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Sustainable Models of Electricity Use A comparison of a community-owned model with a private corporation-owned model. |
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This commentary was first published on the Sustainable Energy Forum as part of discussion on developing sustainable uses of energy generally. NGC had posted a statement outlining their role in the Electricity Market. ******************************** October 2, 2004 and the G7 made the following statements relating to their prime concern at their meeting- the rising price of oil. “So first, we call on oil producers to provide adequate supplies to ensure that prices moderate," they said in their closing communiqué. "Second, it is important consumer nations increase energy efficiency." And to quote Reuters: The elite club also pressed the International Energy Agency to improve "oil data transparency." For me this is a coded message that we are in a high risk situation. Figures I heard on the weekend suggest that for every dollar increase in the price of oil per barrel, Asian growth rates reduce 1%. I am aware of the impact of that on billions of humans as our ability to produce and distribute food diminishes. I believe we need take urgent heed of the call for energy efficiency. We must stop playing stupid games with resources like electricity and start using them intelligently. First to go is the Electricity Reforms. They breed inefficiency and were always unsustainable, never more so than now. It is vital that privileged countries like New Zealand take the lead and provide the world with models of intelligent uses of valuable energy forms. An early contribution we can make is to scrap the Electricity Reforms with their spurious notions of competition. We need to replace them with legislation that allows communities to again participate in the electricity market and that provides a national focus on developing free flowing and transparent community solutions through local grids. The recent NGC contribution to SEF provides an interesting opportunity to compare two alternative models for creating elements of the systems required to deliver sustainable uses of electricity. What follows was largely written before the G7 call. You will find here detail that cannot be sourced in universities. Indeed a comment on SEF that my netmeter survey posting should be fed into the universities resonated deeply with me. There were many occasions when I dreamed of somehow dragging the Victoria University Business School wallahs down and showing them the nonsense and misery their policies created at the street level. As I have a long and arguably traumatic association* with NGC, in as much as the company inherited Arthur Andersen’s and Co’ creation, TransAlta NZ, I will first summarize my motivation: I was born privileged to enjoy a sense of the bounteous nature of energy. With this privilege and insight comes a sense of the perils of adopting flawed images of energy and using energy forms without care. Since my youth I have been keenly aware of the unsustainable nature of human activity on Earth’s environment. In the early 1980s, this sensibility of risk opened me to the possibility that Human Induced Climate Change provides the most systematic threat to the survival of human civilisation. Our activities threaten our existence. Hence my career of two decades as an electricity meter reader was an important avenue for providing sustainable uses of energy through the intelligent use of electricity in dwellings. Two decades in Christchurch’s smog gave me a sound training in the potential value of electricity as a mitigating agent. My commentary is not a vendetta against NGC. I simply draw on my experiences with the structure they operate or used to operate in. I then compare it with the previous structure I worked in. Regular visitors to my website www.bonusjoules,co.nz will know my vision. My website explores a wide range of our images of energy and climate processes. I am primarily concerned with generating creative responses to the present human predicament. As part of that exploration I am examining the effect of sponsorship of all sectors on our national education curricula. NGC features as I am aware that it has played a dominant role in shaping the modern school curriculum in New Zealand. It is simply an incident of fate that the TransAlta-NGC structure has been one of my most important teachers. My comparison draws on two periods – my decade with the Christchurch MED 1977-1986 and the decade since 1993 in the reformed Wellington electricity industry. For the sake of brevity, I describe these periods as: Community Owned = Christchurch Community-owned integrated local Grid-retail Model Private Corp = Arthur Andersen and Co structure of privately-owned fragmented local Grid-retail Model: TransAlta >>NGC (OnEnergy) NGC wrote *** “A large
amount of information about NGC's operations and ownership is available
from our website www.ngc.co.nz. Some information on the NGC website is in a complex form that my computer cannot access. I have to rely on a memory of an NGC statement in 2003 that 90% of NGC's income is from gas interests and 10% from metering with income expected to rise 10 fold over the next few years from the latter. The ownership of key elements of the monitoring-response technology in the national electricity system means NGC has a key role in the functioning of the electricity market. The use of gas for heat and electricity generation means NGC is intimately affected by the operations of the wholesale electricity market and is a major player in it. For it or any legislator to believe otherwise is to be unaware of the reality. Acknowledgement of Role NGC wrote *** “We provide
a range of metering equipment and metering services to retailers. In
respect of these activities: As I have argued elsewhere in more detail, the technology that NGC owns determines the technology beyond that point. NGC, as owner of the monitoring and response technology, effectively controls the design and operation of all sub-boards and appliance capacity in a building. The local grid may provide a thousand signals and the building owner may invest in a thousand responses but the owner of the switchboard dictates whether they are transmitted. The local grid may be able to capitalise on local distributed generation and the building owner generate a surplus of electricity but neither can benefit if the owner of the switchboard has the meter switched off to outflows from the building. The main switchboard, consisting of meters and relays, is effectively the gateway. Comparison Private Corp. The NGC statement contains little public acknowledgement of the pivotal role of the main switchboard in the creation of resilient, sustainable electricity systems. This is reflected in a limited investment strategy in terms of community and environment welfare. Community Owned. Strong public acknowledgement of the dominant role of monitoring/response technology with wide scale investment in maintenance and research of this technology and related technologies eg Whispergen, Thermocell (coolers), efficient motors, solar water heating, "heat storage systems (Nite stors), “prepaid metering”, consumer focused and information-sharing billing systems etc. Primary Motivation for ownership NGC writes: **** “NGC owns metering equipment (meters and/or load control relays) at around 800,000 of the 1.8 million metering installations in New Zealand” I am happy to be corrected on exact numbers. The figure of 800,000 has been on NGCs website for at least a year and I had been informed that numbers could be over 1 million with NGC expanding ownership rapidly eg in areas like Taranaki. The national total is close to 1.9 million installations. Ownership of 800,000 switchboards makes NGC the dominant owner of this technology in NZ. As such, it is in a powerful position to control the direction of the development of the technology, particularly as it is now a cornerstone shareholder of the most prominent R&D company, Energy Intellect. The scale of these ownership figures generates some interesting reflections. ComparisonPrivate Corp. The Arthur Andersen and Co model defines electricity as primarily a tradeable commodity with the aggregation of services and infrastructure providing efficiency in the market place. The primary driver at all levels is the “the profit motive” of the company, the need to optimise the value of all company interests short term and the need to satisfy principal shareholders. This drive to aggregation is seen in the NGC drive to dominate the industry. A merger with Vector will give their ultimate owners control of 1.5 of the approx 1.9 billion switchboards in New Zealand Community Owner. The community model defines electricity primarily as a means of providing lighting, heating/cooling and access to electrically driven technology to the local community. The primary driver at all levels is the “service motive” in the structure, the need to achieve the above objectives and the need to satisfy the community electorate. Christchurch MED owned, on behalf of its community, about 105,000 switchboards. There was no drive to aggregation of ownership. Switchboard ownership in New Zealand was divided among approximately 55-60 community-owned structures. Transparent accounting accompanied by open and integrated channels for communication and information sharing is seen as providing efficiency in the market place. Comparison- Ownership, Distribution and Access.Private Corp. Ownership and management of switchboards is internationally and nationally based. Distribution of switchboards is spread over a wide range of sites, subject to disparate geographic and climate conditions. This works to promote uniformity of response regardless of local conditions. It also works to suppress creative local initiatives to solve local problems. This was manifest first in TransAlta’s establishment of placing all calls through one centre in Christchurch and now NGC’s operates in a framework where “As a business-to-business company we do not operate a call centre,…” With the exception a few large influential customers, the bulk of its customers have no effective access to the owner of the main switchboards in their buildings. There is minimal involvement with or communication through local community structures such as councils and trusts. Community Owner. Ownership of switchboards is locally based. Distribution of switchboards is spread over one city and immediate environs with common geographic and climate conditions. The nominal board owners are intimately integrated with the local council and trust structures This works to allow responses to local conditions and the generation of creative local initiatives to solve local problems eg industrial v residential load demands, pollution threats, poorly insulated dwellings, temperature extremes, technology innovation etc. Customers had direct access to an integrated response for grid, metering and billing issues to experts with an intimate knowledge of the reticulation area .Customers could also express their opinions, suggestions and concerns through election processes and public hearings of Council committees. Comparison –Control of operationNGC states: “Where NGC owns the load control relay, we do not control its operation (either the retailer or lines company do).” NGC is responsible for the maintenance standard of the equipment. It is also incumbent owner of large blocks of main switchboards. Together these factors give it considerable leverage in renewal and modification programmes. This leverage is amplified if the owners of NGC have potent synergies with the owners of bulk-electricity generator/retailers. NGC’s extensive gas interests make such synergies probable. The combined effect of these powerful synergies mean NGC ownership of the load control relay can significantly affect switchboard and grid operations. In general, these industry synergies tend to work to enhance the interests of Bulk-electricity suppliers. They tend to work against the promotion of technology that gives maximum empowerment to the average consumer so they can reduce demand and participate in an intelligent way with the grid. National investment patterns show these trends clearly. I shall detail a few less obvious ways ownership can impact on operations. These may not be readily apparent to regulators/academics. Private Corp. Maintenance is largely governed by office-based intelligence. I do not know if it is safe to presume this still includes the use of reports from local grid owners of load management capacity. This information is augmented with relatively random surveys performed by the switchboard (ripple response and meter) field audit team. NGC states “NGC's provision of meters and/or load control relays at any site is entirely at the discretion of the electricity retailer.” In theory, this discretion makes large investment in quality technology and maintenance a high risk activity. The owner of the building may decide to switch to an electricity retailer that does not wish to use NGC technology. This acts as a brake on investment in truly intelligent products and services. However the general reality of the Electricity Reforms is that the new system is governed by a large inertia that favours the NGC structure. The risk from "consumer churn" is reduced if a generator-retailer dominates the local market. However that dominance will also dictate NGC technology too in a range of practical ways. It will be in NGC's interests to look for synergies with dominant Bulk-generator/retailer. Consumer focussed and efficient technology may well conflict with the wider interests of the principals of NGC and certain Bulk-generators. For instance such technology may well reduce gas sales to gas-based electricity generators. More effective uses of electricity, demand reduction measures, altered focus on industry development and the use of hydro, wind and geothermal sources could reduce gas sales also. Costs from equipment failure can be passed on through the retailers to consumers as the competition focus is at "retail" level. (For proof of this narrow focus, study the Consumer Institute's "PowerSwitch." and general business media coverage.) Community Owner. Maintenance was governed by reports from the in-house community-owned grid; plus audits from in-house inspectors who checked all new installations and alterations; plus system-wide intelligence from a wide range of field staff. Investment in quality technology and maintenance is low risk and high return. The monitoring/response technology is integral to grid management. Any reduction in bulk-purchases from reduced peak loads directly benefits the owners – the local community. Conversely, costs from equipment failure directly affect the owners of the technology – the local community. We were highly valued as meter readers and kept fully aware of the value of our surveillance role. For instance at a time when the gross domestic charge for a unit of electricity was 4.6cents (controlled) and 2.3 cents (night rate) we were informed that every failed ripple relay we detected saved $90 per anum in reduced peak load charges. It was a simple matter to calculate that I only had to detect 4 failed ripple relays a week for a year and I saved Christchurch consumers the equivalent of my annual take-home income over a period of years. An ethos existed where new concepts and technology was constantly evaluated as to how they could be used to benefit local electricity consumers. *********** Private Corp. Key field activities such as special and regular meter reading were contracted out in Arthur Andersen and Co's reforms of Wellington's system for TransAlta. These employees were described as "liabilities while on the books" and disposable. Field workers were employed on individual contracts to subcontracting companies with no automatic access to legal support. The average worker's wages dropped from about $25000 to $21,000 per anum in Wellington with little security. The role of the meter readers was redefined to be limited to meter reading. Contracts were designed to reflect this, being primarily concerned only with obtaining readings accurately and on time. Extra duties would be subject to negotiation. In practice, this meant field intelligence was given zero value. Training and feed-back mechanisms to exploit this intelligence and motivation were dismantled. Quality of field-sourced intelligence deteriorated for other reasons. These included job insecurity, staff churn, fragmented systems and extended conflicts of interests. "Competition" meant field knowledge became locked up by considerations of "commercial sensitivity." The Electricity Reforms created a whole new raft of inefficiencies. For example, ownership of switchboard access and location details gives the incumbent meter reading company a competitive advantage in tendering and performance. Other contractors also benefit from inaccurate location descriptions. In the new contract system they are paid for each unsuccessful visit in search of a switchboard if location information is flawed. They might have to pay for up to four visits before an accurate location description was available. Community Owner. Key field activities such as special and regular meter reading were in-house. The personale providing this service were valued highly. This was reflected in feedback to staff from surveys indicating almost 100% consumer satisfaction ratings of service from meter readers, the highest rating of all front line staff. It was reflected in wages. In 1985 the average meter reader's wages was $21,500 (Christchurch living costs were 40% lower than those in Wellington). Workers had permanent employment, had a range of in-company career options and had automatic right of legal protection. Billing accuracy and equity was given prime focus. Meter readers were trained to detect and report rigged or faulty meters and bypassed ripple relays. All security seals were subject to regular physical checks as were ripple relays using a combination of mechanical flag setting or magnetically set LED fault indicators. My experience over a decade was that feedback systems worked without flaw. The quality of field-sourced intelligence was high for simple reasons. Flawed field information such as inaccurate switchboard locations only added to staff workloads, not their income. Quick amendment procedures plus access to the intelligence of a range of in-house field staff resulted in up-to-date intelligence and heightened security of the system. ******************** Comparison - Innovation and Creativity NGC wrote “ With respect to new technologies, NGC is working hard to implement the next generation of metering technology." Private Corp Most main switchboards in New Zealand are governed by technology that is now thirty or forty years old. Investment in smart technology effectively ceased when ownership of switchboards was transferred to TransAlta-NGC. This is despite the continuing national tax on electricity consumers through rentals of over a billion dollars since 1995. Previous plans to replace all meters by 2000 were shelved as was Capital Power's substation-based monitoring research, logger feedback systems and other feedback systems. I believe this is true too of card-based prepayment systems in Christchurch. These were developed by Christchurch City Council and used ATMs in 18 (?) malls throughout the city. A TransAlta-NGC executive told me these were to be closed as they were "far too costly ". The trend is that innovation is tailored to meet the interests of the bulk-generation sector and large industrial consumers. This is reflected in the trends of pricing mechanisms and in barriers to small-scale, distributed generation and "smart" consumer technology. (See my netmetering survey) and the Governments focus on what it describes as “Industry –derived solutions) Community Owner. Christchurch MED was at the cutting edge in technology with its systems rated as exemplary by international agencies. As described elsewhere, equipment was maintained to a high standard. Replacement of equipment was probably at a slight hiatus by 1986 as existing equipment was in excellent condition and it was anticipated the new wave of "smart technology" would supersede it. The trend was to community-based solutions and empowerment. ********************* Private Corp Operations were fragmented into "specialist" areas with subcontracting providing limited and rigid frameworks for activities. A field worker became an individual contractor to a contracting company which is in turn contracted to the electricity retailers who sell electricity through the main switchboard. The retailer in turn contracts to the owner of the main switchboard. Contractors may be used to manage the contracts for the main contractors. The top management of the principal contracting companies were often based in other regions or overseas. The individual companies may well have fundamental interests at odds with the needs of the industry and local communities. The company contracting the field worker can decide they own the entire knowledge of the field worker of the electricity industry, no matter how narrow the activities of the company. They thus control and exploit all movement of that knowledge and are able to be the sole beneficiaries of that knowledge. This means the electricity consumer, the industry, the country or the global environment are unable to enjoy the benefits of the use of that knowledge. Control can be in the form of forbidding any form of contact between the field worker and any other division of the electricity industry or media on any matters remotely related to the use of electricity. This can be enforced by a range of mechanisms including threats of legal or other forms of annihilation. Note: A loss of innovation is not the only cost. This system also works to prevent "whistle blowing " when a field worker perceives the public good is at risk. The dispersed physical location of personale in the new system works to limit communication as well.Even if the field-worker's knowledge is arguably outside the immediate interests of the contracting company there are major barriers to innovation. The industry structure is so fragmented and disparate it is impossible to communicate innovative ideas to top management in different cities and countries. In summary, geography, lack of community involvement, conflicting intermediaries (commercial sensitivities), technology and corporate dissolution works against sustainable innovation. Community Owner. Operations are integrated with common career and corporate structures for employees. Top management is local and often intimate with staff. There is a range of local channels through which innovative suggestions and practice can occur. A prime avenue is internal Electricity Department processes. Other avenues include local democratic processes and Christchurch Council processes. The latter avenues include through community organisations input into Council decisions, through other Council departments and committees and directly through the Council committee that overseas local grid and distribution issues. While some councils give the "service motive" nominal value, Christchurch City Council structures were relatively "service-driven". This common factor combined with the integrated structure enabled the relatively free flow of ideas. This was my experience. A case study follows. ************************ Private Corp TransAlta inherited the system of Smooth Flow or Even Flow payments from the previous community owners of the Wellington electricity distribution system. This system of billing involved averaging the annual consumption of a consumer and billing them in twelve equal amounts with an adjustment at the end of the year. The managers "appointed" by Arthur Andersen and Co saw this system as an opportunity to increase profits. They calculated they could save $75,000 in Wellington city area by cutting meter readings from the customary six readings to two readings per year. This accounting was driven by the new "profit-driven" thinking and the new contracting out of meter reading services. The contractors are paid per reading. Based on this accounting four "saved" readings "saved" TransAlta perhaps $5.00 per customer per anum if postage is a factor as well. The postage factor soon disappeared as billing became a marketing opportunity. The analysis had two major flaws. Smoothflow worked on principles counter-intuitive to the "profit" principles our universities indoctrinate our MBAs with. I make this statement having experienced in the custom-made graduates they churn out for cultures such as that of Arthur Andersen and Co. It is counter-intuitive to their thinking in that if you work the Even/Smooth-Flow system for a profit, it will cost at least two times the planned savings. If you work the system as a service it will provide at a profit at least two times the amount invested in the service element. The contracting system introduced a flawed economics as it took zero account of the reality of meter reading. Transport and downloading is a large component of the work and once in the field extra readings usually take very little time. If the meters are on a common board it may take only 7 seconds to log an additional meter. Hence to strip even 20% of the meters out of a 6 hour round may save less than 20minutes, depending on the terrain and access problems. Under the previous salaried conditions, the costs of reading an additional meter was as little as 2% of the new contracted rate per meter. Indeed the removal of an account can add to work-loads as irregular and complicated topography has its own logic. Concerned for the impact on Wellington electricity consumers, the city, the environment and TransAlta, I wrote a commentary warning of the flaws in the proposed amendments to the Smoothflow system. I also argued that a computer programme should be created to "flag" a variation on anticipated use and the customer be alerted so payments could be adjusted. Such programmes already existed for general readings on the small field computers. The new management deemed this proposal too expensive. My commentary and proposals were greeted with hostility and ostracism. Indeed such unwelcome input is one of the reasons why TransAlta executive(s) "binned" my 25 years of work records to ensure I was completely discreditable if I ever went public in any way. Within a year TransAlta was in trouble and my estimates of costs proved most conservative. I may have been out by a factor of five. Arthur Andersen and Co had advised the use of a call centre and advised it would need to handle 100,000 calls a year. Even before some of their other flawed constructs impacted on consumers, the call demand was 200,000 per anum - twice the expected volume. Many calls were consumers ringing up irate as the Smoothflow system of estimates was extremely inaccurate and very disruptive. TransAlta had effectively destroyed consumption histories in a series of "profit driven" decisions. When TransAlta assumed control of South Power's very sophisticated and customer-driven retail system, complaints went up exponentially. Soon the drop-off rate of unanswered callers was reaching 80% . The average waiting time was topping 18 minutes some days and the general average was 13 minutes. TransAlta responded by enlarging the call centre to a reported 220 operators. By 2001, TransAlta -NGC executives told me they were scrapping SmoothFlow as it was far too costly. Community Owner. The Christchurch City Council accounting used "Triple Bottom Line" principles. Social and environmental (particularly air pollution) considerations were integrated into "economic" considerations through a raft of linked community structures. This resulted in an awareness of the impact of electricity use on disposable incomes, health costs, gas emissions and other aspects of community life. This in turn resulted in a range of measures such as prepaid metering, consumer advice and billing options. Disconnections were less than 20% per head of population compared to some other large distributor-retailers. The pegging of electricity prices to rocketing oil prices in 1979 had led to a rapid rise in the bulk charges for electricity (60%) and the Council was considering doubling the number of prepaid (coin) meters to enable consumers to cope. Unlike other major cities, Christchurch had no gas option by this point. It had a serious air pollution problem and up to -10C frosts. Prepaid coin meter accounts were 10 times as expensive to maintain as other accounts. Higher prices meant twice monthly clearances. The advent of gaming machines made the switchboards a target for coin burglary. Also prepaid metering comes with a great social/economic risk. Communities no longer have an indication of how many families are effectively disconnected from the grid. In the hands of an unscrupulous electricity retailer, prepaid metering can be used to disguise the wider impact of disconnections. As an alternative to increasing these pre-paid meters, I proposed to the Council committee looking at the issue that an even-flow payment system with constant feedback to help consumers budget for the high winter prices would be more helpful. The concept was completely novel in New Zealand and MED accountants were not able to immediately see the benefits of the system. However the wider considerations of the Council prevailed and the system was instituted. I suggested a range of safety mechanisms such as ensuring regular readings and bills so that consumers clearly knew what their balance was every month. This would enable both consumer and office monitoring of the accuracy of estimates. Also I proposed other simple measures. The scheme should be limited to consumers with at least a consumption history of spring- summer usage in a dwelling. The system was instantly profitable for both the Council and for consumers. Some consumers told me it transformed their lives, especially their attitude to coping with winters. Traditionally " prepaid consumers" tended to be those who had difficulty budgeting and were the most costly to bill.. As mentioned, the coin meters were also expensive to maintain. Within a year the Christchurch City Council was able to phase them out entirely. This alone represented an ongoing saving of up to $70,000 per anum compared the pre-paid meter option. Within a decade the system had been adopted by many other community-owned electricity supply authorities throughout New Zealand. ************************ Comparison -Education in Effective uses of Electricity TransAlta-NGC inherited a number of education initiatives to promote effective uses of electricity. As these did not exist in my period with the Christchurch MED, comparisons are more difficult and I will have to resort to generalisations. Private Corp In the early 1990s Wellington MED -Capital Power began installing a new cheap ($250 installed) New Zealand designed electricity data logger on the switchboards of 250 of its largest consumers. This monitored and recorded usage at half hour intervals on all phases for 41 days. The information was retrieved at the end of each month. A team of three advisers were trained to interpret the information with the consumers and discuss mechanisms for responding to grid load in a way that benefited both the company concerned and the city as a whole. Inefficient uses of electricity could also be detected and eliminated. I immediately saw the advantages for our city and for the national environment and devoted many hundreds of hours outside my paid duties to ensure that the data retrieval system was the most efficient possible. All other areas used trained electricians to collect the data from the loggers. Initially there was some opposition from meter readers and doubts from management. However I worked closely with Ross Brown of Wel Technology and we persevered. Soon the data was being collected on a monthly basis by the regular meter readers at an additional cost of only about $1 a consumer compared to normal monitoring costs. Customers were inconvenienced by only one visit rather than multiple visits from different people. Site bills coincided with the logger readings. The system was cutting edge in that it combined simple technology with cheap processes within a framework of informed feedback that enabled considerable customer involvement in demand reduction. The primary objectives of the communication system were blocked by the National Government's Electricity Reforms. These replaced the "service" motive with the "profit" motive. This redefined profit in a very narrow sense i.e. short term cash returns. Some Councils, including the Wellington City Council, adopted this interpretation and wider forms of community profit were disregarded. The new accounting system placed all the focus on electricity sales volumes and this conflicted with the objectives of enhancing more effective uses of electricity. In the words of one of the 'business consultants' in the consumer advisory team " The management simply do not know what to do with the data anymore." Open feedback to customers ceased. The Arthur Andersen and Co reforms of Capital Power-TransAlta disbanded the team. Those who clung to the belief that efficient uses of electricity rather than volume sales should be the objective were laid off, along with the "small-consumer" advisory officers. Meter readers, including myself, were laid off soon after as Arthur Andersen and Co deemed we were not core business. TransAlta- NGC removed the loggers from the switchboards. Destruction was doubly ensured by the Electricity Reform Legislation of 1998 which forced the decoupling of links between the local grid owner, the retailer and the community. Community Owner. The advent of this data logger technology post 1986 makes direct comparisons impossible. I have already detailed the customer focus of the Christchurch MED and its use of the ripple response system. It was already working with building owners to incorporate distributed generation into their system. The raft of innovations in energy efficient technology that South Power- Orion is renowned for stems from the period I worked for it. Despite a growth in population and the loss of its electricity retail division, the city has managed to delay the need for transmission upgrades. The city continues to win awards for other investments that enable the community to use electricity more efficiently. An example is programmes of house audits and the retrofitting of over 5000 older homes with insulation this decade. ************************ Private Corp TransAlta inherited a consumer advisory system from the previous community owners. The consumer advisory officers were among the first to get sacked under Arthur Andersen and Co's restructuring. The new framework had no role for them. TransAlta's first national marketing manager told me the new system was only concerned with billing. When I outlined to him the value for all concerned of community involvement in activities such as promoting efficient and safe uses of electricity, he said there was no place for such activities. The company amended this policy as public outrage and hostility to TransAlta billing and other practices mounted. The Resource Management Act may have provided an additional reason for the change of policy. Involvement in "energy efficiency" education programmes can be cited as mitigating activities for the impact on the environment of proposed thermal-based electricity generators. A further reason is that, as outlined earlier, despite its size, the call centre could not cope with the volume of complaints and enquiries. The establishment of a dedicated "energy efficiency" advice call centre (named Efficiency Plus) enabled TransAlta to draw off some of the load on its main call centre. This Efficiency Plus call centre was based in Auckland using young people new to the industry. (The Arthur Andersen and Co ethos accorded industry experience little value and it became practice for TransAlta to employ students on its call centre at cheap rates to keep "profits up".) The Efficiency Plus call centre was headed by experienced person(s). However, key elements of advice tendered by the consultants employed in its creation were ignored. It is probable that the call centre damaged rather than enhanced public perceptions of the concept of energy efficiency. Some advice was misleading and costly. For example, families least able to afford it were advised to call in the expensive services of tradespeople to repair non-existent equipment. The call centre covered TransAlta-NGC consumers throughout New Zealand. The bulk of these were in the Christchurch and Wellington regions. Auckland has a relatively mild climate with temperatures rarely below zero. Temperatures vary within a 30C range. Wellington experiences a similar range of temperatures but wind factors have a large impact on practices. Christchurch experiences up to -10C frost and temperatures can vary by up to 50C. It also experiences major air pollution problems from the inversion of thermal layers. The type of housing stock varies between regions and within regions. Humidity problems vary between regions according to seasons. The call centre was ill equipped to advise such diverse communities. As a promotion, and possibly to help draw off callers from its overload main call centre, TransAlta gave out free energy audits on a random basis to callers of its Efficiency Plus Call Centre. Often the winners were people who had already taken every measure possible within the thermal constraints of New Zealand's low standard building codes and construction design. Those who could most benefit and gave the greatest national return for the advice could not afford it. The call centre ceased with the collapse of OnEnergy in 2001. NGC cited the Efficiency Plus Call Centre as a mitigating factor in an RMA application for consent to extend gas-fired electricity generation. Community Owner. The advisory services maintained by the community owners of the local electricity network and distribution provided many efficiencies. They offered targeted advice to where it was most valuable for the supply authority, the community and the country. A prime focus was on customers who had difficulty managing their use of electricity and keeping up with payments. These customers also tend to generate disproportionately high health bills and absenteeism problems. By enhancing the ability of customers to make payments overall billing costs are reduced. By detecting faulty water heating valves, leaking hot taps and pipes, uninsulated equipment, malfunctioning thermostats and poor uses of electricity in general, a range of efficiencies were gained. The information gained of local conditions enables the Council more profound insights into the state of the community. More efficient uses of air movement reduce thermal losses and humidity problems. These reductions impact positively on both regional and national electricity demand and health bills. The enhanced ability to use electricity effectively works to maintain faith in electricity as means of surviving the cold winters. This is vital in a city such as Christchurch with a very serious pollution problem. In the "service driven" community-owned system there is no conflict between consumer empowering advice and marketing requirements. Energy efficiency and the reduction in electricity demand while enhancing personal comfort levels results in a healthier, wealthier community. This sustained, informed form of consumer advice also works to create a positive image of energy efficiency as an enriching process, not the deprivation ethos the Government, the bulk-generators and EECA promote. The grid owner and the community it serves share direct connections and common interests. This enables innovative practice and technology not possible in a competitive "profit-driven" model operating under present Government legislation. ************************ Private Corp In 1995 a school-community environmental education programme, Energy Action, was created by Grant Dunford of Negawatt Resources Ltd. Grant created it in response to his insight that energy efficiency practice cannot occur without education. His work in this field had shown him householders, and most crucially, tradespeople are thermally illiterate in New Zealand. This ignorance was reflected in the prevalence of poor standards of products, installation and practical uses. With the support of his local community owned Hutt Mana Energy Trust, he created a resource that communicates to schools and their communities: - basic science principles of energy; -effective strategies for using valuable energy forms such as electricity and fuels; - and promoting knowledge of links between human activities and their impact on atmospheric balances. A key innovative feature was the communication of the impact of a use of electricity and its impact on global CO2 levels. This programme education resource was delivered into 1400 schools and their communities. Its facilitation by trained teachers and "energy auditors" into about 140 schools provided evidence of its clear ability to achieve its objectives. Electricity consumption was a minor but measurable criterion. Average usage dropped 27% and the largest drop was 48%. This was a school that had not appreciated the reduction in demand possible in new insulated buildings. Capital Power (ex Wellington MED) , Hutt Mana Energy Trust and Southpower (ex Christchurch MED), all community owned structures supported the education programme into their regions. By 1999 all three retail operations of these three community systems were under the control of TransAlta >>NGC OnEnergy. Such programmes had no place in the ethos created by Arthur Andersen in TransAlta-NGC. The programmes were are also an anathema to the spirit of the Electricity Reforms of the 1990s and to a Government committed to traditional forms and definitions of "economic growth." By 2000 funding for the programme ceased. The education programme still contained potential value as a marketing device for TransAlta -NGC and they maintained an interest in it. Their RMA resource consent application to extend gas-fired electricity generation claimed investment in Energy Action education resource as a mitigating factor. In fact, NGC ceased interest in the programme in 2001and did not invest in it. Negawatt Resources Ltd had made a considerable commitment to an expansion and edit of the resource on the basis of TransAlta-NGC's continuing expressed interest and involvement. The company was reduced to near bankruptcy by the NGC decision and the staff involved in the project had to be laid off. NGC has transferred interest and investment into community activities such as the Karori Wild Life Reserve. This eco-activity does not impact on gas/ electricity sales and does not enhance public awareness of their atmosphere mining activities. A fuller account of the sponsorship process can be viewed at the www.bonusjoules.co.nz in the Energy Gobbledegook section - see the link to Greenwash in Environmental Education seminar. Community Owner. A direct comparison with the activities of the Christchurch community-owned structure cannot be made as Energy Action did not exist then. However such programmes have a fertile base in these structures where community empowerment rather than community exploitation is the norm. SouthPower promoted the resource into Christchurch schools until Government legislation forced the community to divest ownership of its retail division. The new owners TransAlta-NGC retained an interest in promoting the programme into Christchurch till 2001. As outlined above, they then suddenly pulled all support, thereby ensuring the demise of the resource. ************************ NGC wrote **** "NGC's provision of meters and/or load control relays at any site is entirely at the discretion of the electricity retailer. NGC is contracted by retailers to provide this service and retailers are free to put alternative arrangements in place at any time. " ****** Such a statement offers little insight into the reality created by the Electricity Reforms. The Electricity Reforms of the 1990s represented a massive intervention in the economy to alienate communities from the Electricity Market and to divorce them from their local grids. This intervention has been largely successful, especially with recent sale of Taranki Trust shares in Power Co and with the imminent float of Vector. This float, if accompanied by a merger with NGC, stands to give the ultimate owners of the conglomerate unprecedented monopoly over the design of New Zealand switchboards as well as significant control of Natural Gas use. The Electricity Reforms were accompanied by the myth that they would bring competition to the Electricity Market. The reality is the number of groups now permitted to engage in the Market is greatly diminished with over 50 communities effectively excluded by the legislation. The main players now are large industries and the bulk-electricity generators. They are bound together intimately by a common goal of staying in business. These narrow sector interests are deeply threatened by structures and technologies that enable distributed generation and intelligent consumer-oriented responses to grid loads. The inefficiency generated by the Reforms is summed up in proposals requiring consumers to have two meters if they wish to netmeter. The extra meter is primarily there to ensure the main electricity retailers still retain a function in the "smart age". It is nothing to do with sustainable uses of energy and little to do with grid resilience. It has nothing to do with a Knowledge Economy and its associated economies. ************************
Comparison - Customer Security NGC wrote: ***
"NGC does not carry out onsite meter reading. NGC
understands that it is the norm for retailers to contract with
specialist meter reading companies for onsite meter reading services.
We do provide remote meter reading services for larger time of use meters
where it makes commercial sense to the retailer and My recent report of my survey of retailers (see www.bonusjoules.co.nz in the Electric Thinking section) did not detail the third element of my survey. I asked each retailer who I would be giving the key to my house to if I joined them, who would be reading my meter and how did they ensure my personal and property security would be protected? The only retailers that seemed to have effective protections in place were TrustPower where they still own their meters* and Meridian in Christchurch where their contacted meter reading company remains closely incorporated with Orion. Mighty River Power does not serve the Wellington region. Note -a year ago Trustpower sold the switchboard in my house, along with 6000 other switchboards to NGC. Neither company contacted me or any other affected household that I know of to inform them that security arrangements had been completely altered. Indeed recently I encountered TrustPower customers who still were unaware of the transfer of the switchboards. Comparison Private Corp NGC owns the majority of the main switchboards in the Wellington region, including the switchboard sited in my kitchen. NGC's telephone operator informed me they do not talk to electricity customers. Initially all Electricity Retail call centre operators assured me they had secure systems in place to protect my person and property. They outlined how key labels use security codes and the keys are stored in secure areas. However these assurances became most uncertain as I asked for clarification. Most operators were unclear of the lines of responsibility. In some cases they had to seek advice about whom they would be giving access to properties in the Wellington region. Some knew that the contractors used people who are on individual contract. Others did not know this level of detail. No one could tell me if a wider range of key safeguards existed. Such safeguards include the automatic right to legal representation for meter readers in case of dispute. There appear to be no authorised channels for meter readers to communicate direct to the retailer if they feel consumer security is being compromised. The present industry structure means the security system is now relatively vulnerable to infiltration by criminal elements. Community Owner. As outlined earlier, meter reading services were "in house". Meter readers were valued and well paid. Managers had access to detailed corporate records that provided a range of protections for all concerned. All meter readers had automatic right to legal support in the case of any perceived conflict. During my decade during which the regular meter readers would have accessed properties on over 6 million occasions I was aware of only one serious breach of security. That individual received full legal support before being dismissed. Integrated corporate knowledge and care means the security system was at low risk of infiltration by criminal elements. Not once did my employers policies place my personal integrity in a compromising position or make my honesty any form of liability. Summary comparison
The Arthur Andersen and Co construct which NGC inherited is "profit- driven". Large amounts of those profits go off-shore. For a short period the TransAlta website in Calgary, Canada, highlighted how they made a direct $350 million profit from the sale of their brief investment in New Zealand. My sympathies are with AGL (NGC) as the structure they inherited was unsustainable without continuing massive Government support and subsidy. It is now history that the structure was deeply flawed, unsustainable and collapsed. Even with the continuing Government levels of support for "supply side" bulk-generator solutions NGC has been left in a difficult position in terms of contributing to a sustainable national economy. Its structures divorce it from local community-sourced solutions to a wide range of activities. These include opportunities to reduce electricity demand while enhancing community living standards. The synergies between the investment interests backing NGC, bulk-generators and the gas industry, the need to meet the short term demands of principal shareholders and present Government policies all mitigate against NGC being a profound and much needed agent of long term sustainable practice. Community Owner. This locally owned and operated structure allowed for a wide range of activities that worked to directly enhance living standards of those in its reticulated area. It was closely integrated with the community it served through democratic procedures and its integration with the Council and is committees. Demand-side initiatives worked as the integrated grid-retail system were "service driven". Profits from the associated efficiency were retained locally in a wide range of forms. Its close association through a wide range of links with local education and research institutions provided avenues for the generation of innovative and efficient uses of electricity that provided demand-side models for the world. The direct links between the local community and their local grid enabled truly creative synergies that optimise the intelligent use of electricity. These initiatives were sustainable and world leading. Note The Electricity Reforms from the 1990s (still continued) were designed to destroy this model. They did three ways. They forced the Christchurch community to restrict their use of their grid resource to very narrow economic parameters. They forced the city it to divest itself of its retail division. They created a wide range of barriers to inhibit the community from negotiating directly with the grid. This included the erection of barriers to effective netmetering and response systems. NGC wrote: You may be aware that NGC recently
completed a trial with a major electricity retailer on a new form of smart
pre payment meters. These allow the householder to keep closer
watch on their usage and key in payments as they go. NGC
expects this product to be made available to the market over the
coming months. I very much like to think this is good news. All these technologies have significant potential to enable us to develop a sustainable global economy by reducing our destructive impact on the environment while providing our 6 billion people with creative, comfortable and meaningful lives. New Zealand, for a range of reasons, including its creativity, its small intimate population, its diverse geography, its variable climate and its range of natural resources has the sensibility and power to make a significant impact on the direction humanity takes. If that ability is suppressed by narrow sector interests, then we will make a disproportionately large contribution to the global collapse into world wide war, famine and misery. Globally an extra four billion souls have been added to the planet during the Cheap Oil Age and we all now depend on an agriculture based on cheap oil and gas supplies. The stakes are high. If New Zealand’s talents and skills are enhanced by the activities of large corporations such as NGC, then we may be instrumental in diverting humanity from catastrophe. The choice is quite stark. The massive imbalance of in investment in "bulk supply side" solutions has brought us to this point. We can stay with the "industry -derived" solutions, including those of the bulk-electricity generation sector . This has generated the present very high risk and unsustainable situation. Alternatively we can divert a large portion of those huge funds into "community-derived "solutions and promote demand side options. Then we have a chance of generating a sustainable economy that enhances our lives and averting war. NGC faces a massive challenge in transforming the culture it inherited from Arthur Andersen and Co. Its difficulties are made worse by the regulatory framework the nation inherited from that same culture. It will not find the support for change it requires in industry players around it. It will find it in the communities it serves. In communities it will find the most sustaining and exciting future. The pivotal role of the main switchboards it owns means it can transform the common awareness of sustainable uses of energy for better or worse. NGC is a major miner of the atmosphere. I like to think that NGC will rethink its attitude and begin supporting education programmes that are relevant to its major area of impact on the environment. Examples are types of programmes like Energy Action. NGC should be supporting research and programmes that communicate effective uses of energy to electricity consumers and that teach our young how their use of electricity and fuels impact on the atmosphere. It is little use providing sophisticated electricity-use monitors if the technology just works to promote a sense of helplessness and deprivation. To be a positive force, the equipment must be accompanied with strategies and technologies for using electricity intelligently. I like to think NGC will join communities in arguing for sanity in legislation governing netmetering. I do not apologise for repeating my commentary on the daft proposal that small electricity generators have to have two meters. This proposal is an indictment of the standards of efficiency promoted by the present market system. The fact that a second meter even need be proposed reveals the serious flaws in the present legislation. There is something very wrong with the concept of a competitive retail industry when it requires two meters to make it viable. Profits should not be derived from the volume sales of electricity. Retailers should be able to profit from connecting communities to their local grids in intelligent, sustainable ways. NGC needs to be able to work with the latter type of agency. I like to think NGC is working with local communities developing NZ created state of art technology that that sends a raft of signals from the grid to a large range of smart appliances in dwellings. I am very interested to learn of concrete initiatives with individual communities. I am also very interested to learn how they are promoting the open development of new technologies. Prepayment systems have great potential for either health or harm. In poorly governed regimes and in the hands of unscrupulous retailers, prepayment systems are simply a mechanism for misery. People can end up effectively self-disconnected from the grid. If charges rise as their consumption drops then consumers can find they are paying very expensive prices for a very few units. I like to think NGC will work with communities and retailers to ensure effective grid-access is publicly monitored and a wide range of measures are in place to ensure everyone can afford to use electricity. When NGC says it hopes "regulations will address these issues in a straightforward and practical way" . NGC is a large, internationally based corporation and a key player in the gas-electricity-construction industries. It is in a potent position to shape regulations. It is in good position to influence our present government as it is driven by "industry- derived solutions". A senior executive from the company now plays a key role in the Electricity Commission. NGC wrote "I regret that Mr McArthur's phone call to NGC did not meet with his satisfaction, and I apologise for any inconvenience. As a business-to-business company we do not operate a call centre, so I suspect the call went through to the corporate receptionist who would not be familiar with the details of, or the terms used in, all our diverse group operations. The retailers have expressed to us that their preference is for us to refer enquiries from electricity customers to them, so our receptionist would have been following that policy." There is no need for apologies. My communication was simply part of my survey to ascertain the response a "small consumer" or layperson receives to an inquiry about netmetering and switchboard ownership. The receptionist was quite correct in her response. It was the retailers that had referred me to NGC. The response confirms the general picture of the incoherent, unsustainable industry framework NGC operates in. NGC wrote "Should Mr McArthur or other members of SEF wish to discuss a particular issues with NGC, please feel free to contactEwan Gebbie (formerly of EECA) who is now working with us(Ewan.Gebbie@ngc.co.nz)." Thank you and I return the invitation. I am not sure if the link to EECA is helpful. I am aware EECA contains individuals who are dedicated to developing a sustainable economy. However I have come to the conclusion that, on balance, the organisation forms a major block to New Zealand developing a Sustainable/Knowledge Economy. I trust Ewan can achieve at NGC what EECA is at present unable to. ************************************* * This footnote is for academics, especially economics/ business lecturers, and policy makers who have little contact with the reality of the policies they espouse and promote. May I humbly suggest that a sound knowledge of history is most helpful. In the case of the electricity industry, it is valuable to understand the reasons why cities in New Zealand ended up buying the local electricity companies and why rural communities banded together to form Trusts to create grids in their regions. It is also helpful to know why these communities developed a wide range of safeguards and mechanisms to protect the security and welfare of members of their communities. Some of these precautions were adopted after people learned from bitter experiences in wars, in natural disasters, in criminal violence and in family tragedies. These experiences gave them profound insights into the true nature of efficiency and accountability. However these safeguards and mechanisms are given zero or liability status in the prevailing economic rationale. I saw little evidence of a sound knowledge of history in our policy makers, our regulators and the graduates flooding out of our universities into consultancies such as Peat Marwick and Arthur Andersen and Co. As we witnessed the latter group restructuring Capital Power and Hutt Mana Energy, even the most uneducated workers could see how flawed their analysis was. They were a laughing stock. At every point we knew of they asked the wrong person for information. They assumed the person supervising a section knew how it worked. For instance they asked the supervisor of meter readers for advice on how meter reading works, not bothering to learn that he had never read a full meter round. They did not seek information from experienced meter readers at all. The supervisor’s expertise was debt management and data transfer. They asked his manager how to manager the merger of the two company's systems. Unlike the supervisor who had managed the transfer of data from a manual to a computer system, this person had no experience in such a transfer. As a result vast amounts of history were lost in the merger, making algorithms a joke and billing a nightmare. And so on it went. The second thing we noticed was that it was very easy to predict which managers would be retained and which would be sacked. The rule was the more respected the manager the more likely they would leave or be shafted. The more psychopathic the manager, the more likely they would be promoted. This was sufficient warning for many of the most capable and diligent workers to get out while they could. The third thing we noticed was a shift in the approach in the approach to problem solving. The nascent Total Quality Management (Denning) scheme was scrapped with the new CEO informing us that the company had progressed beyond the point that we needed it anymore! A problem with a consumer ceased to become an exercise in searching for remedies to prevent it reoccurring. It became an exercise in "damage control" and "maintaining image". The fourth thing we noticed was trust was no longer valued and service no longer counted. A person was valued for their ability to support and adopt new policy without question. When that new policy was deeply flawed and amoral, then the criminal element thrived. At such times, honesty became a severe liability. The fifth thing we noticed was that if there had to be a choice of two systems, then the inferior one would be adopted. For instance we found simple keyboard operations that had be refined two movements would become a complex of 7 or more movements. It was easy to predict the flawed Arthur Andersen and Co construct would fail. I mentioned how we found the new policies of "competition", "accountability" and "efficiency" a laughing stock. They were also the cause of considerable misery and the source of a serious drain of integrity and talent from the industry. I will spell this out a little for academics and policy makers. I feel it is hard for them to believe how their policies impact at the street level. In the new system, there was a relatively high turnover of executives. The executives that thrived in the new system were masters at covering their mistakes. When things started to go wrong publicly in TransAlta I was informed that all 25 years of my exemplary work records were "binned" to ensure I was discredited. It was made very clear to me that I would be annihilated if I spoke out. I was nearly 50 and had been a labourer most of my working life. My sole marketable qualification resided in my records for intelligence, integrity and diligence. As a meter reader I was aware that I shared my plight with many other workers from a range of restructured industries. I was also aware of the difficulties many of those able individuals faced getting work again. At job interviews it is very difficult to explain why your previous employer may provide a very negative impression of you or may be in prison or whatever. Competition for jobs and lucrative contracts is fierce in the "unskilled" areas. In the new "deregulated" industrial environment, it is helpful to have experience or acquaintances with the ability to put your argument forcibly. Our bulging jails and widespread drug trade gives evidence that this experience and ability abounds. Other meter readers saw the writing on the wall and got right out. I thought it might be possible to just keep my head down and read meters. It does not work like that. In corrupt structures, honesty is a liability and thus is viewed as a potential threat to profits. I came to dread what I would next learn of. I will make it clear I am not referring to the period May 1996 to October 1997. I can say the Employment Court offers little protection for a worker or the community they serve. I can say before and after those dates I was subject to consider a range of threats. Some were directed at me, others at my family. Post 1997 I was repeated warned that if I did not "stay right out of the electricity industry " I could expect to have my "family raped and home trashed" by criminal elements. Over a period of years this creates incredible stress on the family. My partner of 28 years was well aware of the risk my existence created for the family. It is not a sign of a civilised/free society when a person has to say to their loved one that they will, if the dire need is seen, disappear without trace overseas so those that threaten the family can know nothing is to be gained from trashing family members. It is also understandable that even long term relationships fail in such settings and the family home sold up. It is not a healthy society when public knowledge of family estrangement comes as a relief to the estranged. That is the environment the Electricity Reforms created. That is the reality "deregulation", "liberalisation" and all those other easy policy words. I think some of academics and policy makers would be truly shocked to know who they empower and how they are the heroes of criminals. This is the real and usually unrecorded stuff of history. That is also what I meant when I used the term 'traumatic relationship' with the Arthur Andersen and Co construct. As a footnote, in my decade with the Christchurch MED I enjoyed only respect and not once was placed in a compromising situation. And yes, I still believe energy is bounteous and I continue to feel privileged. I am aware that others around me were not so fortunate. I feel I have been able to turn bad events into something positive. When NGC pulled the rug on the Energy Action programme at Negawatt Resources Ltd in 2001 I lost my job again, this time in the education arena. This effected my "early retirement" from the work force. I have attempted to turn this into a creative opportunity. It has enabled me to generate a wide range of responses to the global challenge we face and to provide positive options in communicating the nature of energy and climate issues. The ideas and content of the Bonus Joules website may not have occurred without my enforced "retirement". I will post this on the website in the Electric Thinking section as an alternative interpretation of History and Economics. My hope is that it may enhance wisdom and insight into sustainable use of energy in our universities, policy makers and local communities. Below is the full NGC posting on the Sustainable Energy Forum. Back to top Return to Welcome Page Return to Electric Thinking
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