Business leaders yesterday slammed the Labour-Green electricity policy but the two political parties responded by saying they had no intention to withdraw the controversial plan to nationalise the industry.
The Mighty River Power share offer closes today and the attack by the business leaders appears to be timed deliberately to coincide with the closure. Pricing of the issue will take place on May 8 and the shares will list on May 10. The Government will retain a 51% share in the company but brokers expect the shares to list at the lower end of the Government's $2.35 to $2.80-a-share range.
In an open letter to Labour leader David Shearer and Green co-leader Russel Norman, the business leaders called on the parties to withdraw their ''damaging polices''.
Electricity policies based on subsidies and greater state control were not the right answer to counter rising power prices, the leaders said.
''Such policies have been tried in the past and have been shown to be incapable of meeting the challenges of a modern economy with a complex, real-time electricity market.''
Putting aside the sheer complexity of their implementation, policies that protected businesses from the full costs of the inputs they used ultimately dulled the incentive to innovate and make them less, not more, internationally competitive, the leaders said.
Reducing retail prices below the full marginal cost of production encouraged households to use more than they should.
Of particular concern with the policies announced was their ''chilling'' effect on investment across the entire economy, the letter said.
''We are especially concerned at investment analyst reports noting the potential for $1.4 billion of shareholder value to be wiped off the books of the private power companies. A similar amount, if not more, will come off the value of the public power companies.
''Capital destruction on such a scale will severely undermine business confidence. It sends signals to investors, on whom the New Zealand economy relies, that their wealth and the benefits it provides are not welcome.''
Investment plans and job creation opportunities were forgone.
The dampening of investment intentions would have a direct and real economic impact on those of all walks of life who sought to accumulate wealth by working hard to save, invest and grow, the leaders said.
It caused interest rates to rise, depleted retirement savings held in KiwiSaver accounts and meant that other economic opportunities, such as first homes, were forgone and new business ventures as savings were unexpectedly reduced. Individuals were less well-off as a result.
''With the good of all New Zealanders in mind, we ask you to withdraw these damaging policies,'' the leaders said.
''We offer to work with you in increasing public understanding of the operation of the electricity market and in ensuring consumers, both small and large, have better choice from one of the two increasingly competitive electricity markets in the world.''
Green co-leader Metira Turei said the Greens made no apologies for wanting to get power prices down to a fair level. BusinessNZ and National seemed to think electricity company profits mattered more than lower power bills for families and businesses.
It was important to note that the firms BusinessNZ was supposed to represent would benefit from the plan. NZ Power would reduce electricity costs to business by around $200 million a year, allowing them to expand and hire more people, she said.
That was why groups like the Manufacturers and Exporters Association had come out in support of the plan .
''BusinessNZ and National need to explain to small and medium-size business owners up and down the country why they should continue to pay too much for electricity,'' Mrs Turei said.
Labour finance spokesman David Parker targeted Business- NZ chief executive Phil O'Reilly in his response to the open letter, saying the letter did not cure the current problems in the uncompetitive electricity market.
Mr Parker claimed prices had increased since an independent report found $4.3 billion of overcharging.
''Currently, super profits are made on the back of our public resource - free water. This must be addressed if power bills are to be lowered. Mr O'Reilly again offers no effective solution.''
The letter repeated the Government's scaremongering about investment, Mr Parker said. The NZX was up since the announcement. There was no investor flight or fear. It was irrational and damaging to markets and the New Zealand economy to claim there was.
However, brokers spoken to by the Otago Daily Times said people who had put money aside to invest in Mighty River Power were now investing in other companies, because they were feeling uncertain about the effect of the Labour-Green plans.
Signatories
Phil O'Reilly, BusinessNZ; Ken Shirley Road Transport Forum; Catherine Beard Manufacturing NZ; Ralph Matthes, Major Electricity Users Group; Chris Baker Straterra; John Scandrett Otago-Southland Employers Association; Raewyn Bleakley Business Central-Wellington; Kim Campbell EMA; Peter Townsend CECC; Michael Barnett New Zealand Chambers of Commerce.
