Labour-Greens ‘nightmare’ power policy is ‘bass-ackwards’, says Wolak

Oh dear me, as I blogged yesterday Labour’s go to academic that they quoted extensively in their NZ Power release with the Greens has turned on them, describing their policy as ‘bass-ackwards’ and a ‘nightmare’.

David Parker is beside himself, issuing desperate press releases.

The sad part is that this is largely passing under the radar because the media are in a huff and trying to manufacture the demise of our democratically elected Prime Minister and at the same time accusing him of anti-democratic activities.

Some media though are focussed on their jobs.

The American academic whose work underpins the Labour Party’s electricity policy says New Zealand’s existing market arrangements are starting to work better and should be improved further.

In a wide-ranging interview with BusinessDesk, Professor Frank Wolak of Stanford University described the Labour-Greens NZ Power single buyer policy as “a sham that might make me feel a bit better“, but was the wrong weapon to attack “runaway” retail electricity tariffs, which he says are the real problem in current market arrangements.

The Green/Labour bloc promoting this ‘sham’ policy are going to be very upset. As I have said before they have extensively quoted Wolack many, many times.

Wolak says the NZ Power policy, which would unpick a 25-year-old experiment in electricity market design in favour of a centrally planned model, “may not even solve the problem, which is runaway retail prices.”  

A policy that won’t work, is described by Labour’s own preferred academic as ‘a sham’. Can it get worse? Yep it can.

Wolak believes moving to a cost-based, single buyer model could be a disaster.

“If what they are going to try and do is say ‘we are recovering costs and allowing you a fair return’, then oh my god, it’s just a can of worms that you wouldn’t believe that’s going to get opened,” Wolak said of Labour’s plan to calculate rates at every power station in the country on a cost-plus return basis.

“They are going about it in a kind of bass-ackwards (sic) way and saying ‘we’re going to say what each guy’s price can be in terms of generators selling’. That’s just a nightmare.”

“What’s simplest is to say we’re going to make this thing as competitive as possible.”

The game changer policy of the Green/Labour bloc is turning out to be a disaster of their own making.

Wolak is no fan of New Zealand’s vertically integrated industry, where electricity companies own both generation plant and retail businesses – a reform Parker described in a statement as “a patently necessary step.”

Wolak said retailers and generators were usually separated in single buyer markets but the change was not worth it as it wouldn’t solve the underlying problem of high residential tariffs.”

“If there’s one person or 1,000 people that represents this demand, it doesn’t matter. You are going to get the same market outcome,” said Wolak. “The only way a single buyer is going to matter is if the single buyer can say no,” he said.

“But the single buyer can’t say no, they are just buying on behalf of existing inelastic demand. If you’ve got no ability to say no, you’ve got nothing,” he said. “Single buyer is just a sham. It might me feel a bit better, and it probably creates a new administrative office for the government, which costs money, but it doesn’t do anything for you.


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  • johnbronkhorst

    Nothing to say…except:

  • steve and monique

    Well founded and researched policy, Yeah right.

  • Macca

    If this was a National released policy and the media were able to find an expert with Wolak’s credentials to ridicule it, I wonder how many days it would be top news on all channels for?
    So therein lies the difference between a National policy and a left policy – one is carefully thought out and properly costed and the other……………..