By Jim Anderton
WELLINGTON — Responsibility for Auckland's power crisis belongs to the government because it made profit, not public service, the sole focus of the power companies.
How could the entire central business district of New Zealand's largest city be left virtually without power? No natural or human disaster has brought the situation about. And the failure is expected to last at least a further two to three weeks.
We know the immediate cause. Four of the main electricity cables leading into the city centre failed. Two of the cables are 40-year-old gas-filled cables which Mercury Energy knew, since at least 1990, needed replacing.
But that doesn't tell us much. Anything left to rot will eventually fail. The real question is why were the cables left to rot?
In the early 1990s, the National government restructured the electricity industry to make power companies more closely resemble private businesses. Out went old-fashioned ideas like public service and reliability of service, and in came the pursuit of profit at all costs.
The government's justification for the restructuring makes sickening reading now. Just last September, Mercury Energy opened a new power station in partnership with a private business, and energy minister Max Bradford said, "It is good to see exciting developments occurring at many levels of our electricity market — developments which will bring security of supply and lower prices to everyone in this country".
Until 1992, we had publicly owned power boards dotted around the country. We used to vote for the board members. When National abolished these, the old directors were tipped out and replaced by corporate raiders from the private sector.
Plenty of boardroom blood was spilt in the reform of the Electric Power Board into Mercury Energy. There was never a public vote to force out defenders of the public interest. The charge was led by Jim Macauley, who is now chairperson of Mercury.
The method of appointing the Mercury board is a scandal. Ownership is vested in a community trust. But the trust is deemed incapable of selecting directors, so the right to select five of the nine directors is vested in Auckland legal firm Russel McVeagh.
With the old power board gone, an Australian chief executive arrived on a salary package worth almost half a million dollars annually. Under its new leadership, Mercury decided its highest priority was to take over Power New Zealand. Three hundred million dollars was spent on this adventure.
The power play between Mercury and Power NZ dragged on for months. As the cables beneath central Auckland continued to rot, Mercury boasted of increasing profits.
The directors rewarded themselves richly. Last year they increased their fees by up to 40%. Chairman Macauley hiked his fees from $50,000 to $70,000. Other directors increased theirs from $25,000 to $34,500.
The deputy chair of Mercury, until he resigned last week, is the head of the Auckland Chamber of Commerce, Michael Barnett. His director's fee was increased last year from $37,500 to $42,000. He was quoted in a newspaper saying it would be "crazy" to call for heads to roll just yet. Odd, then, that his head was the first to roll.
The largess enjoyed by directors and executives didn't extend to employees. Nearly half of Mercury's work force has been laid off since 1992, when it employed 1141 people. Now it employs just 596. Among those laid off were experienced cable fitters. Their absence means Mercury now has to import Australian tradespeople to carry out emergency repairs. More delays.
The former AEPB chairperson, John Collinge, has made it clear that Mercury knew as long ago as 1990 that the central city cables were in disrepair. To be fair to Mercury, something was being done. A $110 million tunnel is under construction to carry cables nearly 10 kilometres from the supply point at Penrose.
A prudent board, however, would not have put all its faith in the forlorn hope that the system would hold together until the tunnel was built.
Knowing the frailty of the network, Mercury should have devoted substantial energy to ensuring the security of those lines. Instead of wholesale staff sackings, it should have ensured it had the capacity to attend rapidly to any emergency. It should have deployed staff into a maintenance program which kept the cables up to scratch.
That would have reduced Mercury's profits. It might not have had the resources to bid for Power New Zealand. But it is the kind of decision a democratically accountable power board would have made because it would have put security of supply first.
The decision to put profit ahead of security of supply was exactly the outcome the government intended when it commercialised the electricity industry. Mercury is no longer even allowed to consider the public interest. Its sole focus has to be profit.
Business leaders such as Michael Barnett were among the most vocal supporters of the electricity industry restructuring. As so many businesses are now discovering, to their cost, the government's cheerleaders were doing business a mighty disservice. The episode proves that businesses benefit from public services. We ignore the non-profit goals of essential services at our peril.
[Jim Anderton is parliamentary leader of the New Zealand Alliance.]