There is a Light that Never Goes Out

Labour and the Greens announced today their plans to reform the electricity sector.

It's not a bad start, and the message that power bills will drop by more than $20 per month is simple and powerful, especially when compared to the likely retorts from National, which will be "bad economics/stalinism".

I read some commentary that this will leave a hole in the government's accounts.  The other side of that coin is that it will leave money in people's pockets; it's kind of like a tax cut.  So National can't really use that line of argument, because they say they like tax cuts, though their actions say the opposite.

In my opinion it is just a start.  Labour and the Greens still appear to believe that electricity is a commodity, whereas it is in my opinion an essential service.  As a commodity the system is run to maximise return on investment, or in simplified terms, profit.

There's a school of thought that says by maximising the profit the system becomes efficient, through competition.  It's a reasonable theory, the practice is somewhat different (the same applies to communism - good as a theory, doesn't work in the real world).

So even with Labour and the Greens plan implemented (and the latest Roy Morgan poll tells us they will get the chance, because National are festering in their own muck), we still have competing electricity generators supplying a single buyer of electricity.

The change of mindset I think is necessary follows on from treating electricity as an essential service is this:
the system should be run to provide electricity at a minimum cost.
The way to achieve this is not by "hoping it will be achieved as a by-product of competition between companies trying to maximise their profit".
It is quite possible to work out, every year, month, week, day, hour and minute, how to run the generation, transmission and distribution system as components of a single system to produce electricity for the lowest possible cost.  It is a complex task and requires clever people, however, the techniques are well known and the data are available.  The obvious question is - "if it's that easy, why hasn't it been done?" and the obvious answer is "electricity is sold on a market, there's no money to be made from changing how we produce and sell it".
Disappointing, really, the money saved could surely be put to better use.

The Smiths - The Queen Is Dead, 1986

Bohemian Rhapsody

Mercury was the god of profit and thieves, amongst other things.  It always struck me as odd that a power company would co-opt the name, however it's a fact that one did.  And so we ended up with Mercury Energy.  A division of the soon to be owned by people apart from you and I Mighty River Power.

Their recent advertising has caught my eye.  They've introduced a thing called GEM, an acronym that stands for Good Energy Monitor.  Good, I suppose, because "Energy Monitor" is dull, though that's all it is, and because it results in a much better acronym.

It achieves two things.  It allows you to read your electricity meter without going outside.  It presents the data from the meter in a user-friendly and flexible format.  And neither of those things are particularly new, it's always been possible to do this, but it's required a little bit of effort and enough knowledge to read the meter.

The introduction of what are referred to as "smart-meters" began a few years ago, and it is being rolled out across the country.  Smart meters do have a couple of genuinely new features.
They can be read remotely, so there's no need to have a meter reader come around every month or two.  Apart from the resulting job losses, there are quite a few positive outcomes from this.
They can also be used to change the price of electricity with time, and this is actually what GEM is about.

Electricity demand has a diurnal profile.  That is, the highest demands occur in the morning (before people go to work) and in the early evening (when people return from work).  Market theory says that as demand rises, so should prices and as demand drops (as it does overnight, when everyone goes to bed), so also should price.
And that's what smart meters can do - allow anyone who wishes to do so to follow the market and bow to its whims.  I won't, because I am sufficiently well paid and the savings I can make from keeping an eagle-eye on a website showing my electricity consumption are not worth the effort.  It seems to me that most people won't be bothered either.  Which does four things.  It leads me to wonder about the fate of people who will watch their meters.  It leads me to wonder why Mercury Energy are doing this.  It leads me to wonder what I should do.  And it leads me ask, once again, could we as a society do this better?  So, in order:

There are people out there to whom an extra few dollars on the electricity bill each month makes a world of difference.  The active promotion of smart meters will focus them for a while on meter-watching and minimising their energy bill by going without when prices are highest.  It will be considered by people who have never gone without as enabling and enhancing individual choice.  Like choosing to go without heating in the middle of winter is a choice.  As someone who went without heating for several winters, I know from experience its not a choice, its using an abstraction ("the market") to inflict cruelty.  Smart meters encourage further suffering.

Why are Mercury Energy (and others) doing this?  It's simple.  They are commercial enterprises, if it isn't making money, it isn't happening.  So it's to make money.  The best I can figure is that it is intended to make consumers feel responsible for the cost of electricity, by giving them the feeling that they are in control of the cost.  Of course, individual consumers have very little control over electricity prices.  The reforms overseen by Max Bradford and National in the 1990s took something flawed but functional and amplified the flaws while keeping the appearance of functionality.  My expectation is that rates and thereby prices for electricity will rise, and the suppliers will use tools like GEM to say "we gave you control and it's up to you to use it", to deflect the criticism directed at them as prices rise.
Why do they need to increase prices?  To pay for the quite realistic 73% pay rise for the directors, perhaps. No, even though most of us got a percent or three if we were lucky, and 73% is genuinely ridiculous, that's not it.  Prices need to be increased to increase profits, which are necessary to meet the requirements of the commercialise model for electricity supply.  That's all.

What should I do?  Very little, I suspect.  All I can think of is that there are appliances coming out that can link to the smart meter and operate when rates are low.  This will mean my washing machine and dishwasher will run late at night and the spin cycle will wake me up.  <sarc>Being woken up will of course be a good thing because when the children tidy their rooms and leave a giant mountain of washing, I will need to be woken so that I can empty the washer and put a new load of washing on.  And another after that.  Because what I really want, after a full day of work, is to be up all night doing the washing.  Waking from my few hours sleep to a dishwasher that needs to be emptied so everyone has clean plates, bowls and cutlery for breakfast will be something to look forward to.  And with the hot water cylinder on ripple control and all the hot water used by the washing machine, a cold shower in the morning will be really refreshing.  I can't wait for smart meters and the opportunity to totally change my lifestyle around to suit the all-powerful market forces. </sarc>.  It seems likely that the first generation of smart appliances will have a premium, and I'll have to work out whether the benefits of buying one outweigh the extra cost, or whether it's better to wait until smart-meter compatibility is the default.

And could we do better?  Certainly.  The service that is delivered (and it is a service, I can't fathom why Mercury refer to it as a product) is the same everywhere, 50Hz 230V electricity.  Does having ten retailers marketing their service to me make that service any better?  No.  Does having five generators selling bulk electricity to the retailers make the service I receive noticeably better?  Still no.  Could it be run more efficiently if we applied some brains to its operation, instead of saying "It's in God's hands.  God will look after it, and make it work" (Pick your own god, the current ethereal abstraction is most commonly referred to as the market.  You can read about his recent works in the business section of tomorrow's paper)?  Yes, we could.  We just don't, and so we pay the price.  Literally.  Fortunately for people like me we have the aforementioned market to distribute the costs to those who can least afford it, and to absolve me of responsibility.

Footnote - smart meters, coming soon to a water supply near you.  Why restrict yourself to getting rorted for electricity when you can get rorted for water too?

Queen - A Night at the Opera, 1975

Street Spirit (Fade Out)

Roading New Zealand, a consortium of roading contractors is calling for radical change, their words, for the way roading work is divided up and managed.
Here's the written version from Radio NZ
And here's the audio clip, also from Radio NZ
What they are proposing is the bundling together of contracts across several councils, and longer contract terms.  Cost savings of 20% are offered as a carrot.

I understand why contractors would want to have the business from several adjacent councils.  They can reduce the office staffing requirements, and get their staff in the field to cover wider areas.
The thing is that councils can already get together and procure the services of a contractor.  In some areas, such as Southland, and Bay of Plenty, they already do.
In other areas they choose not to.  There are a whole lot of reasons why.  These could be to support local employment and business; having a contractor for your district pretty much forces the contractor to have a depot in the district, and for the majority of the staff to live in the district, and this has spin-off benefits for plant hire, light industry and commercial business in the district.  Or it could be because the relationship between the contractor and council is closer, which increases accountability.
Contractors are at best ambivalent about the communities they work in and will play lip service, when required.  Accountability is generally perceived as detracting from the bottom line (profit), so is best minimized.

I understand why contractors would want to have longer term contracts.  Tendering for contracts is costly, and there's no guarantee of success.  And long term contracts look good on financial reports; they are the next best thing to money in the bank.
The thing is that councils can already determine the length of maintenance contracts.  There are plenty of good reasons for contracts being the length they are, and they vary around the country.  They include changes to work methods and materials, the need to keep the contractor motivated and the idea that the longer the contract, the less chance their is of any viable competitors surviving in the area until the contract is renewed.  In reality what happens when a roading maintenance contract changes hands, the field staff transfer from one employer to another and do the same job with different stickers on the side of their trucks; it's the managers that change.

The big picture is Roading New Zealand wants central government to be even more proscriptive with local government, to benefit roading contractors and by reducing the input of the people who are paying for the service.  There is no way I can support this.

Many of the big roading contractors are foreign owned, and the profits go to overseas (mostly Australian) shareholders.  As many are privately owned, there are only a few sources of information on the profitability of this kind of work on the internet.  From what I can see, they make some profit, but not a huge amount.

So, where could the cost savings come from?  I can find three areas, reductions in service (through fewer staff in the field), reduction in staffing costs (through attacking working conditions) and reduction in input costs.  How could this go wrong?  Where do I start?
Input costs are pretty effectively screwed down, there's not much room to move on costs of aggregate.  Steel prices are determined by the world market and there's not much room to negotiate them.  The price of oil, which powers almost all the plant, and is a key component of sealing coats (as bitumen) is predicted to rise.  So the 20% won't come from there.
Reducing staffing costs by attacking working conditions is foolish.  Skilled road workers are in demand in places like Australia, which is a couple of hours away by plane and popular with about 1,000 people every week.  Attacking working conditions will only exacerbate the diaspora, reducing the pool of available talent. So no cost savings there, either
Which leaves us with reductions in service.  Clever contractors will achieve this by implementing solutions that defer the full costs beyond the end of their contract.  Like a household appliance that breaks down a month after the warranty expires.  And we will, collectively, end up with another maintenance backlog.  On the other hand, dumb contractors will just do stuff badly, or not at all and, like the present government, try to muddle through.
In short, the 20% isn't there.  It's an illusion that's only there to get Roading New Zealand what they want, at the expense of the rest of the country.

A radical solution would involve looking at how road maintenance is procured and how much of a role the private sector should play when its involvement results in profits going overseas and the creation of the illusion of competition requires all sorts of wasted effort and duplication.

A really radical solution would involve looking at how transport fits into the society we have at present, and how it will fit into the society we will find ourselves in in twenty or fifty years time.

What Roading New Zealand proposes is minor tweaks, for self-serving reasons.

Radiohead - The Bends, 1995

Gouge Away

A post over at Robert Guyton's blog, on the subject of education, got me thinking.  The basis for the post was a post by Chris Trotter, at Bowalley Road, so it's come quite a way to get here.  And the posts themselves were not that exciting, it's more the comments, and what we can draw from them.
In this case it's the effectiveness of National's message-management back in the first part of their first term.  Case in point - The decision to axe night-classes was petty, poorly thought out, and economically unjustifiable.  We are worse off, as a society, as a direct result.  Yet the stupid meme that was used to sell the destructive change still persists.  The simple message was that there are courses on notionally pointless stuff like making stained glass.
Night classes were mostly about learning much more practical stuff, like languages, wood and metal crafts cooking.  I learned about computer aided draughting and small business accounting at night school., and put both to practical use.
The more abstract stuff is, well, more abstract, but using abstractness as an excuse for destroying something good is a poor reflection on our obsession with monetary value.  In business terms the value of similar concepts is referred to as "intangibles", or "brand value".  The night classes for abstract things were good for the soul (I presume, I never did one) and helped people weave their way into the fabric of the community.
I wonder whether our rapid change into a society that imports everything except food* means we have given up our crafty roots, abandoned our desire to actually build the stuff we need, and want.  Our innovative spirit has let overseas IP become a barrier.  Our talented people flown overseas to escape the miasma that is low quality jobs and poor management; visionless leadership.
We let another institution go for no good reason at all, just a simple concept expressed effectively - "night classes in making stained-glass".
*acknowledging the massive generalisation

Pixies - Doolittle, 1989

Teethgrinder

Ruth Richardson popped her head up with an opinion piece in the Herald, yesterday.
It's verging on unreadable.  And for me unreadable is quite a low.  I struggled through some sections of Ulysses, on my first reading of it (episode Three - Proteus was most baffling), but it made sense*.
Richardson's opinion-piece is rubbish.  I had to read it twice to make sure I had not missed anything.  Strings of cliches and a collection of disparate and discredited ideas without even an attempt at making connections, or writing something that flows.  Unless it's a cunning attempt to undermine the government, I'm surprised the Herald would publish such tripe.
I feel a bit weird, having suggested some equivalence between Joyce and Richardson.  Let me express the comparison like this:
If you do not understand James Joyce, it's probably a failing on your part.  However, if you do not understand Ruth Richardson, it's definitely a failing on her part.  If you think you understand Ruth Richardson, you are seriously deluded.

*For anyone who has tried to read Ulysses and given up, I recommend Frank Delaney's podcast.  It's available weekly (on Thursdays NZT), it manages the rare feat of making what appears complex quite understandable and Frank Delaney's accent is beautiful.

Therapy? - Nurse, 1992

Stop Me If You Think You've Heard This One Before

Chris Trotter suggests that the ACT-appointed architect of the amalgamation of local government in Auckland, Mr Ford, will be "assisting" with the rebuild of Christchurch.  I sincerely hope he is joking.  Or speculating.
Mr Ford is to local government management what the Ministry of Works were, in the 1960s, to architecture.  Brutal, functional, ruthless, pervasive.
I've not liked the parochialism that characterises Canterbury, but maybe it could have one virtue.

Boodle Boodle Boodle

In amongst all the fuss about National increasing its spend on consultants was a note that NZTA as excluded from the figures.
NZTA spend most of their funding on contractors and consultants, with their staff costs being mostly for managers and spokespeople.  It would be difficult for them to spend any more consultants.  It's about time we asked if the out-sourcing model used as the only method of procuring the provision of roading maintenance, construction, design and planning is still appropriate.
Anecdata about MoW staff leaning on their shovels all day are old and out of date.  We just don't know if pure contracting out really works.  I think we should look at a mixed model, to inject a bit of competition between the ideological models.  There's no room for objection, if you are inclined to believe that contracting out is a good thing, you tend to also believe that competition is always good.  So bring it on.

Coda

Investigated Hawkins a little further last night, as a part of trying to find out a little more about Learning Infrastructure Partners, the loose consortium appointed to run the PPP school in the east of John Key's electorate.
Apart from finding that the company is, essentially, owned by a very small handful of people, and that the ownership structure is quite complex given the small number of people involved, the only points of interest were:
- the appearance of Richard Prebble as a director.  Does that qualify as "links to the ACT party"?
- the lack of links between the directors and owners to anything else of interest, except a very good charity that I will not name.

School Is No Good For You

My goodness, Craig Foss is unsuitable to be a Minister.
I heard this interview on the radio yesterday and was genuinely appalled.  Impressed that Mary Wilson totally demolished Mr Foss, but shocked at the responses from Mr Foss.  Certainly this leaves many more questions than answers.
I can not decide whether Mr Foss was refusing to answer what were quite reasonable questions, though he knew the answers, or whether he simply did not know the answers.  Neither is acceptable.  The taxpayers of New Zealand deserve answers, if Mr Foss can not provide them he should be sacked for incompetence, and if he will not provide them he should be sacked for being an arrogant twat.
Either way, this interview is the worst display or repeating, ad nauseum, tired, hackneyed old party lines.  He makes Tolley and Heatley look good, and that's a real achievement.  A meditative mantra would have been as informative, and more soothing.
It did provide a new excuse for my list of bullshit excuses from National - "the ink is still drying on the contract".  Really?  I have my contracts printed off on a modern photocopier.  Sure, I sign them with a fountain pen, but they invented quick-drying inks for signatures more than fifty years ago.  As I see it, this excuse is a variant of "it's commercially sensitive" and has two real meanings.  One is "we gave it to our mates" and the other is "we don't know how much it cost, but since the contract allows a profit shortfall to be made up from taxes, and socialised, we don't care."
So on the subject of "we gave it to our mates" - who are Learning Infrastructure Partners?

Gut Feeling

Local government has always interested me.
The debate, if one can call it that, has consisted mostly of dog-whistles from the government.  The whole "rates have risen too quickly, therefore we must intervene in this manner" meme is so full of flaws I have a whole lot of  half-written posts attacking the individual wrongness of it all.
In amongst all the hoohaa about rates rises, staff costs rises and debt rises, there are some unasked and unanswered questions.  I'd like to know:
how much has the contracting out of services increased since [arbitrary time period, selected to emphasize the point]?, and
how much has the cost of contracted services increased over the same time period?
My gut feeling is that it will be easy enough to demonstrate the cost of contracting out has risen faster than the rise in rates.  This implies that councils have become more efficient, rather than less.
Let the pendulum swing.

Chop Me In Half

Rod Oram gets it right, in part.
In a nutshell, the increase in local government debt has been driven mostly by what is politely referred to as "deferred maintenance".  What he means is that for decades local authorities let their infrastructure decay, to keep rates rises down.
This approach of undertaking minimal maintenance only works for so long.  One day your children and grandchildren actually have to pay to stop it breaking down so much.  Not maintaining systems, deferring costs into the future, is borrowing from future generations.  That "one day" has been the last decade, where we have seen a combination of rates rises, cushioned by increasing local government debt (another form of borrowing from future generations).
Ultimately the solution is in the hands of the electorate of each local government.  It would be nice to see central government keep out of local government, except perhaps to provide information.  Rather than doing the nanny-state-National thing and deciding it knows better than I do about the governance of my local area.
It would be nice to think that the mess that Kaipara District Council and Dunedin City Council find themselves in is not used as an excuse to implement National's poorly thought through agenda.
Footnote - I disagree with Mr Oram's ideas that we are over-governed, and to this end I think amalgamation is not the right solution to the problems faced by local government.  If anything we need de-amalgamation, to make local government more local.

Mr Telephone Man

Yabba are some form of brand owned by Telecom. I've been puzzling over their advertising for some time. The advertisement is for a pre-paid international calling card, and what strikes me is that the most expensive place to place a call to is New Zealand.

The differences are significant, depending on the country it's three to five times more expensive to place a call within New Zealand. How can that be right? I am compelled to believe that Telecom are taking advantage of their yabba card customers.

We are told that private business is better because it is more competitive and efficient, due to the profit motive. In this instance the profit motive is abundantly clear. It's the efficiency that is noticeably absent.

Kill the Poor

Phil at whoar.co.nz has described the government as being like Alice in Wonderland.  I'm leaning more towards Kafka.  The genesis of the idea is the same, there is some form of cognitive dissonance within the government.  Looking at the proposed welfare reforms (and glumly accepting that they will be implemented), it's obvious that John Key never realised that the Dead Kennedys' "Kill thePoor" was satire.  Actually, I doubt John Key ever listened to DK, he seems more like a  Phil Collins-type.

I would like the principle behind the proposed reforms explained.  I can see some horrible logic, is it:

·         Women who have children must not have more children, if they are receiving a benefit (because [insert reason here – I haven't worked it out yet]).  Or

·         Women who receive the DPB should not have sex (because sex outside marriage is immoral).  Or

·         Children who are born to a woman on the DPB deserve less support than other children (to punish the mothers for their wantonness)?

The tripe that the government served up in parliament over the last two days has been appalling, and has gone almost unchallenged.  Key and Bennett have both talked about the positive side of the ledger, jobs created, and completely ignored the other side, jobs destroyed. Authors at The Standard have picked it up in several posts, but opposition parties have dropped the ball and it's gone swish over the heads of the media.

The proposal is that carers for five + year olds need to be ready for part time work, and 14 + year olds for full time work.  The cognitive dissonance here is that unemployment has steadily risen since National came to power; there are no jobs because more jobs have been destroyed than created.

At least we have had record net migration to Australia.  Imagine how bad unemployment would be if all those skilled people hadn't left the country.

The vilest part is saved for the most sinful of beneficiaries (the woman who dares to have another child while on the DPB), who are required to be ready to work when their child is one year old.  Is there any evidence to show this is a good idea?  Because to me it looks like it is purely punitive, and ideologically based.

At a fundamental level I agree with National, in fact I would go further and say the benefit system needs to be abolished.  Where we differ, drastically, is that I believe the abolition can only occur when we have a society where the payment of benefits is unnecessary because no one needs them.  National have moved us away from that goal and put us in a position where benefits, as a proxy for support from society, are needed more than ever.  Hang your head in shame, Mr Key.

Princes of the Universe

I'm not much into rugby.  I've watched two or three games in the last decade or so, the last one being the turgid affair that was the RWC final.  It's not that I dislike rugby, it's just that I like other stuff a lot more.

The Otago RFU is insolvent.  Professionalism is to blame.  Yeah, yeah yeah, whatever.  The Otago RFU has done a lot more for NZ, and especially Dunedin, than the finance companies that the government eagerly bailed out.  And they have a proud history.

I'd be happy to fund some statutory managers or receivers to trade the union out of debt, perhaps with its debt restructured and possibly eventually written off, either entirely or in part.

The small issue that the voters of Dunedin tend to favour Labour will undoubtedly influence the government's thinking.

What's My Scene

"...and another thing I've been wondering lately, am I crazy to believe in ideals?..."

I worked for local government for a time, including in the 1990s when National last attacked it.

I worked in the private sector too, and I've come to a range of conclusions, none of which I intend to address in this post.

The question to the Minister of Local Government on 15 February 2012 was a cause for reflection. As an employee in the private sector I am paid about 25% more than I was in local goverment, though I have a role that carries less responsibility and is less complex. In my case, the best reason to leave the private sector is ideological, there is no financial gain.

So the Minister's implication that remuneration in the local government sector is too high, or out of control, is flawed.

It would be interesting to see a question to the Minister about the relative proportions of budgets to in-house service provision against contracted out service provision. Followed perhaps by a question about the comparative increases in costs. The first question would certainly put the issue of staff costs into proportion.