The Role of Government in Driving Change: Electricity in New Zealand and the Politics of Privatization Hafsa Ahmed

In November 2011, the New Zealand's National-led government felt justified to pursue their policy of privatization following a landslide victory over their opposition. Their plan to implement a Mixed Ownership Model (MOM) of public assets by selling 49 per cent of the shares in three of the electricity State Owned Enterprises (SOEs) was met with a lot of opposition. Resistance to this change by key stakeholders, coalition groups and the general public did prove instrumental in disrupting this process and in influencing key turning points and outcomes. However, the government were still able to push through change and secure the asset sales of three energy SOEs. This case tracks these processes and describes the issues and challenges that occurred, highlighting not only the uncertainties of change but also the role of government and power-politics in understanding the speed, direction and consequences of change.

The Mori Claim

In response to the government's proposal to privatize the electricity industry, the New Zealand Mori Council approached the Waitangi Tribunal (the Tribunal) and lodged a claim (the National Freshwater and Geothermal Resources claim). Their aim was to halt the asset sales of the SOEs by arguing that the government's proposal failed to recognise the Mori's (indigenous people of New Zealand) authority over the land and waters (mana), as established under the Treaty of Waitangi Act of 1975. The Treaty of Waitangi (The Treaty), which was signed between most Mori tribes and British representatives in 1840, formalized the British settling of the island and provided the British Crown with governing rights over Mori land and waters. The Tribunal is charged with making recommendations in response to claims brought forward by Mori relating to any actions or omissions made by the Crown that may breach promises made under The Treaty. As caretakers (kaitiaki) of the land and waters, the Mori Council put forward the claim that they have:

Unsatisfied and unrecognised proprietary rights in water, which have a commercial aspect, and that they are prejudiced by Crown policies that refuse to recognise those rights or to compensate for the usurpation of those rights for commercial purposes.

The claimants recognized and accepted the rights of non-Mori to share and use benefits of waters; however, their claim argued breach of their residual proprietary rights which were guaranteed under The Treaty. As English style property rights are not seen to allow appropriate recognition of their guardianship (kaitiakitanga) and authority as a people (tino rangatiranga) they considered the Crown in breach of the principles of The Treaty. The Tribunal's report recommended halting the sale until the matter was resolved. Although a recommendation of the Tribunal is not binding upon the Crown, Prime Minister, Hon. John Key confirmed at a press conference on 3 September 2012 that the government decided to delay the sale of assets until March 2013. The prime reason for doing this was its coalition with the Mori Party. He stated:

The Mori Council has told Ministers that if the Government does not follow the Tribunal's recommendations - which include a national hui (meeting) on water rights - it will take the Government to High Court.

After months of commotion, matters ended up in the High Court as the government continued to pursue its plan. The Mori Council approached the High Court to seek a judicial review in October 2012 and, following a hearing in Wellington, a ruling was finally issued in December stating that the Mori Council had lost their bid to stop asset sales. The Mori Council responded:

The Council's concern is that government has not been willing to address the issue of indigenous water rights, the Court itself noted, and has relied upon statutory technicalities: but in this instance we think that the view taken about the statutory framework does not fit with previous court decisions and we are now working on an appeal.

The government was hopeful the matter would be resolved before the public share offering of the first SOE - Mighty River Power - in March 2013. The Mori Council approached the Supreme Court in January 2013, but their claim was rejected. The Supreme Court indicated that partial asset sales would not 'impair to a material extent the Crown's ability to remedy any Treaty breach' (Cunningham and Anderson, 2013). However, the Supreme Court pointed out that although the Mori Council failed in its appeal, it was successful in highlighting how the Crown was bound to comply with 'principles of The Treaty' before selling any shares (Cunningham and Anderson, 2013). Following the Supreme Court's ruling, the government announced its decision to go ahead with the share offering of Mighty River Power, boasting that this 'will give kiwis a chance to invest in big New Zealand companies'.

Political Resistance and Public Opposition

A coalition of the Labour-Green Party set out to resist this programme of privatization and launched a Keep Our Assets Coalition in May 2012. The effort aimed at collecting 310,000 valid signatures in order to trigger a citizen's initiated referendum on the sale of assets. The Coalition successfully collected 393,000 signatures and submitted its petition to the Clerk of the Parliament in March 2013. The spokesperson of the Coalition Roy Reid said:

The Keep Our Assets Coalition has today presented the biggest ever citizens-initiated referendum petition to the New Zealand Parliament ... the Government must listen to the overwhelming number of New Zealanders opposed to their asset sales plan. Having the privilege of the Treasury benches shouldn't mean ramming through an unpopular asset sales program with a majority of one.

Unfortunately, in May 2013, it was reported by the Clerk of the Parliament that the petition for a referendum had fallen short of signatures and the Prime Minister had accused the opposition of misleading the public. The Coalition continued their efforts and were successful in submitting a petition to initiate a referendum in September 2013. The spokesperson at the time indicated that:

Our energy assets were built for the benefit of the all New Zealanders, selling them only benefits a small number of people who can afford to buy shares. New Zealanders don't like that [and that] the sale of Mighty River Power has been a disaster for the Government and investors. The share prices has plummeted and average mums and dads could not afford to invest.

The prime minister announced that the referendum would take place in late November and early December 2013, but that the referendum would not be binding on the government. The Labour Leader David Cunliffe announced in opposition that: 'We expect the voters to send the government a powerful message about its partial privatization programme. The result will kick the last leg out of John Key's moral authority to sell public assets.' But in the interim, the government set about selling shares of a second SOE - Meridian Energy - in October 2013. On 17 December 2013, the results of the referendum were released indicating that 67.3 per cent of New Zealand voters were against the sale of the SOEs.

The Outcomes

As it turned out, the government simply ignored the results of the referendum and continued with the sale of the third SOE - Genesis Energy - in April 2014. The SOE share sales raised NZD 85.5 million with costs accounting for 2.5 per cent of this sum. Public opposition and stakeholder resistance failed to prevent these changes from occurring and whilst there have been some short-term financial gains, the real value of these returns in meeting the interests of the public can be questioned.

Questions

1. Who were the key stakeholders who were part of and impacted by changes in the New Zealand electricity industry; and how did their choices influence the process of change?
2. In your opinion, do you think that the choices that the government made were justified? Provide an explanation for your answer.
3. If you were an advisor during this change process: a) what advice would you give to the government; b) what advice would you give to the opposing coalition; and c) what advice would you give to the Mori Council?