Friday, January 28, 2011

Transpower and public ownership

We mentioned before that Transpower was excluded from public ownership.  Today we thought that we might offer more of an inside view as to why this is the case.  

1) There is no current competition for Transpower.  It is a monopoly.  

2) There are large barriers of entry into the Transpower market.  It is hugely expensive to build another national grid.  If one was built it would be unlikely to integrate in with the current network.  

3) Transpower has the right to essentially buy (or lease) land by force in order to build more pylons.  This can be quite controversial at times.  The reason this right is given is because the pylons often stretch over many different owners (generally farmers) and their properties.  If Transpower were to buy 9 of the 10 properties it needed the 10th owner would be able to charge an arm and a leg.  Also the areas of land Transpower builds on are of little use to anyone except the owner and transpower.  (Do you really want a small section of land that is landlocked by one other owner?)  This power is meant to enable transpower to expand the network in an efficient manner.  Would you really want another company given this right? 

All of the above indicates that Transpower is a monopoly and will remain one.  The standard argument for the government to retain ownership of a complete monopoly is that investors will want to maximize returns and this will come at the consumer's detriment. 

The problem with the power companies is that the individual lines companies are monopolies and some of them are privately owned.  Whilst the privatization of the power companies may make them more efficient (if you accept John Key's argument) the inefficiency of the lines monopoly's will remain and this will mean that overall all consumers are worse off. 

Hopefully this doesn't happen. 

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