There is a power crisis, with rolling blackouts in Victoria, South Australia, California and, it now seems likely, New
Zealand. The deregulation of the electricity markets was not deregulation at all, but restructuring accompanied by
re-regulation. Pete Hodgson's power crisis meeting tomorrow should consider that. Maree Howard writes.
California has already faced the same problems with its electricity that we face. That is, while the economy demanded
more and more electricity, no new power plants had been built for over 12 years. The impending "crisis" was entirely
foreseeable.
They are more fortunate, however, in that they can import power from neighbouring states - at a price, of course.
Far from creating a free-wheeling and open market place, the break-up of the California electricity industry forced
power companies of the time to split and sell-off either transmission or generation, while the government retained
significant control.
Their government forced electricity suppliers to use the state-run Power Exchange as their main source of electricity
and set up an artificial "spot price" system that made the highest price bid in a given time period the prevailing
price.
They left wholesale prices uncontrolled but froze consumer prices in the earlier split-up and sell-off deals, so that
when the wholesale prices spiked - as was bound to happen under the government's distribution system - the electricity
companies couldn't pass on the increases to consumers and they literally lost billions of dollars while the government
made billions.
They refused to let consumer prices - the most effective method of inducing conservation - rise to reflect the wholesale
prices which had become artificially high due to government intervention.
California has now fast-tracked new power station construction and 12 have already been given preliminary approval.
They have also focused on what they can now do to increase the likelihood of ample electricity over the long-term by
articulating a vision of moving toward competition that will alleviate concern of regulatory intervention.
The message that business was hearing from their government was that officialdom regarded them as either an enemy or a
target.
The political instinct - to find another to blame, to sound tough - held sway until business told government in no
uncertain terms that carrots work better than sticks and if government continued they could likely expect to see an
exodus of business and corporate headquarters from California.
Business leaders also told government that companies thinking of locating new branches or operations in California would
think twice before committing to a state when electricity supplies were unreliable and officials viewed business as a
handy whipping-boy.
What Energy Minister Pete Hodgson needs to say tomorrow is something like this:
"We've got serious supply, distribution and marketing problems and the government has had to take a larger role than it
would have liked. But we view our involvement as a temporary role. Our goal is an electricity industry that is open,
competitive and market-oriented."
" We want suppliers to know that while we will enforce health, safety and environmental standards we are streamlining
the permitting process and won't engage in or allow petty harassment."
" We want consumers to have choices so that they can shop around for genuine electricity supplies which meets their
needs and nourishes their values - which is the best way to bring prices down."
"We have learned that a true and open marketplace can co-ordinate supply and demand better than government, involvement,
intervention and supervision."
" Over time we want an open, competitive, free, private and healthy electricity industry."
Without such a crisis statement from Mr Hodgson to reassure the public and the business community along with providing a
cohesive long-term vision for electricity supplies, it will be difficult to avoid dire long-term consequences for the
country.