Power plan likened to Soviet era

Simon Bridges says the plan amounts to nationalising the electricity industry. Photo / Bay of Plenty Times

Labour-Greens' plan to regulate wholesale prices amounts to nationalising electricity industry, ministers say

The Government says Labour and the Greens are trying to sink the Mighty River Power share float with a hastily drafted threat to impose Soviet-style intervention on the electricity market.

However, Labour and the Greens say their plan to regulate wholesale prices is a sound policy used in several American states and will halt rising power costs, cut household power bills by as much as $300 a year and give the economy a $450 million a year boost.

Labour leader David Shearer and Greens co-leader Russel Norman yesterday said that if they won next year's election they would establish a new agency called New Zealand Power which would act as a single buyer of wholesale electricity.

The agency would also have the power to set prices based on generators' operating costs and a fair return on capital. NZ Power would sell power to electricity retailers at prices lower than those on the current wholesale market and those savings would be passed on to consumers.

However, those savings would come at the expense of power companies.

The plan would cut the nation's power bills by up to $700 million a year and that money would come straight out of the revenue streams of power companies, including Mighty River and others earmarked for partial sale.

Mr Shearer said the plan would ensure "a fair return" for those companies, "but it won't be at the super profit level that it currently is at the moment".

He had written to the board of Mighty River Power and to shareholding ministers asking them to issue a supplementary disclosure to warn potential investors of the plan.

He denied the proposal was an attempt to derail the asset sales plan.

Energy and Resources Minister Simon Bridges said the plan "smacks of policy on the hoof by the Labour-Greens, effectively to try and scupper the Mighty River Power sale".

Finance Minister Bill English said the Mighty River Power share offer remained "firmly on track".

Mr Bridges and Economic Development Minister Steven Joyce said the plan amounted to nationalising the electricity industry.

"They may want to return to sort of United Soviet Socialist Republic of New Zealand days but National certainly doesn't," Mr Bridges said.