John Roughan: I refuse to save power - so charge me for it

Sorry, I'm not turning off the towel rail. I'm not going without a warm towel so that the likes of Comalco can maintain production through a power shortage. This, I submit, is a perfectly reasonable economic decision.

The aluminium smelter at Bluff is the largest user of electricity in this country and my towel rail is possibly the smallest but they have one thing in common: both are of marginal value, to me and to the country at large.

The smelter was always marginal. It would never have been set up here but for an offer of electricity at a price so low that for years governments wouldn't disclose it.

Now that prices can fluctuate with supply and demand Comalco has been one of the first operations to be found out once the spot market began to reflect another dry summer.

Too bad, I say as I towel down. If I faced the spot price I'd probably turn off the rail. So charge me. That's economics.

Warming to this thought, I might even mention that those of us who disregard exhortations to reduce consumption - more than half the population in a survey this week - could claim to be serving the national interest.

I didn't know what an economy was until I had the good fortune to be an embedded reporter at Parliament when Muldoon was toppled and the forces of free marketry ransacked the Treasury.

One day during the commotion I found myself a quiet corner and started to read "the books". Fortunately they had been written for cabinet ministers. It was economics without the algebra that had repelled my previous assaults on the subject.

That was the day I realised that a national economy is not some sort of steam locomotive, it's more like an internal combustion engine. You don't set it on a fixed track and simply heave in all the fuel you have. The idea is to tune it so that it sucks in the right balance of all the resources available to it.

Only then is it most likely to run to its full potential and generate as much national satisfaction as it can. Maximum human satisfaction, not production, is the point of it all.

That was also the day the penny dropped that "markets" are not some ideological end in themselves; they are the instrument for tuning the engine. When resources carry their true price in a competitive market, the country is probably extracting their maximum benefit with minimum waste.

Well, it made sense to me.

And it is an effective antidote to this crude 5 per cent power saving appeal. We don't need political campaigns to conserve electricity when we have a market that can transmit the message much more reliably.

Domestic consumers don't face the wholesale spot market directly, to our disadvantage half the time. But if a shortage persists we soon feel it. During the last drought, two years ago, retail suppliers exposed to the spot market for some of their bulk supply had an obvious interest in giving households some useful conservation tips.

Their notices were far more credible, sophisticated and precise than the half-hearted appeal coming from some central committee right now.

This one sounds like an attempt to satisfy Helen Clark's fearsome impatience with an electricity shortage for a second year in three.

The electricity wholesale market set up five or six years ago might not be functioning perfectly but it is making progress. The 1991 crisis left the big generating companies owning most of the retail business which might be no bad thing.

It reduces the visible trading but it gives the industry more co-ordination. There remains enough visible trading to provide another early warning of winter shortages. The more serious indictment of the market is that it is not attracting sufficient investment.

The capacity to generate power is not growing apace with rising demand. That spells a steadily rising price - which politicians fear but which may be in the national interest.

Is it wise to invest in additional capacity so we can afford to continue wasting power on heated towel rails and make-work aluminium smelters? Would the land and money devoted to new power schemes be better left in, say, orchards and vineyards?

Do you trust a committee to make those decisions or a market of four million consumers? Almost certainly a committee would aim to build surplus capacity; a market left alone would ration demand.

For the moment we have a committee, convened under Finance Minister Michael Cullen, to ponder the market's supposed underinvestment in "infrastructure", not only power generation and transmission but roads, railways and telecommunications, too.

Meanwhile Energy Minister Pete Hodgson, a fairly market-sensitive soul, is doing his utmost to ration demand a little with this 5 per cent campaign.

He knows electricity has been underpriced and as a greenie he looks forward to the day when price reaches a level at which wind, wave and other renewable sources become competitive.

Long before that day arrives, the market, left alone, would spawn small-scale responses to power shortages. Industries would look to their own generating resources.

All sorts of machinery, once in motion, spills energy that might be tapped. Some would generate surplus power that could be sold into the market. A Government committee cannot plan those solutions. A market can.

A committee of national planners can only think big.

There is a Russian joke that goes: How many economists does it take to change a lightbulb? Answer: They don't need to change it; all the conditions for lighting exist.

Many a truth is told in jest.