Rodney Hide: Proposed power plan full of holes

Labour Party leader David Shearer (right) and Green Party co-leader Russel Norman. Photo / Mark Mitchell

The Labour-Green power plan is fatally flawed. Here are 10 reasons:

1. Electricity prices are working. As they should. Labour and the Greens keep repeating that the electricity market is not working. But wholesale electricity prices are doing exactly what they should be doing: they're matching supply and demand. When we flick the switch, the lights go on. That's the market working.

2. Electricity prices are fair and reasonable. Much is made of hydropower being generated cheaper than what we pay. But hydropower is no longer sufficient to cover demand. When we flick the switch, we're paying for the dearer generation that we are drawing on, and for the transmission capability needed to deliver peak demand.

3. Quick! Turn up the swimming pool. The plan puts more than twice as much money in the pockets of rich families as it does poor families. That's because rich families use more power. The promised $6 a week saving is for the average household. The "upper end" estimate for the lowest decile families is only $4.

4. The lights will go out. The promised 30 per cent cut in power prices will mean more people using more power. The same cut in price will mean less power being generated. Some generators now in production will prove uneconomic. More power used, less power produced - the result will be a power shortage.

5. We all lose as taxpayers. The Government owns about 78 per cent of the hydro- and geothermal-generating capacity. The lost revenue means less income to the Government. That means spending cuts, more borrowing or higher taxes. Taxpayers have already been hit with the power plan dropping the price of Mighty River shares.

6. Businesses shut, jobs gone. Both Labour and the Greens are promising more business and more jobs. There's no doubt lower power costs would boost the economy. But regulating the price of power downwards doesn't change the cost of power. It just artificially lowers the price and makes for shortages. The resulting rolling blackouts would mean less business and fewer jobs.

7. What about the planet? For years both the Labour Party and the Green Party have campaigned for higher power prices. They want to cut the burning of fossil fuels to arrest global warming. That's why we have an Emissions Trading Scheme. Labour and the Greens continue to campaign for an even tougher scheme. They are now campaigning for a further hike in power prices and a cut in power prices.

8. We have choice and competition. Recently, Meridian knocked on my door promising a better deal. We switched. Contact then rang us promising a five-cent-a-kilowatt-hour saving if we switched back. One in five Kiwis likewise switched power suppliers last year. We have choice and competition and we are reaping the benefits.

9. Shearer-Norman power. The power market is one of the easiest to enter. Labour and the Greens claim companies are making "super-profits". If that were the case, they could set up their own power company and fund their election campaign - and lower power prices for everyone. They won't, of course, because they can't. There's no easy money to be made supplying power. The super-profits line is political rhetoric: it's not true.

10. It's cheaper to hand out money. The Greens and Labour would be better to hand out money to help poor families pay for power. They could give the bottom-decile families $4 a week for less than two-tenths of 1 per cent of present welfare spending. That's not even a rounding error in social welfare's budget. And the country's lights would still go on with a flick of a switch.