Heather du Plessis-Allan: Reform of the energy sector? More like tinkering

Energy costs are adding $1.5b to household bills every year. Photo / Getty Images

THREE KEY FACTS

• Simon Watts’ energy reform is criticised as inadequate, offering only a 2% reduction in wholesale power prices.
• Removing the electricity sector from the ETS could drop prices by 30-45%, significantly more impactful.
• High electricity costs are being blamed for business closures and financial strain on one in three households.

So much for “fundamental” reform of the energy sector.

What Simon Watts produced as a solution for our high electricity prices was like installing another checkout at your local grocery store and calling that “fundamental” reform of your supermarket.

If we’re honest, a better description is tinkering. Tweaking. Adjusting.

Or, disappointing. Because after two tough winters of business closures due to high electricity prices, two winters with the coalition Government promising to fix this crisis, a report with 10 recommendations, months of senior ministers considering options, and then who-knows-how-many meetings on the top floor of the Beehive, what Watts finally served up on Wednesday will only bring down wholesale power prices by an estimated 2%.

You want to know what “fundamental” reform actually looks like? Any of the 10 ideas given to him in the Frontier Report. Selling off the last of the Government’s stake in the three gentailers partially sold by John Key. The Government taking over some or all of NZ’s power generation. Removing the electricity sector from the ETS.

This is not to say the ideas are necessarily the right idea. It’s just to illustrate what fundamental reform actually looks like.

But if we are debating the merits of ideas, removing the electricity sector from the ETS is actually a good idea.

It would drop electricity prices almost overnight, which is the problem we’re trying to solve. Because electricity is now so expensive that mills are closing down and one in three households are struggling to pay their power bills.

The ETS makes your electricity more expensive by adding a punishment tax on to power generated by gas and coal burning.

This is where the ETS becomes pointless for electricity. It is supposed to force us to choose alternatives.

But we have no alternative to gas and coal. If we don’t burn them in the winter, we will run out of electricity.

So, if the ETS is not driving us towards better options, what it’s doing is simply punishing us for cooking dinner and turning on the heater.

It adds $1.5b to our power bills every year for nothing. It’s a wealth transfer from Kiwis to the power generators taking our money.

We get no gain from that $1.5b. We’re not saving the planet, we’re not burning less coal. We’re just taxing ourselves to greenwash the country’s electricity system.

If we took power out of the ETS, wholesale power prices would drop by an estimated 30-45% some say, which makes Simon Watts’ 2% saving look as pathetic as it is.

Watts can’t do something this bold because he’s not just the Energy Minister, he’s also the Climate Minister, and taking anything out of the ETS is not a good look for the Climate Minister.

Nor is it a good look for the National Party who still have not decided whether they are in the Beehive to build up NZ’s economy or their own reputations.

This is unfortunately becoming a theme for the Nats. First, it was the promised fixing of the supermarket duopoly that never really eventuated. Then it was the fixing of the banking system that failed to appear. Now it’s the electricity market. It’s all very Ardern-era in the persistent hype without results.

Of all three, though, energy is the most disappointing because this is a proper crisis. This is wiping out businesses. Mills have closed. Horticulture businesses are scaling back. One major fertiliser business is not sure it can continue. There are rumours about Methanex closing up altogether. Not all of this is salvageable. But some of it is.

Here’s hoping next winter isn’t dry and cold because otherwise this week’s “fundamental” reforms will be shown up for what they really are.