Cold Comfort

Why do electricity prices continue to rise?

Wholesale electricity prices have doubled in the last three weeks. Thousands of us are living in energy hardship, with 1 in 5 people reported to be worried about being able to afford a power bill, and some businesses, such as the multi-million dollar Pan Pac paper pulp making plant near Napier, have temporarily closed down, impacting the lives of hundreds of workers.

We once had some of the cheapest electricity in the world, so why have we got into this situation?

A little economic history helps with some of the answer.

The price of electricity was once completely controlled by the government, who owned every aspect of the power network because we understood it to be a public utility created by us for the benefit of everyone.

But in the mid-1980s, the introduction of neoliberal economic policies, with its mantra that the government should not own anything and the free market knows best, saw public utilities relabelled as public “assets” and sold off.

The publicly owned New Zealand Electricity Department became part of the Ministry of Energy and then a state-owned corporation, the Electricity Corporation of New Zealand (ECNZ).

The transmission branch of the department was separated off to become another state-owned company, and controller of the grid, Transpower.

The government construction agency, the Ministry of Works, was dismantled and sold off, and the power planning procedures replaced by the creation of an electricity market.

The breakup of ECNZ began in 1996 with the creation and subsequent sale of Contact, a group of stations representing 30 per cent of ECNZ's generating capacity.

The remaining portion was split into three separate companies in 1999. Therefore, the planning and construction of new generating stations are now in the hands of private enterprise, as it was in the early 1900s before the government decided the generation and distribution of electricity was something it needed to own and control in the public good.

The lesson?

Government ownership is not a bad thing because it is driven by meeting the needs of the people. Private ownership, on the other hand, is driven by profit and giving the highest return possible to its shareholders.

Could we turn back the clock and nationalise our electricity system again?

There is currently no political will to do so because it would require the government going into considerable debt (as it did when it built the dams and the transmission network back in the day) and neoliberal governments are averse to debt, even though much of our everyday world operates on debt (eg. home mortgages).

I also think that, as a consequence of the neoliberal demand to keep wages low and profits high, many New Zealanders are forced to focus on solving today’s problems – paying the rent, putting food on the table, the cost of getting to work and, yes, paying the electricity bills – to think about tomorrow and what we might do to improve our lives and those of our children and grandchildren.

In short, the cold comfort of privatised electricity is something we have been told we must accept.

I’m not so sure that we do. In the 1980s, we chose to change the way we ran our economy. We could choose to run it differently again if we wanted to.

(Cartoon is by the talented Rod Emmerson of the NZ Herald)

( Cartoon is by the talented Rod Emmerson of the NZ Herald )

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