Ordinary businesses that are not in positions of market dominance should go on high alert at Fran O’Sullivan’s column on the background to Paula Rebstock’s abrupt departure from the Commerce Commission. Even more so, at the suggestion of a push to get rid of the commission entirely.
The regulatory debate is sometimes characterised as between “the business sector” who don’t want regulation, and “the rest” who do. Nothing could be more wrong.
Targets of regulation are in many cases progeny of former government organisations that ran essential services such as telecommunications, energy and air travel. They inherited positions of invincibility which, in the absence of regulatory oversight, would have left them as perpetual monopolists at huge community cost.
Ernie Newman of TUANZ commenced his recent opinion piece for the Herald. Newman believes we need a watchdog with teeth, not a toothless bulldog. I agree. It is possible that the power generating industry may well be found in the forthcoming Wolak report to have been indulging in some anti-competitive behaviour as well.
Newman concludes his article:-
The Government may come to regret being influenced by a small, skewed group of disaffected stakeholders who enjoy a position of market privilege. It should think with enormous care, and consult far more widely, before weakening the commission any further.
This all came to mind when I read this report in the NZ Herald. It is about Gerry Brownlee launching a Ministerial Review of the electricity sector.
Mr Brownlee said the review would bring together a number of reports into the sector already under way or completed.
Many might suggest that I was being unduly paranoid, but Paula Rebstock has gone and as far as I am aware the Wolak Report has not been released. The Wolnak report being the results of an independent investigation by Stanford University Professor Frank Wolak. Why not release the Wolak report. Why set up yet another review?
In a description of some of his work available on-line Professor Wolak wrote:-
In spite of the California electricity crisis, three years of unusually high prices in the US natural gas industry, two electricity crises in the New Zealand electricity market in three years, and several other episodes of aberrant market outcomes in energy industries in other countries, the
process of worldwide energy industry restructuring continues. One lesson that has emerged from these events is that the unique features of the structure of production and regulatory oversight in electricity and natural gas industries make them susceptible to the exercise of unilateral market power. This fact makes successful restructuring in electricity and natural gas industries extremely challenging. The only thing regulators can be sure of is that the initial market design will contain flaws that must be corrected, and if they are not corrected significant consumer harm can occur in a very short time. Consequently, particularly for these two industries, there is a need for consistent measures of market performance that can be compared across regions and over time to detect market design flaws and determine the appropriate regulatory intervention or market rule change.
This comment makes me keen to see the conclusions of the report Prof. Wolak has prepared for the Commerce Commission.