MRP chief slams socialist' plan

Doug Heffernan. Photo / Greg Bowker

Heffernan says cleaner renewable energy would be less likely, as NZ First leader adds buyback pressure

As Mighty River Power's boss prepares the State-owned company for sale, he has slated the new Labour-Green electricity policy as "socialist".

The company would not have been able to invest in environmentally friendly power under the policy, said chief executive Doug Heffernan.

Labour's finance spokesman David Parker hit back yesterday: "In an industry that pays its chief executives million-dollar salaries on the back of a lack of competition, I'm not surprised that people who benefit from those settings defend them."

Heffernan's attack came as NZ First leader Winston Peters issued an ultimatum. He told TV3's The Nation that he would not go into government with National unless it agreed to buy back the power companies.

Last week, Labour and the Greens announced plans to establish a new agency, New Zealand Power, which would act as a single buyer of wholesale electricity. They said the plan would cut the nation's power bills by up to $700 million a year, lowering household power bills by up to $330 a year, and giving the economy a $450million annual boost.

But those savings would come out of the bottom line of power companies, including Mighty River and others earmarked by the Government for partial sale. It would also mean a loss of dividends to the Crown, and new shareholders.

The Government says competition is the best way to set power prices and a single buyer would result in higher prices over time.

Heffernan said the surge in renewable electricity investment over the last five years would not have happened under the opposition parties' plan. "What you've just described is a socialist consumer model," he said in an exclusive interview. "Mighty River Power would not have made the $1billion investment into geothermal energy that we've made in the last five years ... The risks would have been too high."

Without that investment New Zealand would now be using more coal and natural gas to meet electricity demand, instead of moving to become "one of the greenest electricity systems in the world".

His comments echo views of Contact Energy chief executive Dennis Barnes, who said it was "hard to see" how comments on his company's $2.5billion renewables investment over the last five years would have been viable. Unlike Contact, though, Mighty River is publicly owned, meaning executives are usually wary about wading into political debates.

Heffernan is prevented from commenting on the sale process, but the Financial Markets Authority says it is "watching developments with interest" as Mighty River, the Treasury and sale advisers consider whether the partial share sale offer document needs an urgent update to cope with the new policy, which would unwind much of the industry structure built in the last 30 years.

Heffernan said power prices rose in the last decade because natural gas prices rose steeply, making investment in wind and geothermal power commercially viable, but that period was "at an end". "The pressure now is from transmission and distribution prices."

Asked if the policy was socialist, Green Party energy spokesman Gareth Hughes said: "We'd call it a practical and cost-effective solution." Parker rejected the "socialist" accusation: "I would say excessive profiteering is neither socialist nor capitalist, it's just uncompetitive."

- BusinessDesk