Meddling expected by those in power

By Richard Braddell

Far from being embittered that former energy minister Max Bradford forced him to get rid of his New Zealand electricity retailing activities, the chairman of UnitedNetworks' parent UtiliCorp United, Rick Green, sees the development as simply reflecting the way the world is going.

Similar splits were part of the restructuring of Victoria's gas and electricity industries and are becoming common around the world.

So what if the supply company split looked like a heavy-handed usurpation of shareholder property rights? "Here, there is a real fascination with the energy marketplace because it is the most progressive energy marketplace in the world, given the attempt to change it to benefit customers in the long run," Mr Green says.

He also welcomes the wide-ranging energy inquiry that Labour plans for the first few months it is in office. He says it is important if only because New Zealand is different, with its unique tensions between generators, Transpower, retailers and lines companies.

Mr Green also seems to agree with incoming Energy Minister Pete Hodgson, who wants the inquiry to do much more than establish a basis for curbing the monopoly pricing power inherent in lines businesses.

His argument that quality of service is every bit as important as price echoes Mr Hodgson, who has made security of supply a central plank of Labour's energy policy and a key issue for its inquiry.

It remains to be seen how far the inquiry will get. Mr Bradford's attempt at curbing line companies by price regulation was defeated by Labour and the minor parties in May because they thought the mechanism to be used was too crude.

That mechanism involved applying a downward ratchet on real charges by limiting increases to the rise in the consumers price index, less a factor known as X.

Two months ago, Mr Hodgson said there was no New Zealand data upon which to determine a value for X and only two people at the Ministry of Commerce were working on it.

A critical concern to Mr Hodgson was that the X factor would penalise some lines companies while advantaging others, because it would not take account of individual cost structures determined by things such as geographic dispersion and the amount of cabling installed underground.

Another risk was that bonus-chasing executives would be persuaded to push up short-term shareholder value at the expense of long-term security of supply, thus skimping on maintenance and risking another Mercury-type blackout.

"The possibility is that we are going to find this all very hard," he said, although he held out hope that overseas experience, and probably some consultants, would provide pointers.