Kiwi Experience Corporatisation and
Privatisation
a country with abundant energy
resources stumbles from crisis to
crisis.
The worst of both worlds
Price rises, job losses and a five week
blackout.
Prepared by ETU December 2012
Kiwi experience corporatisation and
privatisation Dec 2012
1
THE EARLY DAYS
CORPORATISATION
Electricity generation and transmission Government department, the Ministry
of Energy. This Ministry was also responsible for policy advice and regulatory
functions
• In 1985 local distribution and supply were the responsibility of sixty-one
electricity supply authorities (ESAs)
• 1987 ECNZ was set up as a company under the State-Owned Enterprises
(SOE) Act to own and operate the generation and transmission assets of the
Ministry of Energy.
• April 1988: ECNZ organised its activities so that Transpower was set up to run
the transmission network as a subsidiary of ECNZ, which became solely a
generator.
• September 1989: Task Force recommendations
The Task Force's key recommendations were:
• Separate ownership of generation and transmission
• Further study of limited generation break-up and creation of a wholesale market
(subject to this, ECNZ to be privatised)
• Transmission to be owned by a club of generators and distributors
• ESAs to be corporatised and privatised
• Removal of statutory franchise areas and obligation to supply
• Development of a light-handed regulatory regime
•
Kiwi experience corporatisation and
privatisation Dec 2012
2
A BIT OF HISTORY 1994 – 1998 CORPORATE
NEGLECT
Profit before people (Privatisation and Corporatisation)
Job losses
Sell -offs and restructures
Dodgy management structures and huge director
payments. (Wayne Gilbert).
• Maintenance failures
• Ideological reform
• Rising residential prices
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Kiwi experience corporatisation and
privatisation Dec 2012
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BLACKOUTS,
SECRECY AND
CONSTANT
REFORM.
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Feb 1998 Downtown Auckland plunged
into darkness the blackouts lasted for
more than FIVE weeks and up TWO
Months in some areas. Poor
maintenance blamed for outage.
The influence of Wayne Gilbert
(Mercury Energy Boss) on $500,000
per year in 1994, architect of the
SEQEB dispute and the privatisation of
Victoria’s electricity industry.
Massive job losses – Mercury Energy
itself halved its workforce from 1100 to
less than 600.
Aussie cable Jointers flown in to NZ
due to lack of skilled workers.
Privatised Mercury Energy forced to
pay $128m in compensation.
Contact Energy privatised in 1999
A further blackout occurred in 2006.
Picture courtesy of http://miscellaneous-sonstiges.blogspot.com/2009/04
Kiwi experience corporatisation and
privatisation Dec 2012
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Prices on the rise for residential users
Despite all the so called reform the cost of electricity has continued to rise for Residential users
while Commercial users have seen a substantial drop and industry has seen a moderate reduction
over time, following the full privatisation of Contact Energy in late 1999 prices have risen from
17.5 – 27.5c
Residential 12c/kwh – 27.5c/Kwh (1974 – 2011) Commercial 26c/Kwh -17c/Kwh (79-2011)
Industrial 13c/kwh – 9.5c/Kwh (79-2011) National 17.5c/Kwh – 17.5c/Kwh (79 -2011)
Kiwi experience corporatisation and
privatisation Dec 2012
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Never again – 250,000 sign up to
Keep our assets
Kiwi experience corporatisation and
privatisation Dec 2012
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National PM John Key wants to sell 49% share
in the remaining three generators
So, what would happen if nearly half of the electricity companies were
sold to private, often overseas, buyers?
• They would demand higher profits.The boards of companies would
be legally required to act in their interests – it doesn’t matter if 51%
remains in government ownership, the private shareholders rights to
a higher profit would have to be respected.
• To make higher profits, they would charge higher electricity prices.
• New Zealand has some of the most affordable electricity in the
world because the publicly-owned companies hold the price down. If
they were privatised, that anchor would disappear and prices would
skyrocket.
Kiwi experience corporatisation and
privatisation Dec 2012
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Experience for workers
Job security – massive job losses, impact on families, communities
and wages.
 Contractors – use of and impact on Union strength and ability to
bargain. Reduced apprenticeships and traineeships.
 Maintenance – blackouts and outages are harder to manage as
skills shortages grow.
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The state of the NZ Electricity Industry now.
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Wages – up to 40% lower than Queensland
Opportunities – limited.
Job security – continually under threat due to contractors
Reliability – a constant issue, blackouts on the increase.
Cost – continually rising for residential consumers.
Lessons for Australia – Don’t do it.
Kiwi experience corporatisation and
privatisation Dec 2012
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Conclusion
PRIVATISE PUBLIC ELECTRICITY ASSETS?
Kiwi experience corporatisation and
privatisation Dec 2012
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