Editorial: Regulators deserve some respect

Opinion

Below the Herald's front-page report of Don Brash's marital problems on Thursday was an item hardly less important. The Government's chief electricity regulator, once hailed but no longer wanted, said he had been dumped for refusing to do what politicians would like.

Roy Hemingway, chairman of the Electricity Commission, was brought here from the United States after a couple of dry season power shortages charged with ensuring that electricity companies invest in reserve capacity. It was a role the Government was delighted to create since it afforded another opportunity to point to a supposed market failure.

The market, in fact, had not failed; the loss of hydro-generation in the dry years had sent variable power prices through the roof and those most exposed to the spot price - big industrial users on the whole - had cut back production accordingly. They complained loudly, the present Government listened keenly, and the Electricity Commission was the result.

It would redirect investment a little to build more generating capacity than would be needed in any but exceptional years. That would be wasted investment in strictly economic terms, since the same resources could find more constant use for better return in other activities, but it would stop power prices from causing cuts in some production. Mr Hemingway quickly indicated he was sensitive to the economic inefficiencies he could easily cause if he was not very careful.

He appears to have satisfied both suppliers and major users. Representatives of the latter have rued his dismissal, warning that it could undermine confidence in industry regulation and reverse some sound developments in the electricity system.

Mr Hemingway has fallen foul of his political masters most publicly on the issue of Transpower's Waikato pylons. He told the national grid operator to hold off on its pylons plan and investigate alternative means of supplying Auckland. The Government, ever fearful of disrupted supply, especially to the largest city, decided to support Transpower.

We think the Government was right, but it cannot have it both ways. It cannot install regulatory agencies with recognised expertise and then overrule them for political reasons. The Electricity Commission is not the only recent example.

The Telecommunications Commissioner, Douglas Webb, has also been overruled by the Government's decision to require the "unbundling" of Telecom's business. Mr Webb, who initially advocated unbundling, then changed his mind, has been criticised by the Prime Minister for that u-turn, and for an inability to lower mobile phone charges. When his term expires in March Mr Webb looks likely to go the way of Mr Hemingway, whose contract has not been renewed.

Again, we believed the Government was right to unbundle the telephone network, permitting easier access by competitors. But if we are going to have expert agencies monitor these vital economic arteries, a little deference would be in order. The popular or politically appealing decision will not always be the right one for the country's long-term interests. There is value to be found in agencies that can make decisions detached from the pressures of the market, for short-term returns, or the Government, whose investment horizon is the next election.

But if the Government is not prepared to defer to independent bodies, it should cease the pretence of having them and save us the cost of funding them. If it means to make all the crucial decisions, it should bring regulatory roles back into its departments and be done with it. That would be retrograde, but better than the confusion reigning now.