Another good reason for asset sales

James Henderson at The Standard blogs:

Some analysts are talking about risks of investing in Mighty River Power in the media today. Weather, electricity demand, overseas expansion. I’ll tell you what would make me think twice if I was contemplating buying shares (like most Kiwis I couldn’t afford to even if I wanted to).

Everyone acknowledges the power companies over charge because of the way National set up the system with the Bradford reforms. Right now, the government has 400m reasons a year not to do anything about it. After the sales, that will be $200m in dividends.

Any reforms to lower power prices will fall mainly* on a relatively small number of (often overseas) private shareholders and much less on the government books. That rather reduces the government’s incentive to protect the over-charging status quo, doesn’t it? Lots of votes in being the government to bring down power prices, especially when a lot of the profits are otherwise going to foreign corporates.

James is saying that when the Government wholly owns the power companies, it is less likely to regulate them if in the consumer interest. The massive profits and dividends under Labour suggest he is correct.

As James says, when the state isn’t conflicted by being sole owner and regulator, it is more likely to act in the public interest and stop over-charging. That’s an excellent reason to support the asset sales. It’s outrageous to think that people may have to continue to pay more for their power than they have to, just because the Government is the sole owner.