By Bernard Hickey
Labour leader David Shearer has warned a Labour government would intervene in the power market to reduce electricity prices, potentially hitting the profits of power companies about to be floated.
Shearer was speaking on the eve of the opening of the Mighty River Power float.
"What we're most concerned about is the rise in power prices and the fact that when these assets are sold the likelihood is that power prices are going to go up and that the companies are going to be increasingly held in foreign hands," Shearer said in a news release.
“Over the past 15 years, the annual average household power bill has gone up by almost NZ$770, even after inflation is taken out. Prices in New Zealand are rising faster than in our major competitor countries," Shearer said.
“I’ve spoken to Kiwis who are scrimping on heating their houses and are afraid to turn their electric blankets on because they simply can’t afford their power bills. That’s just wrong. The pressure on prices will only get worse as this Government sells our power companies to mostly foreign and corporate buyers. Those investors will want to push prices up even more to boost their returns," Shearer said.
"That’s why Labour will take action. We are signalling that the future Labour Government will make changes to the sector so that New Zealanders considering purchasing shares in Mighty River Power, are aware of that before investing," he said.
Shearer said Labour would detail its proposed changes in the "near future", but wanted to signal to potential investors its intentions now so they knew before considering buying the shares.
Key rubbishes Shearer
Prime Minister John Key described Shearer's comments as "rubbish" in an interview on TVNZ's Breakfast.
"What a load of rubbish from David Shearer. Their track record of nine years in government power prices went up 72%. Yes they've gone up under us, but it's been slower. Gerry Brownlee undertook reforms of the energy sector and they've been working a lot better," Key said.
"As is typical of Labour, we don't see one suggestion of how they're going to do it," he said.
Key said he could not give financial advice on buying shares.
"But by definition, technically if power prices went up then company profits would go up, but that doesn't necessarily mean they do or they will. What they're saying is nonsense," he said.
Electricity power prices, as measured by MED (now MBIE), show retail prices have risen between 3% and 10% a year for the last decade.
'We've already paid the mortgage'
Shearer later told Interest.co.nz in a phone interview that Labour feared the Mighty River float and the potential floats of Meridian Energy and Genesis Energy meant the pressure for higher prices would be greater than ever.
"We believe the Bradford reforms haven't worked," he said, referring to the reforms to the electricity market enacted in 1998 by then National minister Max Bradford.
Shearer said power prices should be cheaper, given flat demand and that hydro-electric power stations had already been paid for and should be producing cheap power.
"Demand is flat and yet we see people like Contact (CEO Dennis Barnes) saying power prices will have to increase 5% or more. It doesn't seem to be connected to anything that's real," Shearer said.
Shearer said power prices in similar countries had been flatter than in New Zealand as power demand had been flat in recent years. He said New Zealanders had already paid for the building of its hydro-electric power stations decades ago and shouldn't still be paying high prices.
"It's like the mortgage we've paid off and we continue to pay," he said.
Shearer said the detail of Labour's proposed reforms would be released "sooner rather than later", but he would not say if it would be released before the Mighty River Power float closes on May 3.
He did not accept Labour had a responsibility to release its reforms to ensure investors were fully informed.
"We don't accept that somehow we have to dance to the government's tune."
See our chart below.
(Updated with PM's reaction, more detail from Shearer, chart)