Wednesday, May 26, 2004

When the market is the problem, deregulation is not the solution

ACT's response to the prospect of power supply problems in the South Island? "More market and less Government", of course.

Unfortunately, this problem is caused by market forces. It is not the case that TransPower has been prevented by the RMA from building further lines; it has chosen not to build them because it is not profitable enough. Privatisation or gutting the RMA will not change that - in fact, judging by the example of TransRail, privatisation will only make things worse, as the new private owners will demand a far higher rate of return on their investment and run assets into the ground to get it.

An efficient national grid is a vital piece of infrastructure with enormous implications for other sectors of the economy. It's a public good, just like roads or a justice system. The problem we are facing is that TransPower is trying to manage that public good by the imperitives of the market - and as a result, it's not running it properly.