John Armstrong: National gobsmacked at Labour idea

Labour leader David Shearer and Greens co-leader Russel Norman after outlining their proposed electricity reforms. Photo / Mark Mitchell

Humankind can be divided into two categories: those who understand the complexities of the wholesale electricity market and those who do not.

The latter outnumber the former in overwhelming proportions. The Electricity Authority might be proclaiming there is more competition. But confidence that the market will ultimately deliver in terms of truly competitive pricing remains bedrock low.

There may be good reasons for the seemingly constant above-inflation hikes in retail prices. But politicians have given up explaining because consumers long ago stopped listening.

All this would suggest there is fertile ground for Labour and the Greens, who yesterday foreshadowed plans to slash power prices by setting up a new agency, NZ Power, to act as a single buyer of wholesale electricity.

National was truly gobsmacked. It accused Labour of "Muldoonism", "loony tunes" policy making and "North Korean economics".

National accepts that at the outset there might be lower prices. But it argues the policy would distort price signals that are so vital to matching supply and demand. That could lead to power shortages. The policy would distort and even discourage investment in power generation.

National is privately delighted, however, that Labour should have shifted so far away from the current economic orthodoxy. Add the capital gains tax and National believes Labour risks heading into election year with a manifesto chock-full of unelectable policies.

Labour is wary of doing so. But it is relying on such "smart" intervention to provide a sharp contrast with National when it comes to economic growth-inducing policies.

It might be too soon to impact on the Mighty River Power partial share float. But the mere threat of such a policy could seriously depress demand and thus the price the Government gets for shares in the second and third partial floats of Meridian Energy and Genesis Energy.

Labour and the Greens discovered one thing yesterday. The power of two (excuse the pun) is exponentially better than the power of one.

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