John Armstrong: Avoiding a power vacuum

COMMENT

The alarmist-sounding talk of power blackouts and electricity price rises spawned by the abrupt cancellation of Project Aqua ignores a simple truth obvious in hindsight.

Meridian Energy's behemoth was never a goer - politically, environmentally, perhaps engineering-ly, and, as it now turns out, commercially.

Given the Government's understandable reluctance to exempt Meridian from normal planning procedures on "national interest" grounds, the $1.2 billion scheme was always going to struggle to get off the drawing board.

Few tears are being shed around Parliament at its demise - and those that are, are crocodile tears at best.

For the Opposition, Monday's scrapping of the project offered further excuse to cane the Government for the alleged shortcomings of the Resource Management Act.

Never mind that state-owned Meridian's gripes were not with the RMA per se, rather with the special legislation that was brought before Parliament to provide some coherence and logic to a planning application that, in Aqua's case, was in a super league of its own.

But it is a rather poor Opposition that lets the facts get too much in the way of a good rark-up.

Rather than trying to defend the RMA, the Government sensibly rose to the challenge, pointing out that it just happened to be reviewing the act anyway.

Enter David Benson-Pope, Cabinet new boy.

In an extremely smart move, Prime Minister Helen Clark handed him the RMA review after he became a minister in the wake of February's sacking of Lianne Dalziel.

As a former chairman of the Dunedin City Council's planning committee, the new Associate Environment Minister is well-versed in both sides of the RMA argument.

He does not carry the baggage of Marian Hobbs, the senior minister in the environment portfolio, who was lampooned in Parliament this week for once describing the RMA as "beautifully written and beautifully crafted".

In a significant move, Benson-Pope has also been co-opted on to the Cabinet working group on infrastructure issues, which is chaired by Finance Minister Michael Cullen.

That is an indication that Cullen wants a more trenchant review of the RMA than the initial brief that was given to Benson-Pope.

The political lesson for the Government from Aqua's falling over is quite simple: To borrow from Oscar Wilde, losing one power project might be regarded as misfortune, but losing two would look like carelessness.

For now, Benson-Pope is shying away from writing provisions into the act that would force councils to take the national interest into consideration when hearing planning applications.

That is something Economic Development Minister Jim Anderton has been fighting for and something the Prime Minister indicated great reluctance in doing when it came to Aqua.

But the last thing the Government needs now is for a more straightforward planning application by a power generator to fall over because of some unnecessary constraint imposed by RMA procedures.

As it is, the end of Aqua leaves the Government in political deficit when it comes to demonstrating that it can back up its rhetoric about economic growth with sufficient generating capacity coming on stream to meet demand.

Little wonder there is much teeth-gnashing in the business world about what abandoning Aqua means for security of supply, let alone the signal it sends to foreign investors thinking of setting up shop in New Zealand.

However, the Government is taking the attitude that while it would have preferred Aqua to be around to feed more than 500 megawatts into the national grid, it could not bank on that happening.

For that reason, the Government appears more relaxed than the doom merchants believe it should be.

But there is not a great deal the Government can do about making up any pending shortfall in capacity (and not surprisingly, it vigorously disputes whether there will be any) unless it wants to indulge in market-distorting edicts to state-owned generators to build more power stations against their commercial wishes.

It probably went as far as it could in fiddling with the electricity market with last year's establishment of the Electricity Commission to ensure security of supply in years when hydro lakes run low.

While the critics might wail, Labour knows that National, under laissez-faire Don Brash, would not likely behave any differently.

Given that market imperatives now drive investment in generation - and gambling that higher power prices will boost investment - the Government sees little point in saying it can do something when it cannot.

Following Meridian's announcement, the Prime Minister downplayed its impact. The possibility of power shortages was the exact reason why the Government had established the Electricity Commission, which will be an early-warning system in the forecasting of longer-term energy needs, she said.

There was similar soothing spin from Energy Minister Pete Hodgson, who cited the 150-megawatt, oil-fired plant at Whirinaki in Hawkes Bay as one project that will cater for new demand - even though the plant was expressly commissioned as emergency back-up for dry years.

But Hodgson was frank in admitting that power prices will be a "little higher" than would have been the case had Aqua proceeded.

An extremely rough calculation suggests that "a little higher" could add another $80 a year to a household's power bills.

That won't happen for another four or five years. Even so, the lingering political downside in Aqua being axed lies in weary consumers seeing endless price rises coming on top of price rises.

Neither does Hodgson's disturbingly detached demeanour - he sounds so cold-bloodedly analytical that it would be no surprise if anti-freeze has to be injected into his veins - inspire confidence that the lights will stay on.

Offsetting all this is the considerable short-term upside for Labour in the removal of a political irritant in the lower South Island.

With an unlikely coalition of the Otago establishment, farmers and environmentalists opposing Aqua, the Government was on a hiding to nothing no matter how hard it argued that it was at arm's length from Meridian's decision-making.

In particular, the project's death will stop party votes being peeled off by the Greens, the big losers from Monday's announcement.

That party was "delighted" that the project has been cancelled.

No doubt the Greens, struggling to stay in the spotlight now that genetic modification is off the boil, would have been even more delighted had Aqua been shelved after their campaign against the power scheme had gained national traction, not before.