Monday, April 22, 2013

Dumb argument of the day

The Herald's Liam Dann on the Labour-Green electricity market policy:

We'd all like lower power prices. It's a clever election bribe. But if a government bludgeons down the returns available to international investors they simply won't invest, they'll go elsewhere.

New Zealand taxpayers in the future - my kids - will have to earn or borrow the money to pay for new power generation as the population grows.

We either pay as we go or we pay later. Power stations cost.

Firstly, that's exactly what we do at the moment. New power stations don't fall off a tree for free. They are paid for by our power prices, either directly, or through borrowing backed by that revenue stream. And that's the case whether they are built by a government-owned SOE, or a publicly owned company, or a new foreign company entering the generation market.

(Or, more generally: foreign investment isn't free money. We pay for it, through their profits. Which are then siphoned off overseas)

Secondly, historically our new generation hasn't been built by greenfields foreign investment, but by government-owned SOEs and (since 1997 or so) NZ-companies. So, this "threat" to security of supply from a foreign capital strike is simply a fantasy.

The Labour-Green proposals won't any change this. What it will change is how much extra the power companies can gouge out of us under cover of this. By tendering for new generation, rather than leaving it to the market, we can pay only what we need to, and remove those excess, unearned profits. No wonder the business community and their stooges are squealing.