SQ Transp 2048

On Tuesday 16th April in Wellington Dr Geoff Bertram presented a very interesting paper on "Asset Values and Regulation." He argues that during the last decade "excess monopoly profits grabbed by deregulated electricity networks, gas pipeline owners, airports, and ports were crystallised as revaluations of their fixed assets."

He explains his conclusion in some detail, including the various models used to establish asset value in the corporatisation and sale of the assets led to capture of excess profits. Discussing regulation of natural monopoly providing an essential service, he argues the regulator's first task is to set a value for the Regulatory Asset Base, on which prices can be set. He discusses the options and the history, and the implications for consumer prices. He demonstrates the sharp rise in gentailer asset value and concludes that as of 2012 the revaluations totalled over $10 billion, which is not justified by competitive edge or special advantages, but is entirely due to the ability to capitalise excess profits secured from price-gouging, mainly of residential but also small industrial and commercial customers.

Two other presentations from Dr Bertram cover some of the same issues and can be found under his name in the resources section of the website.

An earlier presentation by Peter Harris, Dick Werry and Jim Turner examined the difference in costs over a ten-year period between the water and electricity networks in the Wellington region. The water network remained in public hands and the electricity network was privatised. The costs of the water network rose 17% over the ten years 1999-2010; the costs of the electricity network rose 295%! The authors conclude the electricity rise was largely to service the grossly inflated capital value.

These presentations are all available in the Resources section of the website.