Big power companies pay billions in excess dividends, new study finds

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The report says that every kilowatt-hour generated receives the wholesale price, so when Huntly burns coal, generators make a significant profit on the low-cost kWh they have generated from hydro and wind power. Photo / Doug Sherring

Electricity generators provide “excess dividends” to the detriment of people, the planet and the economy.

A new report from labor unions and an environmental organization has argued that large power utility retailers have paid billions of dollars in excess dividends to shareholders.

The report by First Union, NZCTU and 350 Aotearoa said the partial privatization of power companies resulted in payments exceeding the profits made by gentlemen.

The study argued that the gentlemen raised electricity prices and halted decarbonization.

“Underinvestment in renewable power generation allows high-cost, high-emission fossil-fired electricity to drive the prices of cheaper renewable electricity, driving up market prices and bolstering profits,” adds the report.

The report’s authors said the government should submit a minimum profit reinvestment target at upcoming shareholder meetings to rapidly develop new generation of renewable energy.

The study also called for future dividends the government derives from its own holdings to be used to buy back gentailer shares.

This money should be held by a special purpose vehicle in an effort to maintain a stable and secure energy supply, the report adds.

First Union researcher and policy analyst Edward Miller said the four biggest gentailers paid out $3.7 billion more to shareholders than they earned in profits from 2014 to 2021.

“The excessive distribution of dividends has starved our power grid of the investment needed to build new generation capacity, raising prices for households amid a cost of living crisis and keeping coal and gas generation assets on life support,” he said.

“In December 2020, the New Zealand government declared a climate emergency, but we have yet to see the kind of urgent action needed to match the scale of the threat,” Miller said.

“The government has recently taken action on the banking sector and the oil companies to ensure they deliver better outcomes for New Zealanders,” said Craig Renney, an economist at the Council of Trade Unions.

“This report demonstrates that it is urgent to do so for the electricity sector as well.”

The government announced on Wednesday that it was giving the Commerce Commission powers to set fairer prices for petrol and diesel.

Environmental group 350 Aotearoa said the government had a crucial role to play in finding a solution.

“We cannot expect the market to repair itself,” said 350 Aotearoa executive director Alva Feldmeier.

“The gentlemen feel more responsible to their shareholders than to their consumers, which is neither rapidly reducing emissions nor addressing the huge levels of energy poverty in Aotearoa.”

The report, released this morning, says residential electricity prices have risen 79%, but commercial rates have fallen 24% over the past three decades.

A PwC report last month said many NZX-listed companies were waking up to the need to report on the impact of climate change in their annual accounts, but progress was slow.

New Zealand carbon prices hit $85.40 per unit at the government’s emissions trading system (ETS) auction in September.

NZME attempted to solicit comments from several energy companies yesterday, but they were unable to respond by the deadline.

Meanwhile, the Green Party says the big four power companies should be required to reinvest massive profits into reducing household bills and climate pollution.

The party’s energy and resources spokeswoman, Julie Anne Genter, said climate action and support for energy-poor households should be a key feature of the design of our electricity market.

“As today’s report shows, these design flaws have led to massive underinvestment in production capacity and low-carbon technologies.

“National’s partial privatization of the electricity market in 2014, in particular, stifled climate action, promoted fossil fuels and left households far worse off.

“Massive profits from electricity should be reinvested in renewable energy, measures to reduce household bills and local clean energy projects, such as shared or community energy.”

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