2 May 2013

Labour, Greens urged to abandon electricity policy

9:41 pm on 2 May 2013

Leading business organisations have written to the Labour and Green parties urging them to abandon plans to bring the electricity industry under greater state control.

In April, the parties announced that if in Government after the general election in 2014, they would set up a single purchaser of electricity which would then pass on savings to consumers.

Business New Zealand and the Chambers of Commerce say that the business sector shares the parties' concern about rising power prices.

However, the letter says electricity policies based on subsidies and greater state control are not the answer, as these have been tried in the past and failed. It says they will have a chilling effect on investment and destroy shareholder value in private power companies.

Business New Zealand's chief executive Phil O'Reilly said on Thursday the business community opposes the plan.

"There's a lot of deep concern about the Labour-Greens policy, which effectively would nationalise the electricity generation sector.

"We've taken the unusual step of writing to the parties in an open fashion to say there's plenty of time before the next election - perhaps you could think about withdrawing that policy and getting back into discussions with business organisations and businesses more generally, as well as other groups of course, about how we might improve the electricity market in New Zealand."

Mr O'Reilly said more competition - not price controls - is needed to bring down power prices.

Parties unmoved

The Labour Party says that the business groups are ill-informed about how its policy would work.

Finance spokesperson David Parker said on Thursday their letter is wrong on many counts and offers no cure for the problems at present.

Mr Parker said the Wolak report, released by the Commerce Commission in 2009, shows there was $4.3 billion of over-charging by electricity retailers and that since then prices have gone up further.

"(Our policy) will see household prices go down by $230 to $330 a year and commercial tariffs go down five to seven percent."

The Green Party believes the business groups are being alarmist. Co-leader Metiria Turei says the party will be sticking with the policy because it is the right thing to do for New Zealand households.

"I am disappointed by this open letter - I think that it shows a lack of understanding of the nature of the electricity market, frankly.

"It shows that the real interests of these businesses in particular is the maintenance of high levels of profit at the cost to New Zealand families and businesses. And I don't think it's responsible."

The Greens say as long as generators are also retailers, there will be little competition in the market - and that's what the Greens' and Labour's policy will provide.

Both parties said they are happy to meet with business groups to discuss their policy, but won't be abandoning it.