Thursday, May 27, 2004
Surely it can't be healthy, but apparently I'm not the only one. When I hear about an critical, urgent problem involving electricity, my basic assumption is that it's a con. This winter (says Transpower, the lines company) the north of the South Island may well face evening blackouts because there isn't enough capacity to carry the power. Nobody was told earlier - many were assured otherwise. Much of the indignation is arising from this last point (especially as Transpower is a state-owned company).
But one of the mayors interviewed by Linda Clark on Thursday morning expressed the opinion that the technical problem has been manufactured, or allowed, for the company's own purposes. I don't know that they will profit out of it directly, but they certainly took the opportunity to protest the Resource-Management-Act-related difficulties of building new infrastructure, even though that has little to do with the immediate issue.
My own suspicion of power companies stems from formative exposure to Greg Palast, an American-scale investigative journalism equivalent to New Zealand's Nicky Hager. The dirt he's most known for digging up and flogging unmercifully is the details of the roll-doctoring an other dodgy practices in Florida in the last presidential election.
Palast also enjoys explaining his economic credentials (enough to qualify as one of Milton Friedman's brat pack, even if he was there spying for trade unions) and he's persuasively adamant that things like electricity and water are not appropriate subjects for privatisation. Supply and demand don't balance. If you suddenly have to pay exorbitant prices for water, what are you going to do? Stop drinking? Similarly, the air-conditioner dependent state of California was swindled particularly hard by the privatisation of electricity.
In his book
It is of course a little one-sided. For example, the film Power Trip explored the private adventure in ex-Soviet Georgia from the power company's point of view. From memory, Palast may have discussed this in the book (has anybody seen my copy?) as a case of privatisation being bad. In the film, the bright-eyed Americans were bringing in a modern electricity system, almost as an aid project. Unfortunately, a number of factors including rampant corruption and a populace unprepared to pay power bills made their job impossible. Appearing at the film festival at the tail end of the power crisis of 2003, Power Trip reassured kiwi electrocrats that their problems weren't nearly as bad as all that.
But the point remains that power markets favour the supplier, particularly the generator, and are generally easy to rig. Anyone who says the electricity market would work better if it was deregulated is wrong.
In New Zealand our experience hasn't been quite as catastrophic as elsewhere. We have an increasing number of checks and balances in the market. I know few of the details, but I have a fair amount of faith in them. Partly, I admit, because a blood relative of mine had a hand in them. Also because many of the games that generators can play, such as discarding production capacity to exacerbate a crisis, would presumably be obvious if you tried it with hydro.
At any rate, the 'checks and balances' sometimes seem to mean shelling out public money towards things like spare capacity - things that you'd think would be part of the companies' core job. The expensive fixes reinforce the impression the private electricity is inherently broke. I can't help thinking wistfully of a public system. I won't claim it would be perfect, but the problems wouldn't be any worse than the ones we have now.
And there are upsides to high prices. One the interesting idea is that being gouged by utility companies increases the GDP (not that I know of anyone who claims this) in much the same way that someone buying as many cigarettes as they can afford and then getting expensive lung cancer treatment keeps the money circulating.
Also, high power prices encourage energy conservation and make alternative sources look more economical in comparison. All very green.
The Minister of Technical Stuff, Pete Hodgson, joined in the discussion with the mayors. He made it clear that, if the current capacity problem was manufactured, the swindle just backfired. Transpower will be getting a lot of scrutiny from all quarters, over both the misreporting and the management of its own networks. That's for the future. The first priority for the Minister will be making sure that the supply will be there. It's the absoluteness of this priority that gives electricity companies so much non-electrical power.