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Roger Award for 1999
This year’s Roger Award for the worst transnational company in New Zealand goes to the Canadian-owned power company TransAlta.
TransAlta’s brief foray into New Zealand is a warning to the world of what can happen when basic infrastructural services such as electricity are privatised and deregulated. The company came here in 1993 to take advantage of deregulation; took over electricity services which had been built up by New Zealanders over the past 100 years, then agreed to sell them to an Australian company in January 2000 for a tax-free capital gain over the period of its ownership of almost $300 million.
During its seven years here, TransAlta:
In addition to the main award, we have awarded:
The other finalists were: News Ltd, which owns the INL news media group and Ansett NZ; Telecom; Waste Management; and WestpacTrust Bank.
Assessment of the finalists
The Roger Award is conferred on the transnational that has the most negative impact in New Zealand in each or all of the following fields: unemployment, monopoly, profiteering, abuse of workers/conditions, political interference, environmental damage, cultural imperialism, impact on Tangata Whenua, running an ideological crusade, impact on women, and the health and safety of workers and the public.
Several of the finalists scored heavily on one or a few of these criteria. In particular, we were appalled by Tranz Rail's continued callous disregard for the safety of its workers and passengers. In September 1999 the company was fined $27,500 for failing to maintain its rolling stock, after a rusted bolt on a hand grab gave way causing a Tranz Rail employee, Ioasa Iuni, to fall under a railway wagon, requiring amputation of his leg. The foreign-owned company appears to have taken no regard of a similar accident in 1994, when seven-year-old Morgan Jones fell under the Coastal Pacific Express when a handrail he was holding collapsed. In October 1999, Dunedin train driver Graham White died when his train crashed head-on into a train travelling in the opposite direction in South Otago. This followed repeated warnings from the Rail and Maritime Transport Union that Tranz Rail’s Track Warrant Control system was inadequate. In our view, it is utterly immoral for any company to place its own profits ahead of the safety of its workers and the public. Tranz Rail’s record is a national scandal, and we call on the new Labour-Alliance government to take whatever steps are required to make sure the company dramatically improves its safety record.
We also welcome the new Government’s Commission of Inquiry into genetic engineering, and urge it to pay particular attention to the activities of Monsanto, which is planning to grow genetically modified canola in North Canterbury. Through its joint venture company Genepool, Monsanto is trying to make New Zealand a site in the international development of genetic engineering. It has recently written to the Maori Congress seeking formal consultation arrangements with it, without any indication that it would curtail its operation as a result. We believe this technology has the potential to endanger the world’s food supply and human health, and we urge both the Government and the public to prevent its extension.
We were appalled at the lockout of Ansett pilots by Ansett NZ, owned by Rupert Murdoch’s News Ltd; alarmed by Waste Management’s decision to build a regional landfill in an area which endangers the Canterbury aquifer*; concerned about WestpacTrust's continual increases in fees; and disgusted by Telecom's greed in areas such as Internet access charges and initially refusing to cash in old phone cards when new ones were introduced. None of these companies is a good citizen of New Zealand (* that landfill site has subsequently been abandoned because of the discovery of an earthquake fault line through it).
However, in the end we gave the Roger Award to TransAlta because its behaviour contravened acceptable standards across virtually all the criteria we were asked to consider. Although not legally a monopoly, it has become by far the dominant power supplier in the North Shore, Waitakere, Wellington and Christchurch regions. It has used that dominance to extract extraordinary capital gains for its Canadian shareholders at the expense of the New Zealanders who work for it, buy its electricity or live in the communities where it operates. Its profits and the effects of its activities on consumers, workers, the community and the environment are now detailed.
TransAlta has proved itself to be the most pernicious kind of transnational company. It came to New Zealand, took over electricity services and then left the country with the sole objective of maximising the profits for its Canadian shareholders. Those profits were at the expense of:
TransAlta is the major electricity company in Alberta, Canada. Through its former president, Jim Dinning, it has been a driving force in applying New Right economics in Alberta. As Treasurer in Premier Ralph Klein’s conservative government from 1992, Dinning cut public spending drastically, cut health spending by 21% and reduced the number of employed registered nurses by a staggering 43%. Now that he is back at TransAlta as an executive vice-president, the company has been a major cheerleader for electricity deregulation in Alberta. The architect of deregulation in New Zealand, Sir Roger Douglas, visited Alberta while Dinning was Treasurer and was described as ‘the toast of the Conservative Party's annual policy convention’. TransAlta is also a founding sponsor of the Centre for Regulatory Affairs, an Alberta think-tank that promotes the virtues of deregulation and privatisation.
As deregulation unfolded around the world in the 1990s, TransAlta expanded beyond Alberta, building gas-fired power stations in other Canadian provinces and buying power stations in the United States, Argentina, Western Australia and New Zealand. It has since sold out of Argentina, and in January 2000 announced its intention to sell not only its NZ operations but also its power distribution operation in Alberta - concentrating instead on the more profitable business of generating power.
A TransAlta spoksperson told a parliamentary select committee in 1998 that the company was invited into New Zealand. It established an office in Auckland in 1992. In June 1993 it entered a joint venture with Mercury Energy and Enerco to build a $140 million gas-fired power station at Southdown, Auckland - the first privately owned power station to be built since the Electricity Corporation's monopoly on power generation was removed. TransAlta's share was 47.5%.
In late 1994, it bought:
During 1995 it raised its stake in EnergyDirect to 41%, and in 1996 it bought the remaining 51% of Capital Power. In October 1996 it merged EnergyDirect and Capital Power into TransAlta NZ Ltd, in which TransAlta Canada held a controlling 63% interest. The deal was structured so that every 1000 shares in both the old companies was exchanged for 1000 shares in TransAlta NZ plus 1000 $1 bonds and 500 $1 capital notes which may convert to shares in 2001. TransAlta Canada immediately sold its bonds for about $140 million, effectively taking out some of the capital it had put into the NZ operations by loading up the NZ company with debt.
Meanwhile, in 1995, TransAlta Canada began a joint venture with Mercury Energy and Fletcher Challenge to build another gas-fired power station, this time a $400 million project originally proposed by the Electricity Corporation at Stratford in Taranaki. TransAlta’s share was 33.33%.
In 1997 TransAlta Canada sold its interests in the Southdown and Stratford power stations to TransAlta NZ. As payment for these assets, TransAlta NZ issued $44.1 million worth of new shares to TransAlta Canada, increasing the Canadian shareholding in the NZ company from 63% to 67%. TransAlta NZ also took on TransAlta Canada’s debts relating to the power stations of $163.4 million.
In 1998, the National government legislated to require power companies to split their power line and energy supply operations. TransAlta threatened to leave the country. Its president, Steve Snyder, wrote to Energy Minister Max Bradford saying: "We have invested $600 million here in the last five years and it has been a good investment. But what has happened is the rules are changing. We will now rethink our investment and the worst-case scenario is that we may have to think of exiting".
The Government went ahead with the legislation to regulate lines companies - but not energy retailers. New Zealand First MP Winston Peters issued a statement saying he suspected that the Government had agreed with certain retail companies not to regulate them. If correct, that may explain why TransAlta decided to stay in New Zealand at that time.
Whereas most power companies chose to keep their monopoly power lines and sell their energy supply businesses, where they faced competition, TransAlta NZ chose to sell its power lines in the Wellington region, and expand its power generation and supply businesses because these were less likely to be restricted by regulation. It sold its power lines to Power NZ (now United Networks), controlled by Utilicorp of Kansas, for $692 million, and spent $314 million to buy the energy supply businesses of Power NZ in Auckland and Southpower in Christchurch. It also spent $124 million on buying out its partners in the Stratford power station and buying the Rotokawa geothermal project near Taupo. It has since sold Rotokawa to a local iwi and sold equipment at Stratford, but it continued to lease and operate the Stratford plant. In May 1999 it bought the historic Cobb River power station in Golden Bay from State-owned Meridian Energy.
The net effect of these changes is that, when it sold out in January 2000, TransAlta had 535,000 electricity customers, or 32% of all New Zealand consumers, and 10% of the country’s power generation capacity. This made it easily the country’s biggest power retailer and the biggest generator after the four former Electricity Corporation companies: Contact, Meridian, Genesis and Mighty River Power.
In August 1999 TransAlta Canada offered to buy out the Hutt-Mana Energy Trust and small shareholders who still owned 33% of TransAlta NZ, apparently intending to get 100% ownership of the NZ company so that it could be sold in one parcel. As a result, TransAlta Canada spent just over $72 million to increase its shareholding in the NZ company from 66.5% to 75.8%, paying $2.50 a share. However, despite an aggressive advertising campaign by the Canadians, the Energy Trust and almost half of the 26,000 small shareholders refused to sell. In financial terms they were vindicated when the Natural Gas Corporation paid $2.85 a share for TransAlta Canada’s shares in January 2000.
TransAlta has made extraordinary profits during its foray into New Zealand. In 1998, TransAlta NZ’s return on equity was 21.8%, more than double the next most profitable power company. Its return on total assets, 15%, was higher than all but one of the country’s 35 power companies (its 1999 profit, released in February 2000, was $38.4 million).
When the Government imposed the split of line and energy businesses, TransAlta pinned its hopes on buying more power stations to match its 32% share of retail customers. TransAlta Canada’s 1999 annual report said: ‘the expected privatization of the State-owned generators will create opportunities to acquire new assets.’ But TransAlta’s bid for the first chunk of State-owned power stations to come on the market, through Contact Energy, failed when another North American giant, Edison, paid $1.2 billion for control of Contact in March 1999. The final decision to sell out came when the new Labour-Alliance Government ruled out any sale of the other three State-owned generation companies.
During the past seven years, TransAlta Canada’s total investment in NZ has been:
41% of EnergyDirect, 1994-95 120.0
49% of Capital Power, 1994 120.0
Further 51% of Capital Power, 1996 90.0
Capital Power debt taken on, 1996 33.0
47.5% of Southdown power station, 1993-96 64.4
33.33% of Stratford power station up to
date of transfer to TransAlta NZ, 1997 143.1
Buyout of minority shareholders, 1999 72.1
From this investment, it has taken the following capital sums:
Bonds, 1996 140.0
Debts taken over by TransAlta NZ, 1997 163.4
Sale to Natural Gas Corp, 2000:
TOTAL CAPITAL RETURNED 920.5
In addition, it has taken earnings as follows:
Sept 1997 (3.9c/share) 5.4
March 1998 (9.1c/share) 12.6
March 1999 (9.7c/share) 13.5
Interest on capital notes
3 years @ 9.84% 20.5
TOTAL EARNINGS 52.1
In total, TransAlta Canada has extracted $972.6 million out of New Zealand for an initial investment of $642.6 million, a net gain of $330 million or 51%.
TransAlta’s profits have been at the expense of New Zealand consumers in two ways - high prices, and reduced service.
When TransAlta NZ was formed on 1 October 1996, it promised to freeze power prices for two years. It held to this freeze until November 1998, when it actually reduced its prices to meet competition from the Mighty River Company’s subsidiary, First Electric. Price cuts ranged from 7% for small residential consumers up to 20.5% for large commercial users.
However, in April 1999, four months after its asset swap with Power NZ and purchase of Southpower, TransAlta raised its prices - by 3-10% in Auckland, by 5-10% in Wellington and by 13% in Christchurch. In Christchurch, it bought the name of the City Council-owned Southpower, banking on the confusion that this would cause customers, to retain their custom.
Once again, small domestic consumers were hit hard by the increase, at least in Wellington where the fixed daily line charge rose from 40c to 45c a day, regardless of how much electricity people used. One 73 year old man in the Hutt Valley was actually told by TransAlta that he would be charged more because he used less.
Compared with the prices in April 1996, just before TransAlta NZ was formed, small domestic users are now paying 6.9% more in the "Wellington North" (Hutt Valley/Porirua) area and 15.9% more in "Wellington South" (Wellington City). At the other end of the scale, large commercial users are paying 2.2% less than in 1996 in the Hutt and Porirua, although TransAlta’s policy of equalising charges means they are paying 28% more in Wellington.
Average monthly power bills
Hutt Wgtn Hutt & Change Change
Apr 96 Apr 96 Wgtn 96-99 96-99
C/k Wh C/k Wh Apr 99 Hutt Wgtn
Small domestic (500 kWh/mth) 13.56 12.51 14.5 +6.9 +15.9
Medium domestic (1000 kWh/mth) 12.21 10.83 13.0 +6.5 +20.0
Large domestic (1500 kWh/mth) 11.76 10.26 12.47 +6.0 +21.5
Small commercial (500 kWh/mth) 16.74 16.35 20.71 +23.7 +26.7
Medium commercial (1500 kWh/mth) 15.14 12.35 15.76 +4.0 +27.6
Large commercial (3500 kWh/mth) 14.68 11.21 14.35 -2.2 +28.0
Source: Ministry of Commerce, Electricity Information Disclosure Statistics, 1998, and TransAlta NZ website, Jan 2000.
The company also introduced new fees for disconnection, reconnection and final meter readings. They included:
It also transpired that Southpower, under TransAlta’s ownership, had been switching off Christchurch residential hot water cylinders over summer and autumn, as an easy way to save itself money.
Ironically, the price increases appear to have been designed to justify the high prices that TransAlta paid to Power NZ and Southpower for customers in Auckland and Christchurch. Energy analyst Molly Melhuish says the prices at which assets were swapped with Power NZ were deliberately ‘pumped’ by around $100 million on both sides so the companies could justify higher power prices as ‘required’ to earn an adequate rate of return on their investments. During 1999, as power prices on the new wholesale electricity market dropped because of a glut of power supply, TransAlta refused to cut its retail prices.
Instead, the company blamed its increased prices on the companies which had bought the power lines - especially in Christchurch, where the City Council-owned company now called Orion had changed its pricing formula to raise prices at peak times and cut them in off-peak times. Orion claimed its changes had actually cut power prices on average by 1%, and offered to reinstate the old price structure to stave off TransAlta’s price increase. But TransAlta then changed its line to blaming Orion for not dropping its prices when it no longer had the cost of maintaining and reading the meters, which had been bought by TransAlta.
TransAlta’s increases were quickly copied by its competitors, including First Electric. In response, the Energy Minister, Max Bradford, introduced legislation to control the prices of line companies - but not of energy retailers like TransAlta!
When the Wellington City Council sold the first 49% of Capital Power to TransAlta in December 1994, it stated the following conditions:
Even though most of these conditions were not met in the subsequent 18 months, they were simply restated when the Council sold the remaining 51% of Capital Power to TransAlta in June 1996.
In 1997, the Ministry of Commerce found that TransAlta was still disconnecting people without giving them any warning except on a later power bill. TransAlta’s chief executive at the time, Mike Underhill, told City Voice (10/4/97): "We are looking at sending them a separate letter". In the same issue, City Voice reported that TransAlta still hadn’t introduced a "variable charge only" option. Mike Underhill said the promise was on hold until the end of the two year price freeze imposed in October 1996. In January 2000, TransAlta’s website still listed no such option. Nor did it mention any options such as payment-in-advance meters or payment smoothing.
In a followup report in 1998, the Ministry found little progress. TransAlta’s contract with its consumers was found to be "Onerous and Harsh" because it accepted liability for negligence only up to an arbitrary limit of $10,000 for an incident or $50,000 in a year. The Ministry code says there should be no limits on the liability of electricity suppliers for events where they may be held responsible.
On 30 December 1998, the Press reported that TransAlta cut off power from a Lower Hutt man, Govind Susarla, who received a power bill for nearly $12,000, even after it acknowledged that the correct bill should have been for $46.49. On 9 December 1999, City Voice reported that TransAlta threatened to cut the power off when a Newtown woman, Suzanne Rodley, complained that her power bill had jumped suddenly from under $100 a month to $347. It later acknowledged that the meter at her house was faulty.
In research by Jim Delahunty for Corpwatch in December 1999, Missy Maclean of Porirua Budget Advice said TransAlta took a "tough attitude" to people owing money on their power bills, and often cut people off and reconnected them when their benefits came in. "People had to use candles because of no power. They could be cut off a week and a half until the next benefit arrived and then had to use a substantial part of the benefit in getting the power on again".
In Christchurch, Southpower has closed its Manchester Street payments and inquiries counters and vacated the building. Power bills can now only be physically paid at a bank. There is no point of physical contact between Southpower and its Christchurch customers – only an 0800 customer phone number. Even the recharging facility for the controversial Power Manager cards (used by those who have problems paying power bills; they have to be paid in advance, like phone cards) has been moved out of that building and relocated to a less central service station.
Even before TransAlta took over our power companies, jobs in the electricity industry were being cut. Combined employment in the Wellington power companies, Capital Power and EnergyDirect, dropped from 839 in 1991 to 667 in 1993 and about 550 by the time the two companies merged in October 1996.
By 31 March 1997, six months after the merger, employment in the combined TransAlta NZ was cut to 354 as duplication between the two old companies was eliminated. The historic MED Control Centre in Webb St, Wellington, was sold for conversion to apartments, and a new regional control centre was created at Haywards in the Hutt Valley. All office staff were relocated to a rented office block in Petone.
Cuts in maintenance gangs were so severe that workers considered that they endangered health and safety. One worker told City Voice (10/4/97): "the people who go out and maintain the lines have contradictory instructions. They are supposed to have all their safety gear and not work alone at night. But they are having to, because of the workload pressure, so they could fall off a pole and not be found till the morning". Reduced maintenance also runs a risk of more power failures of the kind that hit central Auckland two years ago.
Since then, staff numbers have been cut further to 340 by 31 March 1998. By 31 March 1999 there were still only 488 staff, even though by then TransAlta had taken over electricity supply in parts of Auckland and all of Christchurch as well as the Wellington area. This year (2000), TransAlta is creating a centralised national call centre in Christchurch, with the loss of 30-40 jobs in Wellington and a similar number in Auckland. Wellington’s new regional control centre at Haywards is being replaced with a new one in Auckland run by United Networks. Some workers will transfer to Auckland and others have accepted redundancy.
Southpower’s closure of its Christchurch payments and inquiries counter in its Manchester Street building has had attendant staff disruptions.
TransAlta Canada initially used the elected representatives of its original community, the EnergyDirect Community Trust (now Hutt-Mana Energy Trust), to gain control of the Wellington region’s electricity system in the period from 1994-96. Then in 1998 it snubbed the Trust by ignoring its wish to buy the region’s power lines, and in 1999 it ran an expensive campaign to try to persuade the electors of the Hutt-Mana area to wind up the trust. In 1996, it created its own "Customer Advisory Board", appointed by the company, but it allowed even that to fall into abeyance after 1998.
There is no evidence to suggest the company has ever made any effort to get input from the Tangata Whenua of the areas where it operates, or from women.
1. Hutt-Mana Energy Trust
The EnergyDirect Community Trust was created in 1993 after an intense public debate about the corporatisation - forced by government legislation - of the former Hutt Valley Energy Board. The Government-appointed directors of EnergyDirect wanted to distribute the company’s shares to all electricity subscribers in the Hutt and Porirua areas served by the former board. The elected Hutt Valley Energy Trust, chaired by Porirua Mayor John Burke, campaigned to keep 100% community ownership of the company through an elected trust. In the end the trust accepted a compromise which gave it 20% of the company’s shares, on condition that a ‘cap’ was imposed that prevented it or any other shareholder from acquiring more than 20% of the shares. This was supposed to give the trust an element of community control over the company.
However in 1995, the Trust agreed to remove the cap, allowing TransAlta to increase its stake from 20% to 41%. In 1996 the Trust agreed to the merger between EnergyDirect and Capital Power to form TransAlta NZ, even though this reduced the Trust’s stake in the merged company to 13.9% (reduced further to 12.5% when TransAlta Canada took extra shares in TransAlta NZ in 1997).
When the National government legislated to require power companies to split into separate lines and energy retailing businesses, the Trust wanted to bid for the Wellington regional lines business. TransAlta ignored the trust and sold the power lines to Power NZ/Utilicorp for twice what the Trust believed the lines were worth. The Trust voted against the deal in December 1998, and tried to rally small shareholders to do so too. But TransAlta Canada, with 66% of the shares in TransAlta NZ, easily won the vote.
In August 1999 the Upper Hutt Chamber of Commerce launched an advertising campaign to get a local referendum proposing that the Trust should be wound up and the value of its shares in TransAlta should be distributed to the 84,000 power consumers in the Hutt and Porirua areas. The chamber president, John Gwilliam, denied that the campaign was influenced by TransAlta’s role as one of four corporate ‘partners’ of the chamber, providing financial sponsorship.
But within a fortnight, TransAlta Canada itself launched a $245 million bid to buy out all 26,000 remaining minority shareholders in TransAlta NZ, including the Trust. It wrote to all 84,000 power consumers stating that if the Trust sold its shares to TransAlta Canada and was wound up, it could distribute a windfall $1,600 to every household. This was backed by a massive advertising campaign. The Trust responded bitterly with its own advertising campaign against the takeover bid. The Advertising Standards Complaints Board partially upheld a complaint by the Trust that TransAlta’s advertising did not make it clear that the offer was being made by TransAlta Energy of Canada, not TransAlta NZ.
By the end of 1999, TransAlta had increased its stake from 66.5% to 75.8%, picking up just over half of the shares held by institutional investors and small shareholders other than the Trust. However, the Trust also bought shares, raising its own stake from 12.5% to 14.8%, and was able to block the complete takeover that TransAlta wanted.
2. Customer Advisory Board
When TransAlta bought the last 51% of Capital Power in June 1996, it promised the Wellington City Council that it would establish a Customer Advisory Board, whose functions would be agreed on by the Council and the company.
By that time it had already established, earlier that year, a Customer Advisory Board (CAB) for EnergyDirect. The six member board was chosen by TransAlta from nominations received from community groups, Chambers of Commerce, trade associations and the EnergyDirect (now Hutt-Mana) Energy Trust. The board stated: "The purpose of the Customer Advisory Board is to give advice and express opinions, not to be a watchdog or arbitrator on behalf of TransAlta’s customers".
In TransAlta’s 1997 annual report, the CAB expressed concerns about:
In the 1998 report, the CAB reported that three Wellington members had joined the board since the merger with Capital Power, but said the move to separate the power lines and energy retailing businesses had delayed the implementation of a new customer supply contract and reduced the number of CAB meetings.
In January 2000, a member of the CAB, Deborah Keating, said the company had not called any CAB meetings in the previous 12 months - apparently since the separation of lines and energy retailing in late 1998. She believes the CAB has effectively become "defunct".
3. Tangata Whenua
No provision was made on the CAB or otherwise for Tangata Whenua input to TransAlta NZ decision making. Although TransAlta Canada has a First Nations member on its board of directors, it has never had a Maori on its NZ board.
Higher power prices for small and medium domestic consumers, particularly the increase in fixed line charges in 1999, have impacted severely on Maori families, who have a lower average income than Pakeha and higher unemployment rates. For the same reason, TransAlta’s "tough attitude" to disconnections has hit Maori households hard. Many Maori are also among the maintenance workers and others who have lost their jobs as a result of the merger that created TransAlta NZ and subsequently.
There is no recognition that Tangata Whenua have spiritual relationship and kaitiaki responsibilities for resources involved in the electricity industry, or that Treaty claims remain unresolved in many areas where TransAlta operates.
TransAlta NZ has never had a woman on its board of directors since the merged company was created by the final takeover of Capital Power in 1996. Yet women are also differentially affected by higher power prices for low income households, because they have lower average incomes than men and are disproportionately single parents.
TransAlta has abandoned energy efficiency programmes that were initiated by its predecessors and by the Hutt-Mana Energy Trust, and its concentration on gas-fired electricity has helped to produce New Zealand’s appalling record on greenhouse gas emissions.
1. Energy efficiency programmes
The conditions of the sale of Capital Power to TransAlta in both 1994 and 1996 included a clause that TransAlta would "promote energy efficient appliances and buildings through advertising, consultancy services and provision of finance for economic energy programmes".
In practice, the company has done little to meet this condition. Hutt-Mana Energy Trust member Molly Melhuish says TransAlta actually discontinued a free home energy audit service that had been started by EnergyDirect.
Later the company supported a trust initiative to provide subsidised energy conservation equipment such as hot water cylinder wraps for households. But Molly Melhuish says the product was still expensive and despite a marketing campaign funded by TransAlta did not sell well. TransAlta has since withdrawn its marketing of the product.
2. Greenhouse gas emissions
New Zealand’s carbon dioxide emissions increased by 14% between 1990 and 1998, despite a United Nations agreement that they should have been reduced back to 1990 levels by the year 2000. The two major reasons for this were a gradual increase in transport emissions and a sharp though fluctuating increase in emissions from thermal power stations.
TransAlta’s 354MW gas-fired Stratford power station alone increased New Zealand’s total carbon dioxide emissions by about 5%, depending on its usage from year to year. The effect of the 118MW Southdown plant has been about a third as big. Together, the two TransAlta plants account for about half of New Zealand’s total increase in CO2 emissions.
In Canada also, 95% of TransAlta’s electricity is generated from coal, and only 5% from its 13 hydroelectric plants. It is involved in big projects to burn natural gas for energy in Alberta, Ontario, Saskatchewan, British Columbia and Australia.
Despite this, the company says it has already met its target in Canada of reducing its net greenhouse gas emissions to 1990 levels by the year 2000 - partly by improving efficiency in its thermal power plants and developing highly efficient co-generation plants, partly by promoting the kind of energy efficiency programmes that it has abandoned in New Zealand, and partly by "offsets" such as planting forests. The NZ government has not required it to do the same thing here, and TransAlta has not done it voluntarily, although its website says it was developing "greenhouse gas action plans for our NZ and Australian operations" before deciding to leave New Zealand altogether.
3/ High power prices and Christchurch air pollution.
TransAlta’s exorbitant power price hikes in Christchurch will make it considerably more difficult for Christchurch local authorities and individual consumers to improve the city’s notorious winter air pollution. The Canterbury Regional Council has been working to reduce the use of open fires and older models of logburners, and to encourage people to use electricity only for heating. That campaign has been dealt a significant blow by TransAlta’s price hikes.
Lessons from the TransAlta experience
In its seven years in New Zealand, TransAlta has made some positive contributions to the country. It has:
These contributions have been at the cost of:
The major lesson of New Zealand’s TransAlta experience is that goods and services that are essential to people’s livelihood, such as electricity, cannot be left totally to the market. Three kinds of intervention are required to ensure that such industries operate in the interests of the public rather than purely of an elite group of investors. They are:
Monopolies and near-monopolies such as dominant power companies need to be regulated to ensure that they provide their services to everyone at prices which are based fairly on the long term costs of production, with sufficient backup to ensure that the service is reliable.
The tax system needs to ensure that all businesses pay their fair share towards the cost of public services and protection of the environment, in proportion to the benefit they extract from the community in profits and the environmental costs they impose, for example through greenhouse gas emissions. This requires both a progressive company tax and either a carbon tax or other mechanisms to ensure that businesses reduce their greenhouse gas emissions.
Because private owners still have an incentive to look for ways around both regulations and taxation, the most effective way to ensure that businesses operate in the interests of consumers, workers, the community and the environment is to ensure that they are owned by at least one of those groups, rather than by small groups of private investors. This requires a fundamental change in the structure of society, which in turn requires the public’s willingness to finance the buyout of private owners.
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