission constraint to its logical extreme.

The EA interprets its legal mandate so say that all its cost-benefit analyses will ignore any "transfers of wealth" from domestic consumers to either the power companies, or to the industrial consumers who get big discounts on their power prices.

They put domestic consumers into the same class as industrial consumers. This treats "apples" and "oranges" as one and the same, allowing the oranges to be squeezed to fertilise the apples.

We conclude that electricity regulation has reverted to the pure ideological model of the late 1980s. It protects investors, making consumers face rising prices and risks.

With privatisation, overseas investors would be protected by the new Regulatory Standards legislation. Instead, the State-Owned companies should be kept in public ownership, and regulated as essential services, as Transpower is today.

Prime Minister John Key's commitment to privatisation makes this a choice the voters can make.


See Molly Melhuish in the Dominion Post on 1 April, 2011, ‘Why power firms shouldn’t be sold’. Or see original Op Ed for easier reading.

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