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Introduction 

Professor Hogan is Research Director of the Harvard Electricity Policy Group (HEPG), which is exploring the issues involved in the transition to a more competitive electricity market. He is one of the architects of New Zealand's Reformed electricity system and Linda interviewed him on one of his "advisory" visits to New Zealand.

The work of the Harvard Electricity Policy Group overlaps with agencies such as dgCommunities and is a prime agent of the small oligarchy of bankers who seek to control our global electrical potential. The group has been very active in every region of the world from Russia to Hungary to India to Chile to Australia to New Zealand to the USA promoting the privatization of community and national electrical assets. It has been very successful in channelling hundreds of billions of dollars to the bankers, often with tragic consequences for the communities from which the wealth was extracted. 

2009 update Often the Harvard Group policies involved imposing rapid economic (privatising) reform on societies and recent studies suggest those countries that had these reforms imposed at greater speed are now experiencing relatively high declines in life expectancy and general health standards. Also evidence is emerging that the reforms have left the countries poorly equipped to transition beyond the Cheap Mineral Oil/Gas Age, especially in Eastern Europe. 
In New Zealand a recent study suggested that in some regions up to 40% of the household can be considered to experience "fuel poverty". Bulk-generated electricity prices have doubled for households since the reforms and have dropped for large corporations.

Sanity Salve

This is the hurried, unedited letter I fired off to  Nine to Noon, the New Zealand National Radio  programme. I was concerned that Linda Clark, the host, might start questioning her own mental stability after attempting to make sense of the recent Electricity Reforms. It was also at a time when there was considerable debate as to the wisdom and implications of the US invasion of Iraq.

May 5 2003

Hi Linda,

I heard your interview with Professor William Hogan from Harvard University who it seems is one of the North American architects of their electricity system in New Zealand.

After the interview you said that you always find the subject fiendishly difficult and it makes your head hurt.

It is simple if you understand one thing: it is designed to make your head hurt. Understand this and life will become more simple. Your head will hurt less though your heart may ache a little.

Examine elements of the new design (new compared to rest of electricity history in New Zealand 1904 –1987.)

It is fiendishly difficult to control loads and optimise generation when the transmitters for hot-water controls (i.e. ripple controls) are owned by one company and the transceivers on the consumer’s boards are owned by another company, both of whom can make tidy short-medium term profits by minimising investment in the maintenance of their property. It is made even more fiendishly difficult by the fact that the owner of the transceiver may have an incentive to maximise electricity sales while the owner of the transmitter has little interest in high consumption and neither suffer medium term penalties for the system’s failure.

*It is relatively simple to control loads and optimise generation when both transmitters and transceivers have the same owners and these owners are the community of consumers who directly profit from the efficiencies gained from high levels of maintenance and operation of the system.

It is fiendishly difficult to know how much electricity is costing you when the price is obscured for so-called marketing reasons by an expanding range of secondary factors like special media and entertainment deals, holiday draws etc.

*It is relatively simple when electricity is retailed as a commodity in its own right.

It is fiendishly difficult for local economies to ensure that all households have light, heating and access to modern technologies from their electricity system when much of the focus of the industry is on ensuring a few capital intensive industries are provided a large portion of available electricity and ensuring a healthy profits are returned to global shareholders in the industry.

*It is relatively simple when the objectives, as manifest in the trust structures that were used to create our national electricity system, provide a relative focus on providing light, heating and access to modern technology to all households. Then it is more possible to have a system in which large electricity users–low benefit businesses like Comalco operate in conditions where they use the nation’s reserve generating capacity rather than the base capacity

It is fiendishly difficult for communities to promote local initiatives in technological innovation and education programmes when the means for doing this are owned by shareholders based outside their community and who may feel that such innovation threatens their medium term interests here and in their home countries.

*It is relatively simple for world leading technology and education programmes to be created by local communities.  This is because they are able to tap into a wide range of local talents, passions, skills and funding mechanisms, to exploit local conditions, and to adapt the regional electricity system to serve local needs. New Zealanders excel at this.

It is fiendishly difficult for communities to develop high quality civil defense responses when the owners of the electricity system are based in other regions of the country or the world and are whose shareholders see no value in the investment involved. As people found in the minor Thames’ emergency, it is now fiendishly difficult to attempt to provide/elicit information through 7-8 retailers, none of whom have local knowledge or close communications with the US based headquarters of the lines company.

*It is relatively simple for the owners of locally owned systems to justify investment in civil defence (alternative/emergency capacity) when the shareholders are intimately aware of local risks e.g. earthquake fault lines, potential storm patterns etc.

It is fiendishly difficult for an industry to share information and research when all its component activities are divided into entities, each driven by the profit motive. In this situation company knowledge becomes “commercially sensitive”.

*It is relatively simple for an industry to generate and share information and research when it is driven more by the service motive with little imperative to be “commercially sensitive” and regional components share a national vision.

It is fiendishly difficult for field workers to communicate a range of information to the industry when they are sub-sub- subcontracted to perform only a very narrow prescribed activity and the information may be in conflict with the interests of the contractor and that contractor may have a similar asymmetric relationship with their contractor and that contractor may have a similar asymmetric relationship with their contractor. This fiendishly difficult situation is compounded by the fact that the mechanisms and technology developed for communication are refined to serve only the narrow interests and priorities of the different contractors at each level.

*It is relatively simple for field workers to communicate a range of information to the industry when they are employed by and share an industry- wide culture where that information is seen to serve the interests of the community of consumers, the owners of the industry.

It is fiendishly difficult for consumers and also for honest, service driven people to operate in systems that is amoral, uncaring and driven by short term profit motives such as that created for Americans with Enron and for NZers with TransAlta by Arthur Andersen and Co et al.

*It is relatively simple for consumers and for industry employees when the industry is driven by service motives and is relatively transparent and accountable to the consumers it serves by way of democratic election processes.

It is fiendishly difficult to develop the national data base of an industry driven by “commercial sensitivity” and in which Government supply-side planning is done by one department (Ministry for Development) and the demand-side planning is done by another department (Ministry for the Environment –EECA), neither of whom have much field experience in the electricity industry. The development of a national knowledge base is made fiendishly more difficult by the fact these agencies believe electricity is energy!

*It is relatively simple to develop a national knowledge base when the industry is driven by service motives as described earlier, where there is direct access to field expertise and these people believe electricity is a form of energy.

It is fiendishly difficult to communicate to the Government when its brain is hurting so much that it is convulsing as it attempts to force the electricity system into a so-called free market model. Some erratic signals suggest it remains aware of the vital role electricity now plays in enabling every NZer to have access to warmth, lighting and access to technology. Even more sporadic signals indicate vestigial glimmers of the ability of transparent, coherent, (monopoly) systems to achieve this. The major signals, as manifest in the Government’s gleeful siphoning of funds from the electricity system in the form of so-called profits from its so-called investments, indicate its addiction to the existing fractured, competing market system.

It is relatively simple when the Government is lucid and able to acknowledge that the electricity system functions most effectively when it operates as a transparent, accountable, democratic, community based monopoly and the country is allowed to create it.

It is fiendishly difficult to understand the wonderful value of the concept of energy efficiency when electricity retailers are “rewarding” consumers for saving electricity and protecting the company’s profits by donating money to hospitals and for statues outside them. The implication is that energy efficiency means you end up in hospital and this probably reflects the reality of the company practice. For many people energy efficiency means going without heat and light. Elderly and sick people, often the most patriotic of citizens in responding to national crises put their country before their own well-being and become health bills. Children in particular get injured and burnt to death with candles. A meter reader for decades, I am keenly aware of how essential electricity is to the health of the household psyche.  I gave out bills and witnessed the affect as people became distressed to the point of angina attacks, of hacking their children to death (the coroners report hinted at the strong link to the distress  I experienced) and had to console another meter reader after he was instructed to cut a consumer’s power off (a corporate error) and went back an hour later to find her with slit wrists.

* It is relatively simple to understand the wonderful value of the concept of energy efficiency when savings generated are returned to a revolving fund to provide consumers access to capital to invest in technologies that reduce peak loads and add resilience to the electricity system. Examples are intelligent meters and substations, intelligent building design, conversion of solar energy and wind power into heat and electricity at point of use i.e. turn houses into generators.

Yes, it is all fiendishly difficult now and the loss of the relative simplicity of the previous systems is reflected in:

o       increasing line losses;

o        less equitable billing systems;

o       less transparency;

o       the Thames emergency and worse.

o       increasing wasteful practice in electricity generation eg burning gas and in domestic use e.g. chronic dwelling design.

o        the zero value given to the huge “sunk investment” and civil defense investments built up by previous generations when the system was sold (Economies in regions like Wellington that have adopted the most fiendishly difficult systems are now at particular risk of failing and already this is becoming apparent.).

o        the destruction of world leading, community based education programmes communicating effective strategies for using electricity:

o       the stifling of technological innovations (NZ historically was a world leader and in the 90’s was poised to make major contributions to the development of responsive and energy efficient electricity systems using cheap, locally designed, cutting edge technology.

o       a “free market system” that offers electricity consumers all choice and no mechanisms to enjoy it e.g. the new wave of electricity monitoring and response technologies we were developing are no longer available to individual consumers.

o       NZ before the reforms had a first world system as measured by outages etc. It is now close to third world status.

The situation was beautifully summed up in a very popular Tom Scott cartoon a decade ago when he portrayed some Treasury officials and/or their advisers saying that the electricity system has to be reformed because while it works fine in practice, it does not work in theory.

It is fiendishly hard to understand why a lucid country would demolish such an advanced system as NZ had created over the previous century and I can understand if the cartoon made many heads hurt.

It is simple to understand what happened if you know Treasury officials were by then governed by US think tanks and North Americans had just gained the controlling interest of our electricity system. David Lange recently summarised this period in our history rather exquisitely when he said (maybe I paraphrase) “Americans operate out of self interest… that is what governs them…they decided it was in their interests to tolerate our Nuclear Free Policy ….they were given unparalleled access to our capital.” 

 As I said in my introduction, our present electricity system has been designed to make your head hurt. It is the age-old trick of colonisers – keep the colonised distracted with myths of freedom and salvation  (free markets) and blame things on religious (market) forces. Establish systems of conflict to keep their heads hurting so they cannot entertain a clear idea of their own destiny and resources.  Keep the natives bamboozled while you siphon out the goodies.

I will be honest. I am passionate about our National Radio and often my head hurts listening to it these days as I hear the predominant US based commentary on all aspects of our lives. It must be fiendishly difficult for listeners who do not know that most discussion of The Market omits the crucial economic fact that the economies of 5% of the world’s population (the US and the UK) would barely function if the global arms industry ceased to exist. Harvard - Boston academics of all sorts seem oblivious to the fact that the US accounts for and controls over 50% of the global arms trade sales and use. UK may be dependent on over 20% of the trade and use. They also fail to mention that many areas of the US find it advantageous to ignore their advice.

I really congratulate you on the valiant way you conducted a fiendishly difficult interview, Linda, and I hope my letter eases your hurting head. I just wanted to show my appreciation of your efforts.

Kia kaha – go strong

Dave McArthur

 Helpful reading

Empires of Light Edison, Tesla, Westinghouse and the Race to Electrify the World by Jill Jones

Power Play - The fight to control the world's electricity  by Sharon Beder

Converge New Zealand's Online Community Network 
E.g.

http://canterbury.cyberplace.org.nz/community/CAFCA/publications/Electricity/index.html

http://www.converge.org.nz/watchdog/08/06.htm

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