The shifts in the political landscape with the anointment of David Cunliffe have sparked a flurry of ‘what if Labour and Greens get in?’ policy speculation recently, and unsurprisingly the electricity sector has been spotlight.

Since it was first mooted earlier this year, the electricity industry and business sector have been at pains to call for a thorough economic analysis before policymakers dismantle the free market system currently used and move to a single buyer model.

Economist and consultant Ben Gerritsen took a stab at it, and this week unveiled the results at a public lecture hosted by Victoria University of Wellington.

The issues, as he sees it, are twofold. Firstly, why have retail power prices continued to climb since 1997 while costs for commercial and industrial users have remained flat (and lower than retail customers)? Secondly, will the Labour/Greens policy fix the divergence?

Gerritsen’s own words frame it better: ‘Is it mad or is it mainstream?’

To answer both, Gerritsen looked at the international examples listed by the opposition of where single buyer models are successfully working, which included at least 14 jurisdictions.

He found that only Brazil and the Canadian province of Ontario bore any similarity to the NZ Power proposal, and even then the comparison was awkward.

Secondly, Gerritsen examined whether a bureaucratic entity would be able to make better investment decisions and lower the costs of existing operating assets than the market, and after a somewhat complicated historical analysis decided that it couldn’t.

The only scope left in the system to reduce retail electricity prices was out of company profits, be they excessive (as the Greens and Labour claim) or out of normalised profits.

Gerritsen’s analysis of the ASX Electricity Futures Market, and the consistency of returns with the cost of capital across both private and state owned power companies, shows there are no super profits in the sector.

That means the opposition wants to take reasonable private profits and redistribute them to the public. It may sound desirable to some from a Robin Hood perspective, but given a comparable situation in Brazil, private firms there spat the dummy and walked – a situation we don’t want to replicate in New Zealand.

Ultimately, Gerritsen concluded the problem isn’t with the generation side of the business, and to introduce a policy that seeks to redress the perceived market imbalances there is clearly madness, even if it is well-meaning.