Risking Dialogue: Electricity Outages Show How Consumers Are Powerless

Listener 29 August, 1998.

Keywords: Business & Finance; Governance

“What do you want?”

“You are the Chief Executive of the power company?”

“How did you get into my office?”


“Do you want a job?”

“No, I have come about risk.”

“About what?”

“Its this government report. It says `responsibility for managing risks relating to supply rests with wholesale buyers of electricity and their consumers.'”


“I’m a consumer, so I have come to see about managing my electricity supply risks. Like if the house gets cut off, there is lighting, the food in the freezer, my washing machine, my computer work, the video and television, and I like a bath …”

“Get some candles.”

“They wont heat the bath water. An article in an overseas learned journal finished that the editor had to cut the article without consulting the author because of the `month-long electricity shut down in Auckland.’ I am doing is what the government says. I am trying to manage my risks by seeing you.”

“But you hardly use any electricity.”

“These things matter to me. To go without power for a month, or even a day, is inconvenient.”

“Get yourself a standby generator.”

“That would cost the earth. What if I were Comalco?”

“You are not Comalco are you? Sit down.” He moved towards the drink cabinet.

“No. But you have special arrangements for them. Why not me?”

“For heavens sake, your annual power bill does not pay a day of my salary.”

“What am I to do?”

“We have a contract which sets down our obligations.”

“You’re a monopoly. You just send it to me.”

“I cant negotiate with each of you.”

“There does not seem to have any protection for me. Where there has been outages, fair redress for small consumers seems to have been ignored.”

“We cant deal with everyone. It would cost us a fortune.”

“Couldn’t the government negotiate with you on behalf of consumers like me?”

“The report says they wont.”

“My local authority? They could represent me if the government wont.”

“You dont belong to the People’s Republic of Christchurch do you? They keep interfering in the market.”

“Even the law does not give me any protection.”

“Well, it was the learned judge who said that the Consumer Guarantees Act did not cover electricity.”

“Perhaps we should change the law.”

The room went dark, there was a smell of acrid smoke and the sound of machine guns. As reality returned, the CE came up from under his desk. “That would interfere with our property rights.”

“What about mine?”

“Look, over the last fifteen years the government has shifted management risk from itself to the consumer. Electricity is just another example.”

“What do you mean?”

“In lots of areas the government use to cover risk, but increasingly its you. Areas like accidents, earthquakes, education, health, imported oddometers, unemployment, retirement.”
“The referendum stopped them on retirement.”

“There’ll be another attempt.”

“I want the government to bear these risks. It’s a kind of social insurance.”

“The government does not bear the risks. It’s the taxpayer. You are a taxpayer so it is a shift from one facet of you to another.”

“Isn’t a shift from the rich who pay more taxes to the rest of us? From you to me?”

“That’s government policy.”

“But perhaps the government is more efficient at providing social insurance. Collective risk via the taxpayer may be lower cost than individual risk, where each has to look after themselves.”

Dark; smell; gunfire. “Where have you been over the last fifteen years?”


Telecom Too?

The quotation about risk comes from A Better Deal for Electricity Consumers, which introduced the recent electricity reforms. A main effect was to break up “vertical integration” in the industry, so the electricity to each house will be provided by a company different from the sole power line which bears the electricity.

The telecommunications industry is also vertically integrated, since most houses have a single telephone line owned by Telecom, which also provides communication services. The government knew about this, when it corporatized telecommunications in 1986, and separated line from value added services. It had forgotten by 1990 when it privatised Telecom, which promptly reintegrated the two. The result has been constant litigation. Many economists argue that Telecom has monopoly power, although this is by no means a unanimous view. We are told there will soon be new technologies which provide price competitive alternatives to the single line. The same justification for not taking action against any Telecom monopoly was used ten years ago.

Having dealt with the electricity, the government is moving onto telecommunications. The Treasurer has announced the changes are likely to be via the Commerce Act which regulates competition, rather than special legislation, as for electricity. He promises action before the election. It will be welcome.