Scoop Election 08: edited by Gordon Campbell

On the power company rip-offs

May 22nd, 2009

red tape, regulation, scoop image lyndon hood

Spot the difference. A Rotorua couple get $10 million overpaid by Westpac into their bank account and hive off with it, with Interpol and the police poring over the paper trail, in hot pursuit. The four main power companies get $4.4 billion overpaid into their bank accounts by the New Zealand public and hive off with it scot free, because the rules have been so rigged as to classify this robbery as a ‘lawful, rational exploitation’ of the rules.

Reportedly, Westpac has already recovered about $4 million of its missing money. The public, according to Energy Minister Gerry Brownlee, will not be entitled to a refund of any of its missing money – even though, according to the Commerce Commission, power prices were about 18 per cent higher than they should have been between 2001 and 2007.

Once again, the ideological right wing of New Zealand politics has demonstrated its disinterest and/or inability – first shown by Roger Douglas, Richatrd Prebble and Co over the sale of Telecom – at controlling the workings of monopolies, cartels, and other abuses of market power. What we are really good at is setting up opportunities for monopoly rents to be extracted from captive audiences, without any meaningful regulation in place to protect the consumer from price gouging. Telecom, Wisconsin Rail, the power companies – the political system not only enables robber barons to rob us blind, it sells this sort of practice back to the corporate sector as the kind of behaviour that should be promoted. We need even less regulation, the Act Party regularly announces, on behalf its friends in the corporate world.

Meanwhile the watchdogs at the Securities Commission and the Commerce Commission struggle on, under-funded and under-geared with the anti-monopoly, cartel busting and anti-collusion tools to do their job properly of protecting the public, and fostering a truly competitive market economy.

The electricity markets were set up by National’s Max Bradford, in the ‘anything goes’ the spirit of the time. Evidently, it continues to thrive. The Douglas-Richardson era was one remarkably – or deliberately – innocent of just how necessary anti-trust regulation has proven to be, even within in the US. You’d think that even a constitutional lawyer like Geoffrey Palmer would have heard of the US history with Standard Oil and AT & T and the need for regulators to regularly intervene, to break up the way that market power becomes concentrated, and prevent market players from colluding to mutual advantage.

“Yes, you’d think it would be a no brainer,” says Victoria University senior economics lecturer Geoff Bertram, an expert on the electricity reforms. “That’s why there was sheer disbelief when we saw what Douglas, and David Caygill and Ruth Richardson and so on, got up to. It beggars belief that they could be privatizing assets without putting a regulator in.”

Compare our fate with the outcome in Britain under Margaret Thatcher, he suggests. “She was a similarly ideologically driven privatiser. But boy, she put regulation in. She was very sure that a fair price was paid for the assets when they were privatized – in that later on, the monopoly owners of the assets were not allowed to collect super profits and make the assets worth far more, as a private asset, than they should have been.”

Co-incidentally, the Commerce Commission report on the power companies has arrived in the same week that a global study ranked New Zealand last of 16 countries surveyed, for its treatment of potential investors. Our D-minus rating – we were the only country to get that lowly mark – was based on our standards of (lack of same) for investor protection, fees, transparency, investment choices, and the lack of tax incentives to encourage long term productive investment. So much for the right wing wailing about the excessive regulation of business in this country – we have been, and remain, the Wild West.

Even now, all that Brownlee is telling the power companies is that they better not rachet up their current scale of robbery even further. The public, during the onset of winter, are left with hoping that further reviews now in the pipeline may deliver a fairer price for electricity, and a more competitive market. Given the government’s inability to make progress on setting a price for carbon (the Emissions Trading Scheme seems in limbo until 2011) or on enacting policy on alternative energy, we shouldn’t be holding our breath.

Obama, Nazi ?

Once the centre has been pulled so far out to the right, acting like a moderate still leaves you as a conservative, not a liberal – much less a socialist. Such is Barack Obama’s positioning problem, six months into the job. When it comes to releasing photos of US interrogations, he has now adopted the Cheney position of denial: the evidence would endanger the troops.

Plainly, he still aims to close Guantanamo, to transfer its inmates into the Supermax prisons within the US, and to put on trial under US federal law those inmates who have a genuine case to answer. He faces massive opposition from within his own party – only yesterday the Senate voted 90-6 to withhold the funds he needs to close down Gitmo – pending him giving them convincing evidence that its prisoners will not pose a threat to the US public, quaking out beyond the Supermax walls.

So much for the phantom vision that the Democrats control Washington, with their nigh-on 60 votes in the Senate. In reality, the socially and economically conservative Democratic ‘blue dogs’ form a sizeable bloc of Obama’s Senate majority. Their ranks include the likes of Ben Nelson, a Democrat so conservative he refers to his own party disparagingly in speeches as ‘them’. With friends like these, Obama’s path to change via the moderate, inclusive centre is going to be an extremely difficult one.

Not that the dinosaurs in the Republican Party have noticed, or would care. To them, Obama is still being depicted as a norteno version of Hugo Chavez, or as an arugula-eating re-incarnation of Joseph Stalin. This Youtube vid about this week’s attempt by the Republican National Committee to officially re-name the Democrats with labels such as “the Democrat Socialist Party” is a pretty sad and hilarious example of just how far the Republicans have fallen.

In like vein. veteran GOP fundraiser Richard Viguerie recently asked his readers to identify Obama’s personal political philosophy – and you can see the wacko results here on his blog. Evidently, some 46% of his conservative respondents think that Obama’s personal philosophy is socialist. Some 11% think he is communist, 5% found him to be ‘liberal’ and 2% think he’s a progressive. No-one mistook Obama for a libertarian or a populist. And, so much for centrism : only 1% think that Obama is a moderate.

Interestingly though, a hefty 10% though, think that Obama’s guiding philosophy is fascist. To these respondents, he may be the kind of guy who gets the trains to run on time, but only in a national socialist kind of way. As the Republicans in the Youtube video also claim, the US has become a state where the government basically controls the corporate sector, and your car, while leaving their ownership status, semi-private. Somehow, after eight years of Bush/Cheney driving a truck through the US Constitution, Obama is the guy they think of labeling as a neo-Nazi.

It makes you wonder where this type of extremism – and virulent terminology – comes from. The Web may have had something to do with it, but only after the fact. Sure, being online can make you feel at times as if you’re in one of those hard floor cafes where the sound bounces off the walls and floors and everyone needs to shout louder and louder to be heard. IMHO, that’s not a problem. Much of what passes for invective on Kiwi political blogs feels alien and imported – its like those rappers in south Auckland, who act like they’re from South Central. They wish.

The US though, all but invented the modern politics of polarization. Pre-Nixon, as the liberal blogger Ed Kilgore pointed out a few months ago, a more collegial style of politics used to be the norm in Washington. Certain levels of civility were maintained. Back then, politicians largely treated political process as a means of achieving liveable compromises – and not as a task of crushing, purging, and liquidating their political enemies.

That change came with the Reagan era, and its style was imitated in New Zealand by its Rogernomics counterpart. Reagan, though was the real deal. He really did run a covert, counter insurgent wing operating outside and against Congress – and it carried with with it, as Kilgore says, an ethos of loyalty and a sense of common cause that treated the formal elected government as a dupe, and an unwelcome obstruction. As the enemy, no less.

It was a vision of politics as warfare, and was echoed weakly here – but echoed nonetheless, in the Roger Douglas concept of blitzkrieg change. This held that change could not be achieved within the slow and balanced systems of elected government, but needed to be enacted by a few brave and visionary souls willing to do what was needed for the good of the economy, and the country.

Along with those inherently undemocratic tactics came an entire worldview. Other political entities were not merely one’s honourable combatants, to be grudgingly respected once the political contest was over. No, they were foes who had to be vanquished and expelled from whatever part of the public service, academia or the media in which they were located. That reformist zealotry went underground at the time Ruth Richardson was toppled. Then came Bolgerism, and the era of cautious, incremental liberalism under Clark/Cullen.

Not any more. There are some signs we may be in the grip of another activist government, of the sort last experienced in 1993. Certainly, the Key administration has tried very hard to project a sense of being inclusive and moderate – more like the steady as it goes National Party under Jim Bolger, than the extremism of Ruth Richardson. Yet the actual programme is increasingly ideological, and its methods increasingly undemocratic. Routinely, it has been reverting to urgency in the House, and is using its parliamentary muscle to ram through its legislative programme. Democracy once again is being defined as letting the public have its say only after the actual – and unwanted – decisions have been made.

Not surprising. Rodney Hide and his business pals are radicals, not centrists. They have rammed the Auckland Supercity process into place, and people are being invited to ‘have their say” – not in a referendum – but after they can meaningfully affect the process. Even the Gisborne Herald has noted the similarity between Key today, and the Douglas of yesteryear:

Such is the speed with which John Key is moving that comparisons may be made with the blitzkreig strategies of Sir Roger Douglas in implementing his economic reforms of the mid-1980s. These were to implement reforms by quantum leaps, neutralising vested interests by denying them time to mobilise.

Sir Roger said it was impossible to move too fast and “once you start the momentum rolling never let it stop” – a strategy that bears an uncanny resemblance to what is happening in Auckland.

Hide’s idea of consultation is in fact, very much like the Supercity plan for having 20 or so local boards – which will also let people impotently ‘have their say’ while the Super Council gets on with deciding what it is to be funded, what is to be contracted out and what it is be hocked off. Meet the new boss, as the Who used to say. We won’t get fooled again – or maybe.

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    1. 6 Responses to “On the power company rip-offs”

    2. By stuart munro on May 22, 2009 | Reply

      On the power companies – the failure of government regulation is substantially because a good proportion of powercos are still feeding govt. coffers. Thus energy ministers are complicit in the rip-off.

    3. By Alasdair Chisholm on May 22, 2009 | Reply

      How much did the CEO’s manage to secure in the way of bonuses from the 4 billion extra profits?.

    4. By lyndon on May 22, 2009 | Reply

      Someone having trouble commenting so I’ll copy it here…

      Kaukapakapa writes:

      SOEs may be considered ‘state-owned’ but in reality the Govt has little control over them. Simon Power and Bill English can’t insist on better returns if the SOEs would rather spend their profits elsewhere. For example, in 2007 Genesis Energy’s net profit was $61.3 million and the SOE (only) paid a $10 million dividend to the Govt.

      And despite a Labour Govt instructing Genesis not to build more gas-fired baseload power stations, the SOE has continued to spend tens of millions of dollars pursuing resource consents for exactly that.

      Sure, reform the electricity market if it’s going to result in cheaper power bills. But also look at the SOE Act and whether SOEs should actually have some accountability. At the moment they’re a law unto themselves.

    5. By BeShakey on May 22, 2009 | Reply

      “It was a vision of politics as warfare…”

      “Other political entities were not merely one’s honourable combatants, to be grudgingly respected once the political contest was over. No, they were foes who had to be vanquished and expelled from whatever part of the public service, academia or the media in which they were located.”

      Your argument that such things started in NZ with Douglas isn’t very convincing. Do you know the name of the Prime Minister before Lange?

    6. By Ian Tinkler on May 23, 2009 | Reply

      The changes by National’s Max Bradford in 1999 split lines companies from retailers this was supposed to stop local power companies ripping off consumers. What it did was remove democracy for the New Zealand electricity market.
      Before 1999 Christchurch’s electricity was supplied by SouthPower. They were owned by the CCC. As they supplied all the power to Christchurch, SouthPower has a large customer of ECNZ (a Monopoly). SouthPower had some influence over price as it was an important customer. I had influence over SouthPower as if the price was unreasonably increased, my city councilor would worry about his job as voters could reject the councilor.
      Now I can buy electricity from any of 5 or 6 companies, however I really don’t count as I am not a major customer and have no influence.
      There need to be a level between electricity generators and household, preferably one where the consumer has collective power. A bit like how it was before 1999. Max Bradford owes us $4.3 Billion plus all the jobs lost by his rotten reforms,

    7. By Be Bold on Jun 4, 2009 | Reply

      The Westpac ‘made millionnaire’ has been hunted down, interpol accessed and hundreds of Dollars, media coverage and sensationalism…

      The power companies have swindled every single New Zealander to the tune of four – six billion dollars. Even signaling that the power companies should pay nothing back. The government owns a huge percentage of the power companies.The PR wheels spinning, and very fast. Remember that the government gets massive profits every year, and, as a major shareholder, has a huge say…This image of ‘back against the wall, feet and hands tied together image’ does not cut it any longer. New Zealanders are up with the play and find this behaviour totally abhorrant.

      Going hard after the little man,

      and doing nothing to the fraudsters that swindled billions(the government and the heavy weights who own the powercos) who are totally above the law – once again, another explanation why certain groups are over represented in prison, while all the Heavy Criminals, including the government, are free to roam the streets, rule the country and travel the world.

      Welcome to culture, value system and DEMOCRACY , Welcome to NEW ZEALAND!!!

      Thank God for the internet which allows freedom of expression- I wrote this response to a newspaper – needless to say, it was never printed

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