Power Price Data Shows Hypocrisy of Labours Claims

Posted on Friday, April 19th, 2013 at 11:29 pm in

Labour and the Greens launch their electricity policy later today, and if the drought had not already broken the deluge of crocodile tears from opposition MPs would have done the job.

Expect to hear much about high power prices and their impact on the less well off when Labour leader David Shearer and Green co-leader Russel Norman announce their power prices policies.

The difficulty they face is the largest sustained household price increases for a generation or more happened between the end of 2001 and the end of 2008.

To get some comparison, look at the graph, compiled from Statistics New Zealand data.

In the 11 years to the final quarter of 2001, household electricity prices rose 47%. That was still above the compound rate of inflation over that time (21.2%) — but nothing like what was to follow.

In the seven years between the final quarter of 2001 and the final quarter of 2008, household power prices rose 63.5%. Over the same period, the compound rate of inflation rose 21.0%.

The reason for picking the final quarter of 2001 is because this marked a turning point in electricity prices — for households, as well as for businesses.

High in Labour and Green party demonology on electricity is the reforms of National’s late 1990s Energy Minister Max Bradford.

These chopped the old Electricity Corporation into four companies, split the industry between lines companies, generators, and retailers, and sold off Contact Energy.

Bitterly attacked

The changes were bitterly attacked, and when the government changed in 1999 Labour Energy Minister Pete Hodgson promised a more “active management” of the portfolio, with lower power prices.

There was an inquiry into the sector in 2000, with much consultation and much talk about “long-term thinking”.

As can be seen from the graph, this is not quite what happened. After a period of quiescence, households started to be hit with much higher power prices. Commercial electricity rates turned upwards as Well.

Taking place as they did three years after the Max Bradford reforms took effect, and two years after a change of government, it is a little difficult to see how these were much to do with decisions made in 1998.

To be fair, there were demand factors pushing up prices -the biggest being the high rate of conversions of former sheep and beef farms to dairying. Milking sheds, operating six or more hours a day, use quite a bit of electricity.

But the biggest factor was an aggressive dividends policy from 2002-07 dividends from the main electricity Companies averaged, in total, slightly less than $500 million a year.

So todays talkfest from the opposition parties is going to be so much hypocritical handwringing about the effect of higher power prices on the poor.

Lt would not be so nauseating if Labour had not been prepared to gouge those same poor with historically high power prices so as to fund the large, Statist empires in Wellington.

That though does not let the current government off the hook. Household power prices are still rising above the rate of inflation. Yesterday’s Consumer price index showed benign inflation of 0.9% but power prices up 5.2%.

It is not a one-off: household power prices are still rising above the rate of inflation. Since the end of 2008 they are up 15.6% when compound inflation is up 9.2%.

But it is still nothing like the power price gouge which took place between 2002-08.

Source: The National Business Review

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