Gehan Gunasekara: Labour-Green power plan trumps Govt policy

Government ministers have issued dire warnings and predictions as to what may occur if the Labour-Green plan were to be followed. Photo / Mark Mitchell

The Labour-Green plan for reducing power prices through a centrally managed bulk buying scheme has certainly set the cat among the pigeons.

It may be true, as Energy Minister Simon Bridges has eagerly pointed out, that power prices and disconnection rates (for non-payment of power bills) were higher at least at one point under the previous Labour Government, but the difference is that Labour and the Greens now propose to do something about the alarming trends of power prices (even though demand is falling) and have a plan to fix the problem.

The Government by comparison has no plan at all and instead places blind trust on the market and the opinion of overseas experts that our system of electricity pricing is good by world standards. Unfortunately, this sentiment does not go down well with a large number of households for whom it is patently untrue.

I do not know if the proposed Labour-Green plan will stabilise and bring down power prices. I do not even know if it will be more or less efficient than the current market-driven model. I am not an economist. I do know, however, that the proposal will appeal to the natural instincts of New Zealanders. I say this because, on the whole and unlike Americans for instance, we like to tackle problems collectively instead of individually. It is how we generally do things when confronted with a common problem. It is, in short, in our DNA however much the ideologues who favour the market might preach otherwise.

Proof of this proposition is amply found throughout New Zealand's history. For around a century we left the negotiating of our employment agreements and wages to be managed centrally through union-negotiated awards. True, we have long since moved away from it but many of us still prefer to be part of collective employment agreements to this day. In other areas our method of choice for addressing social and economic needs is through collective action.

Take for example Pharmac, which handles bulk-buying of pharmaceuticals by Government funded health providers. Furthermore, our no-fault compensation scheme for accidents continues to be a world leader and, privacy breaches aside, is regarded as more efficient than private accident insurance schemes generally are. It is underpinned by comprehensive regulation which amongst other things takes away a legal right - which exists everywhere else - to sue someone who injures you. So we are well-accustomed to centrally regulated management of important aspects of our lives.

Government ministers have issued dire warnings and predictions as to what may occur if the Labour-Green plan were to be followed. The hoary old chestnut of power blackouts and shortages has been thrown around. I suspect this will not carry much weight as most people will recall that these have occurred even under the current market model although not for some time. It may be that power shortages run in cycles related to climate which seem to occur once every decade or so. On the other hand there is another factor that comes into play which may carry more weight. This is the reality that accountability for centrally managed schemes can be sheeted home to the Government of the day. For example, in recent times we have seen the ACC Minister resign following spectacular privacy breaches and related foibles.

By comparison, market failures tend to be blamed on - you guessed it - the market itself. Should a blackout occur under the current market model I would venture to suggest that the Energy Minister would quickly distance himself from any responsibility. The fragmented system allows responsibility to be effectively dodged by everyone. The Cunliffe plan, however, would sheet responsibility home to the politicians where it belongs and I bet they would move heaven and earth to ensure blackouts do not occur. Whatever its merits the Labour-Green plan is smart politics by any name.

Gehan Gunasekara is an associate professor in commercial law at the University of Auckland Business School.

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