Rising prices and privatisation: the need for people’s power

Ian Anderson

Rising power prices have made headlines in recent weeks, with hikes of up to 10% beginning on April Fool’s Day. These increases hit low-income workers the hardest, with prices rising 48% for domestic users between 2000 and 2010 – compared to only 9% for commercial users.

Power prices are also topical due to the government’s plans to further privatise power generation, already corporatised by the Fourth Labour Government. National plans to sell 49% of Mighty River Power to private investors, although some commentary suggests that the law will actually allow more shares to be sold, providing the extra shares do not carry voting rights. Bill English has flagged further privatisation of Genesis and Meridian Energy.

National’s plans are generating tensions with iwi, both with investors and flaxroots Maori. Hapu say their rights to use and protect waterways are eroded by sale to power companies, while iwi investors are concerned that they will lose out. Cabinet has indicated that Treaty grievances will not apply to private shareholders, and that if any shares are required for a Treaty settlement, the Crown will have to buy them at market rates. Surveys say 88% of Maori oppose asset sales, compared to 75% of the general population.

Right-wing commentators suggest that privatisation will drive down prices. However Tim Hunter, deputy business editor at Fairfax Media – hardly a communist – argues that power prices will only head upwards. Hunter asks, “which of these opposing forces will emerge victorious? The hunger for higher margins, or the restraint of competition?” To answer this, he points to two recent examples of increased competition; Powerswitch, a government initiative that successfully led to more consumers switching power companies, but had no overall impact on prices; and the deregulation of electricity in Victoria, which has led to 13 competing brands, 11 competing owners, and higher prices than New Zealand. Even as an investor who stands to benefit from privatisation, Hunter questions the prevailing myth about competition.

The Ombudsmen, independent parliamentary investigators, have also questioned the government narrative. During the election last year, the Ombudsmen found no evidence for National’s claim that assets would be 85-90% owned by Kiwi “mum and dad” investors, and of an anti-monopoly 10% cap on ownership by any one investor. More recently the Chief Ombudsman, Beverley Wakem, criticised the government’s plan to remove the companies from Official Information Act requirements: “They will carry on the same operations as they do presently which have significant scope to impact on individuals and communities and the environment. It’s not just about commercial interests, the impact of these companies goes much wider than that and all of those interests ought to be protected.”

In fact, we could apply the Ombudsmen’s logic to all capitalist operations: margins are placed before externalities, profit before people. Most commercial operations are spared the accountability of Official Information Act requests, because their bottom line is more important. This corrupt saga underlines the importance of public ownership, control and oversight.

A hikoi opposing asset sales, under the slogan “Aotearoa is Not For Sale,” will leave Auckland’s Britomart on April the 28th and reach parliament on May the 4th.