Claim asset sales will lead to higher power prices

The part-sale of energy companies will increase the weighting of the sector in the market. Photo / Simon Baker

Leading domestic energy consumers' advocate Molly Melhuish has slammed the Government's partial privatisation or plan or "mixed ownership model" for state owned power companies warning it will lead to higher power prices for the most vulnerable consumers.

Parliament's Finance and Expenditure Committee is today hearing submissions on the Mixed Ownership Model bill which paves the way for the sale of up to 49 per cent of shares in Mighty River, Genesis Power, and Meridian Energy, and coal company Solid Energy.

Submitting on behalf of Grey Power and the Domestic Energy Users Group, Mrs Melhuish told the committee she'd attended at least two public meetings where Prime Minister John Key said privatisation would have no effect on power prices.

"I challenged that and he said "you're wrong"."

But Mrs Melhuish presented data she said proved that on average domestic customers of privately owned electricity companies paid about $265 more than those of state owned companies each year.

Labour MP Trevor Mallard pointed out the additional $5 a week paid by customers of privately owned companies, "is quite a tax on families".

Mrs Melhuish believed the legislation was flawed because it treated electricity as "a means to achieve economic growth, rather than an essential service".

She said the mixed ownership model should not proceed until key regulatory issues in the market were addressed, including the "free market pricing" which enabled energy intensive industries to expand "at the expense of higher prices to domestic consumers".

"It would lock in the present unsatisfactory regulatory system", she said.

She believed changes in the Electricity Industry Act were required to allow authorities to monitor retail prices and margins "to see whether companies are padding costs".

"We must not have regulation where domestic customers do not count."

Changes in the Electricity Industry Act were required to allow authorities to monitor retail prices and margins "to see whether companies are padding costs".

"We must not have regulation where domestic customers do not count."

Mrs Melhuish observed there were no advocates making submissions in support of the legislation this morning.

"That's because I believe the industry has a direct line to government and don't need to come"

NZ First leader Winston Peters said he was "shocked" by that assertion and asked whether Mrs Melhuish considered that a form of corruption.

However, she said there was nothing illegal about the industry's actions. The industry always complied with relevant laws and rules because it was able to get Governments to tailor laws and rules to its requirements.

"They virtually control the authority so the winners are the ones who make the rules, and domestic consumers are excluded from the process."

The committee is to hear 45 submissions today, leaving little time for each one.

MPs from both sides of the debate used the hearing as a platform for their views and the tight schedule prompted an outburst from Labour's Trevor Mallard when he turned up to learn most submitters would receive just five minutes each to have their say.

That, he said, was unheard of, "it's just outrageous".

"This meeting is a farce."

Of the twenty or so submissions heard in the first three hours that from former United Future MP Gordon Copeland was the only one in any way in favour of the legislation.

While Mr Copeland supported the partial sale of the companies, it was not in the economic social and cultural interests of the country for shares to be sold offshore, he said.

The sale of shares to overseas buyers would worsen New Zealand's balance of payments or current account deficit on an ongoing basis for a modest one off gain.

He believed there would be easily enough demand for the shares from domestic buyers not to require selling them to overseas investors.

A number of young submitters were far more vehement in their opposition to the plan with Wellington man James Barber for example calling it "stupid".

Mr Barber wanted the bill amended so the Government would retain 70 per cent of the companies or even a referendum on the plan "given the huge public opposition" to the policy.

He suggested the upper tax bracket be raised to generate revenue for the state rather than selling off shares in the SOES.

Law academic Carwyn Jones who submitted on behalf of Hawkes Bay iwi Ngati Kahungunu opposed the bill progressing unless stronger protection for Maori interests beyond current provisions were added.

Under questioning from Greens co-leader Russel Norman, Mr Jones said his main concerns about the existing Treaty provisions in the legislation were that it watered them down from applying to 100 per cent of the SOEs' shares or assets to just 51 per cent.

Paul Bruce told the committee the Government had yet to provide "any real justification for the sale of such important assets" when the policy would benefit a "preferential minority" of the most wealthiest New Zealanders.

He said the policy was a threat to New Zealand's move towards high levels of renewable electricity generation and the legislation did not provide any protection against the sale of individual assets such as dams by the companies.

Another young submitter Leo Hyde also criticised the legislation on the grounds that most New Zealanders could not afford to buy shares in the companies. With a student loan of $40,000 "me and my friends wouldn't have jack to invest in them".