David Farrar: Is the problem inflation or power prices?

The Herald reports:

Labour’s finance spokeswoman Barbara Edmonds has floated the idea of setting an expectation that the large gentailers reinvest dividends into new generation in a bid to ensure enough new electricity supply to keep prices affordable.

We do need more supply, but the best solution to that is the Fast Track law, which will now allow new electricity supply projects to be consented in months not years.

Council of Trade Unions chief economist Craig Renney, who sits on Labour’s Policy Council and is a significant voice in the party’s economic thinking, published a paper in 2022 with 350 Aotearoa and First Union arguing that the part-privatisation of the gentailers by the Key Government was to blame.

Renney said the gentailers had prioritised paying out dividends instead of investing in renewable generation.

Let’s look at this claim. First let’s look at the electricity component of the CPI.

Let’s look at it by three year terms:

• 1993: 18.1%
• 1996: 15.3%
• 1999: 8.3%
• 2002: 7.6%
• 2005: 23.8%
• 2008: 22.9%
• 2011: 10.6%
• 2014: 12.1%
• 2017: 4.7%
• 2020: 4.3%
• 2023: 6.6%

The electricity companies were partially privatised in late 2013. The rate of electricity inflation since then has been massively lower than previously.

David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.