Rants, Raves, Reviews

Electricity is a profitable business

By Gary R, in , posted: 6-Jun-2007 19:15

All the following companies are SOE's or State Owned Enterprises and all of them play a significant role in the generation, transmission and retail of electricity.

Genesis Energy
Electricity Corporation of NZ
Meridian Energy
Mighty River Power
Transpower NZ Ltd

It is interesting to read the Genesis Energy financial report for 2006/2007 which states:

'total revenue for the year of $1,987m increased from $1,496m in 2004/2005 due to increased wholesale electricity market prices and increased retail sales'

In other words the retail price is higher so we are making more money.

In the year ended 2001 it was reported to a ministerial briefing that Genesis had a total revenue of $535.6m and paid a dividend to the crown of $23.9m. Here we are 6 years later and revenue is up a whopping 380%.

In the same 2001 briefing Meridian Energy reported revenue of $776m compared with 2006 revenue of $2.2b or an increase of 283%. Massive! In November 2006 Meridian announced a dividend to the crown of $300m which followed on from a 'special' dividend of $800m paid earlier in the year resulting from the sale of Australian assets. A big year for the government with a $1.1b windfall into the coffers from Meridian alone.

Mighty River Power reported revenue of $1255b for 2006 up from $646m in 2001 which is only a modest 94% increase.

The cumulative revenue for the 'big' three is $5.4b, up from $1.96b in 2001. Sure power generation is an expensive business but it is also obvious that this power triad is 'sweating' some assets that are already well and truly paid for by the tax payer.

Do we all see a pattern emerging?

Some people struggle to pay the power bill with reports that power can equal a significant 10% of a persons annual income. The government is the ultimate owner and beneficiary of the dividends paid by companies generating and selling most of the electricity in NZ. We have all been made acutely aware in the last week of how essential electricity actually is. Obviously there are no guarantees that any benefit or welfare monies paid to disadvantage people will actually be spent on or applied to the power bill. Would it therefore not make more sense for the government to hand out some of the welfare payments in the form of power credits that could be offset against an individuals power bill? In the words of Michael Cullen - 'if you give a tax cut most people will spend it'. The same could be said for welfare cash hand outs. Unfortunately people have other priorities besides paying the power bill on time.

There are many classic examples in history of the greed of big business killing people. The difference this time is that the big business is owned by the government. How far up the food chain do we go regarding culpability? Trevor Mallard is the head of SOE's and ironically acting Energy Minister. Helen is Trevor's boss and ironically the self proclaimed head of the current 'lynch mob'.

It just seems a little late for Aunty Helen to be stomping her feet, throwing a fit and pointing a finger at one of her CEO's when the negative effects of ever rising power prices on the countries poor, elderly and infirm have been known for some time. Whatever happens you can guarantee that Teflon Helen will come out unscathed no matter who ultimately 'falls on their sword'.

This is the true Labour legacy, power prices that have risen at least 40% in real terms since Aunty Helen took over the reigns.

Other related posts:
I Smell a Conspiracy
Disposal of Eco-bulbs
Welcome to Vuestar

Comment by paradoxsm, on 6-Jun-2007 20:01

Electricity providers suck, they gouge the country charging exorbidant rates  for what is basically an ancient, eco-friendly free generation system that was built in the 60's which is costing peanuts to keep running.. GO HYDRO!

And now they are charging even more, The network investments is much less.

And yet we are all regulating and  we all moan about a little telephone company called Telecom, You can live without the phone, just not the power....

Comment by antoniosk, on 6-Jun-2007 20:35

I think what really grates is when all these former govt companies claim they need to increase prices to build up the warchest's to pay for upgrades and improvements in infrastructure.

A bit like the chestnut of road user charges actually being used to improve roads, when it's patently clear it's not.

Comment by stevonz, on 7-Jun-2007 08:49

Mate, when are you forming the Jama Party? WE NEED YOU!!! :-)

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