Fran O'Sullivan: Yes, yes and yes ... Minister

Cabinet ministers intent on securing a suitable return on state-controlled enterprises' infrastructure investments are rewriting the rules of the free market, with surprisingly little resistance from the business sector.

Communications Minister David Cunliffe set the ball rolling when he dealt to Telecom's broadband monopoly.

Finance Minister Michael Cullen is also in the frame, wanting colleague Pete Hodgson to give Air New Zealand approval to form a tawdry cartel with Qantas on the transtasman route.

Energy Minister David Parker is the latest one to signal a shift back to Government control over just which company gets to make major infrastructure investments in this country - and on what terms.

A raft of official papers posted under his name on the Ministry of Economic Development website signals a shift to central planning in the energy sector.

Effectively, Parker is using the Transpower debacle - with the state-owned transmission company under repeated fire for failing to get certainty on upgrading the national grid to service Auckland's growing needs - as leverage for what looks like a ministerial intention to take charge of decision-making on major grid upgrade plans.

That's unless the Electricity Commission and Transpower don't manage to reach a suitable (to the Government) way through their impasse before Parker also makes good on another implicit threat: to shift grid planning from Transpower to another independent body.

Parker's Cabinet paper is a little doozy.

Ostensibly, it's all about ensuring this country's long-term supply of energy is underpinned by suitable transmission and lines infrastructure. But any hand-over-heart free-marketer should be concerned.

It is clear that Parker is also keen to ensure the Government's interest as prime shareholder in Transpower is assured.

That's why the Government wants the Commerce Commission to consider the need to guarantee a relevant return for infrastructure investments - not simply the targeted control regime, which sees the commission setting price/revenue thresholds for Transpower and lines companies such as Vector. It wants to limit these companies' ability to extract excessive profits, making sure they face strong incentives to improve efficiency and pass on lower prices to consumers.

Unfortunately for the Cabinet, there are two contradictory forces at play.

The Commerce Commission, under the robust leadership of Paula Rebstock, has taken a single-minded approach to the price-fixing cartels and monopolists that dominate New Zealand business.

Cartels operate across many sectors, masquerading as competitors in public but in fact co-operating to undermine consumers' best interests.

Rebstock has several big private companies in her sights and has already ripped into Transpower and Vector for profiteering at consumers' expense.

But now she's basically being told her job is to ensure such companies get a decent return and to place less emphasis on consumer rights.

Parker says his section 26 statement is not a Government direction, but that is mere sophistry. Coupled with the clear intent disclosed elsewhere in his Cabinet paper to amend the Commerce Act once Commerce Minister Lianne Dalziel's review is finished, it can hardly be read as anything else.

But is this the way for the Government to behave?

The Cabinet cabal that will, ultimately, roll through the plan to put the Government firmly back in the central planning driving seat will no doubt be emboldened by the Herald's Mood of the Boardroom survey, which revealed 76 per cent of chief executives said the market model was not delivering security of supply for electricity.

But the survey figures are somewhat deceptive. It is clear that capital market players and energy sector head honchos believe the free market has been delivering.

Arguably, what's stopping progress is not the Commerce Commission but the antiquated Resource Management Act and Cabinet ministers' failure to use their legislative powers to clear roadblocks to infrastructure investment.

The market is working to deliver generation.

What are not working are the legislative roadblocks that stop the generators and grid players from doing their thing, but which the Government refuses to tackle.

That takes real political mettle, which is so far missing.

That was plain for anyone to see when Cabinet minister Trevor Mallard kicked into touch debate on Transpower's plan to expand the grid into Auckland before last year's election. The Cabinet's failure to use legislation to push through the Waitaki power scheme is another case in point.

If it had taken decisions in both cases and allowed itself to be held politically accountable we would not be having the crisis-mode behaviour.

Another case is Telecom.

The Government has already dealt to Telecom by axing its monopoly over the copper wire local loop so other telcos can get access rights and offer broadband at a more competitive rates.

The solution so far on offer is not a perfect one.

A principled approach would have been for the Government to effectively acquire the local loop itself, paying Telecom a handsome fee that would compensate its shareholders for the hit to the value of their investment.

But it is instead choosing to ride roughshod over private shareholders' rights.