Govt's Handling Of Electricity Shortage Commended

Government's Handling Of Electricity Shortage Commended

"The government is to be commended for its handling of the recent electricity shortage", the executive director of the New Zealand Business Roundtable, Roger Kerr, said today.

"The shortage put severe pressure on many businesses and it is a relief that more normal conditions are now expected.

"The reality is that when electricity supplies are scarce, they must be rationed either by price increases or by cuts in service. Energy minister Pete Hodgson acted coolly in allowing the imperfect market he inherited to work. Calls for price controls and profit rebates were misguided.

"In the circumstances it seems the electricity market structures have performed well", Mr Kerr said. "There will now be time for careful reflection on lessons to be learned by market participants and users alike.

"One important lesson from experience in New Zealand and elsewhere is that markets and competition can be undermined by ill-considered regulations and extensive government ownership. During the shortage state-owned companies increased their presence in the industry. True competitive conditions are not likely to be established while this situation prevails. The case for reducing the government's domination of the industry is a major issue that needs to be addressed. Another is whether there are undue constraints, for example under the Resource Management Act, on building new capacity", Mr Kerr concluded.

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