There is public and corporate support for Government intervention in the energy sector, a prominent business leader says, days out from ministers finally revealing a “significant but surgical” response to a review into New Zealand’s electricity market.
Poll results, obtained exclusively by the Herald, show most New Zealanders support the Government underwriting the cost of new electricity generation if it helps to bring down prices, while many support splitting up the gentailers.
The Herald’s Mood of the Boardroom this week also sent a clear message to the Beehive. Energy price increases were rated the most pressing concern by business leaders, with the security of energy supply not far behind.
Simon Bridges, chief executive of the Auckland Business Chamber, said there is an appetite for the Government to take “bold” action.
“Whether it’s the rising household bills, or the ongoing stories of major employers having to shut up shop, costing thousands of jobs, Kiwi businesses and households have had enough,” he said.
“They expect the Government to confront the sector’s underlying problems and take steps that will bring down energy costs for all New Zealanders.”
He also pointed to the recent 0.9% decrease in the country’s gross domestic product (GDP), which was largely driven by a big fall in energy-intensive manufacturing.
“If decisive action isn’t taken, what we’re going to see more and more is the economy going backwards – the current state of economic activity could be as good as it gets," said Bridges.
Energy Minister Simon Watts told the Herald the Government’s response to the Frontier Economics review into New Zealand’s electricity market would be “significant but surgical”.
“I remain acutely aware of the cost of living pressures New Zealanders are experiencing right now.”
“I can assure you that the Government’s response to the independent review of electricity market performance will focus on targeting the root cause of the challenges New Zealand’s energy system is facing.”
It’s expected the Government will reveal its response to the report in the coming days.
In the meantime, Octopus Energy, a smaller player in the sector which has been lobbying for reform, and the Auckland Business Chamber have commissioned polling by Curia on New Zealanders’ desire for change.
One question asked whether the Government should underwrite the cost of new electricity generation if it helped to bring down prices. There was support from 62% of respondents, 21% were against, and the rest were unsure.
On the question of whether competition might be improved if the Government broke up the gentailers by requiring them to separate their electricity generation and retail arms, 49% were in support and 20% were opposed. The rest – 31% - were unsure.
That compares with the results of a similar question back in May, when 49% of people also supported splitting the gentailers, while 16% didn’t agree. At the time 35% were unsure.
NZ First deputy leader Shane Jones has championed a shake-up. As the Herald revealed this month, he wants his party to consider several options, like possibly renationalising the gentailers or the Government inking long-term contracts with them.
“The gentailers exist for net profit after tax, and their profits depend on constantly shorting the market. We’re fools to think they are going to deliver on energy security,” Jones said.
Jones, also the associate Energy Minister, has also been responsible for the reversal of the ban on new offshore gas exploration, though critics argue that may not lead to much actual gas.
Bridges, who is a former National Party leader and Energy Minister, believes the poll results show New Zealanders back Government intervention if it means lower costs.
“Energy Minister Simon Watts has indicated that his intention is for serious reform – this poll shows that that’s exactly what Kiwis want,” he said.
“We hear the argument from some quarters that measures like operational separation of the gentailers would have a chilling effect on the market. I’d argue that not intervening, and allowing New Zealand’s slide into de-industrialisation to continue, would do far more to turn investors off.”
He also highlighted the Herald’s Mood of the Boardroom survey of top business leaders. Energy price increases were their top domestic concern, with one chief executive saying, “Energy affordability over the last five years has undermined our international competitiveness and reduced shareholder investment sentiment.”
The survey asked whether the Government should require structural separation between electricity retailers and generators to encourage further investment and competition in the generation market. Of the respondents, 39% said yes, 34% no and 27% were unsure.
The Electricity Retailers’ Association (ERANZ), which represents power companies in New Zealand, has consistently said it recognises the pressure households are under as costs increase. It’s emphasised that its members are looking to invest in more generation.
Contact Energy chairman Rob McDonald said at a recent meeting that the market “is not broken" but more capacity was needed.
In August, Meridian, Mercury, Contact and Genesis agreed to have a strategic energy reserve at the Huntly Power Station to ensure back-up availability.
It was a move welcomed by Watts, who said the Government expected generators to deliver additional supply to reduce the risk of power shortages during periods of low lake levels.
“This will reduce the need for significant commercial power price spikes and the need for businesses to reduce their power use.”
That month, the Electricity Authority also agreed to progress a new rule for gentailers to offer their generation at the same rate to all retailers and not offer themselves discounts.
An agreement was also reached in May between Meridian Energy and the Guardians of Lakes Manapōuri and Te Anau to boost hydro generation and deliver an additional 45GWh of energy from the Manapōuri Power Scheme.
It was described by Watts as an “important step in the Government and the sector’s work to protect the security of our energy supply for the future”.
The polling was conducted by Curia between August 31 and September 2. It had a sample of 1000 eligible voters, with 700 interviewed by phone and 300 by an online panel. It has a margin of error of +/- 3.1%, at the 95% confidence level.
Jamie Ensor is a senior political reporter in the NZ Herald press gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist this year for Political Journalist of the Year at the Voyager Media Awards.