... and control on monopoly

Press, 7 September 1989, Page 12

... and control on monopoly

Curiously, doubts have been raised about the proprietorship of the electricity supply authorities that are not departments of local government. The municipal electricity departments seem to be unassailably the assets of the local authorities of which they are part. Origins and practice should dispel doubts about power board assets. Under the Power Boards Act, citizens were enabled to apply for Government authority to create these boards when there was general local agreement about the need for a power supply. A rating authority was accepted by the people in the board districts to underpin loans or other indebtedness.

This commitment, comparable to that made on behalf of all taxpayers to underpin the enterprises of the central Government, should confirm that power board assets were the creation of those who acted on behalf of local citizens and consumers. The power boards must be viewed as co-operatives, founded and owned by the communities they serve.

As in most established businesses, like Electricorp itself, consumers have paid for the assets that have been built up or are in the process of paying off capital raised through loans. The case is compelling for leaving proprietorship where it lies, wholly in the hands of the local communities that are served, for good, practical reasons, by community-owned monopoly systems of supply. This does not preclude the introduction of parallel, competing systems of supply, such as exist now where Electricorp can supply directly to a consumer within a board’s area of franchise. Some control, however, would be expected to protect a locally owned supply network from such incursions as would, for the benefit of a few favoured customers, cripple the efficiency of the established system for the majority of customers. Private participation in the supply organisations by way of shareholdings must imply profits and dividends. This, in theory, holds out the prospect of efficiencies and reduced charges. Without strong competition, or severe regulation of pricing, the prospect is unreal. Strong competition at the local level of distribution is impracticable. Regulation of prices and profits by some outside authority would still have to allow for reasonable profits. Provided that the customers can be given a satisfactory deal, a need to add a profit motive to a public utility does not exist;

No more does the need for profit exist at the level of electricity generation when the

State monopoly is in control of all but a fragment of power generation. Some additional and new generators of electricity might ginger up Electricorp; real competition in the overwhelmingly important field of power generation would demand the breaking down of Electricorp into competing units of substantial proportions. The most favourable sites for hydrogeneration have been taken; the use of new sites by possible competitors will be bitterly contested by conservationists; foreseeable new th'ermal generation is likely to supply, only highly priced peak or emergency load. Nuclear generation, possibly the best hope for the distant future, is condemned, probably mistakenly, in public opinion. Electricorp is likely to remain dominant. It can be checked by the Commerce Commission just as, in the United States, private enterprise can be tested by public utilities commissions. Electricorp, nevertheless, is showing all the signs of other new State corporations: they are insufficiently open and accountable to the State.

Rogernomics devised a mould in haste and did not allow for the rational and considered working out of the whole pattern before part of the die was cast. The rest is still being disputed and designed. Next week’s conference of the Electricity Supply Association may better express the design, its good features and its faults. The association has grappled with the new circumstances on behalf of consumers. The Government has had, at great expense, reports from the association and consultants. Much of the drift of events pushes towards structures that will raise the price to consumers. Change so far has not benefited the consumers — only the Government.

Corporatisation may be a fine concept for the revised pricing of resources. This cannot be ignored; but when inevitable, entrenched, or natural monopolies prevail in the supply of public utilities, corporatisation and private shareholdings are not the natural friends of consumers. Many controls must be added to protect the consumer.

Under public, non-profit management, electricity generation can continue to rely mainly on the renewable resource of water power. Under non-profit control, electricity can produce clean, economimcal and, what is almost paramount in today’s society, reliable energy. If this form of control is at some disadvantage to alternative forms of energy that are non-renewable and not universally available or so conveniently used, the consumers will not complain.