New Zealanders over many generations have worked to build and develop our energy producing assets. State ownership of the energy producing companies was seen as necessary in the past due to their very important role in providing ‘essential services’ to the entire population.
We are being told that the reasons for this plan are to invest in social expenditure such as schools, hospitals and roads – however this money could be raised elsewhere and in a way that is more sustainable in the long term. In fact, asset sales would leave us less able to afford these public services in the future because losing the dividends from the assets means the government has to borrow more.
This debate cannot be reduced solely to one over the financial returns from the assets – it is about people getting a fair go.
- Higher power prices hurt families
On average, privately-owned electricity companies charge 12% more for electricity than publicly-owned ones.1 Privately-owned electricity companies have complained to publicly-owned ones that they are not charging enough for the privately-owned companies to make a profit2 and the CEO of Contact Energy has said that electricity prices need to rise for private investors to make a profit.3
So, what would happen if nearly half of the electricity companies were sold to private, often overseas, buyers? They would demand higher profits. The boards of companies would be legally required to act in their interests – it doesn’t matter if 51% remains in government ownership, the private shareholders rights to a higher profit would have to be respected. To make higher profits, they would charge higher electricity prices.
New Zealand has some of the most affordable electricity in the world4 because the publicly-owned companies hold the price down. If they were privatised, that anchor would disappear and prices would skyrocket.
Families are finding it hard enough to get by already. Can we afford higher electricity prices on our strained household budgets?
For many poor families and people on fixed incomes, like the elderly, the only thing to do in the face of higher power prices is to use less electricity. That means colder homes, which leads to worse health and more costs for our health system.
- Less say over our resources
Treasury’s Regulatory Impact Statement states that asset sales would mean reduced ability for New Zealanders to engage on company strategy. This means less say for us on how these companies are run.
By taking these companies out of the State-Owned Enterprises Act, the Government’s legislation would also remove the companies scrutiny under the Official Information Act and the Ombudsman, so we would have less information about what they are up to, and would remove their obligations to consider the impact of their actions on communities.
- Failed Social Experiments
We have seen with past privatisation of railways and Telecom that when the companies focus more on the bottom line than providing a social service – users suffer. The national railways are now dilapidated and many rural services have closed completely. We arguably have one of the worst and most expensive Telco networks in the Western world and now telecom is being paid to build a broadband network which they should have built out of their own profits years ago.
The state historically developed the electricity system because of the inability of the private sector to do so, and continued to own it to provide low cost electricity for residential consumers and to support industry development. Taxpayers have invested heavily into these power companies so that future generations can enjoy the social benefits of cheap, abundant, renewable power which they provide. To sell these assets would be a crime against future generations of Kiwis who will not grow up with the essential necessities we all take for granted of a warm house, lights to study under and clean water to drink.
- Worker safety
Solid Energy is the ex SOE formed from the state’s coal mines which have been in public hands for over a century. Part of the rationale for public ownership of mines was the poor safety record of private mine owners skimping on safety precautions in the interests of maximising profits.
The Pike River tragedy sadly makes it evident that that is still a very relevant concern. Solid Energy has a better safety record than many of the private operators and it would certainly be easier for the government to ensure that mines operated by Solid Energy are operated safely than for private mines.