Farrar’s dodgy statistics in energy SOE privatisation debate

David Farrar posted at Kiwiblog yesterday in response to a statement by Phil Goff on energy SOE privatisation:

So in Auckland [listed company] Contact [Energy] is cheaper than the three SOEs. The total opposite to what Goff claimed. They are in fact $178 cheaper than the most expensive SOE, not $500 more expensive… [In] Christchurch … Contact is cheaper than two of the SOEs. … In Wellington they are more expensive, but by only $13 to $148. … [In] Dunedin … Contact is cheaper than two of the SOEs.

On the face of it, that seems to be an argument that a listed privatised company delivers domestic electricity supply as cheaply or cheaper than the SOEs do. But what Farrar has done is cherry-pick only the November 2011 statistics from the Consumer Powerswitch website.

Here’s a chart from that site of the prices for the various electricity retailers to Dunedin over the last three years:

Contact actually had substantially higher prices in Dunedin than any of the SOEs for the entire period between November 2008 and August 2011.  It has been only the last four months that it has been (slightly) cheaper than Meridian and Mercury, but still significantly more expensive than Genesis.

Similarly, in Auckland, Contact was more expensive than any of the three SOEs between July 2010 & July 2011. In Wellington, Contact was most expensive between November 2008 and November 2011– the entirety of the last 3 years. And in Christchurch, Contact was most expensive between March 2011 and July 2011.

Farrar also fails to take into account the pricing of Contact’s 100% owned subsidiary, Empower, which where it provides retail electricity supply has significantly higher prices than any of the three SOEs for the entire three year period (see links to Auckland, Wellington, and Christchurch prices above).

Farrar might be right to call out Goff on the $500 annual price differential he claims between Contact and the SOEs – that figure seems to me to have been either exaggerated or cherry-picked.

But to dogwhistle that privatisation will bring lower electricity prices is simply not supported by the evidence.

Incidentally, I’m somewhat suspicious about the sudden and dramatic drop in Contact’s domestic electricity prices from August 2011, just after National’s SOE privatisation announcement.  I’m wondering if this is a loss-leading exercise to gain market share before the SOEs are privatised.

4 thoughts on “Farrar’s dodgy statistics in energy SOE privatisation debate

  1. I once got sucked into changing to Contact as an energy supplier during a promotion they were running at the Home Shows around the country, about ten years ago – they kept to the promotional rate for about 3 months, then right before winter the charges went up.

    I changed energy companies at the end of 12 months (the period I’d contracted to) and never used them again, after having some seriously unhelpful interactions with their call-center staff.

    This was just before Greenpeace came out with their green energy guide*, encouraging people to switch to the most environmentally-ethical supply company.

    Contact, of course, owns Huntly Power Station, a coal-fired dinosaur that is in need of some serious upgrades in order to continue to use the lower grades of coal that we are mining now.


  2. Of course all the SOE power companies have been overcharging domestic consumers as well.

    Since being required to run in the corporate model with overpaid managers with a short term view. Domestic customers have been subsidising the artificial competition for industrial customers.

    4 Billion extra taken out that we know of.

  3. Farrar’s argument simply doesn’t stand up to scrutiny.

    I think the loss-leading exercise by Contact Energy is pretty cynical. They also lowered their prices to take advantage of the recent powerswap advertising that was arranged by Hekia Parata and paid for by the taxpayer.

    Hekia Parata has an undisclosed amount of shares in Contact Energy. I wonder if the Natz even know what a conflict of interest actually is?

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