Perhaps no-one can own the water, but it certainly has a high value

About a week ago I did an interview for Nine to Noon about the state of the National Government’s privatisation programme in which I stated the obvious; that it was in serious trouble.
One almost throwaway line generated two interesting responses and a possible solution to the impasse over water which is bedevilling the attempt to sell-off Mighty River Power.
During a discussion with host Kathryn Ryan about the ownership of water, I observed that although it could be posited that “no-one owns water”, it was clear that water, or at least the movement of water, had great value as a hydro-electric generation fuel.
I then gave the example of an experience I had while a director of Genesis Energy, one of the SOE power generators/retailers scheduled for privatisation.
Some background:
Genesis owns the Tongariro Power Scheme (TPS), a stupendous feat of engineering which, amongst other functions, diverts a large portion of the flow from the headwaters of the Whanganui River through the 240 megawatt Tokaanu Dam.
Via a complex series of collectors, aqueducts and canals the TPS also takes water from as many as 20 rivers around Mt Ruapehu and pipes it through the 120 megawatt (underground) Rangipo hydro, and on to Tokaanu.
This water debouches into Lake Taupo and travels down the Waikato River, helping to power the eight Mighty River Power dams on that river
The Whanganui iwi are understandably unhappy at this arrangement and contested the renewal of the resource consents around the diversions to the rivers flow.
I have considerable sympathy for these iwi. The TPS has severely damaged the Whanganui River with little or no compensation to the tribes who make the river banks their homes.
Beyond the mauri of the river (a concept too ‘spiritual’ for consideration by the owners of the scheme) there were negative practical consequences for freshwater fisheries, transport and communications and the growing tourist uses of the river.
I calculated at the time that the water diverted from the Whanganui headwaters and flowing through the Tokaanu dam was worth $30 million per annum to Genesis.
This did not include waters collected from other rivers and creeks over the large and complex scheme.
I said this on National Radio, and something similar on Q+A, mainly to demonstrate that water was indeed a valuable commodity for MRP, which generates predominantly from hydro-electric dams.
I added that this water then flowed down the Waikato River through MRP’s eight dams and by the time it got to the sea, would be possibly worth another $100 million to that company.
As a result of this, a transcript of the Nine to Noon interview was requested and began to circulate amongst those interested in the Maori Council case before the Waitangi Tribunal (I know this because someone tangentially connected with the case called me for elaboration).
Another consequence was that a senior Genesis Energy official called to remind me – in the most courteous and civilised fashion – that private Genesis board discussions were not for public consumption.
I reviewed ancient and musty notes and found that I had not in fact breached any confidence and that the $30 million per annum value of the Whanganui River water flowing through the Tokaanu dam was my own calculation based on publicly available records of water volume in cumecs taken from the river in the year I’d examined.
A much easier formula to compensate iwi and hapu affected by these enormous and damaging hydro schemes (rather than shares in the newly privatised energy companies or some convoluted governance structure) would be to strike a price for the rental of the resource utilised by the energy company.
This ought to be a simple calculation and the debate would then be around the level of the resource rental.
If my guess at the value of the diverted Whanganui River water is close and the resource rental is set at 10% of the generating value of that water, then the Whanganui River iwi could expect an annual income of $3 million from Genesis and $10 million from Mighty River Power.
This is a trifling sum for companies whose turnover hovers around the billion dollar mark.
This would vary year by year according to the draw-off rate (governed largely by rainfall in the main South Island hydro catchment), but would surely amount to a sum which went some way towards compensating the people whose sacrifice creates profit for the shareholders of Genesis and MRP.

Comments (4)

by william blake on September 06, 2012
william blake

I like your pragmatic thinking Mike, a tax on water usage in and out, for iwi, seems, on the face of it, to be quite manageable. I'm not sure that Maori would see it that way though, as you point out later in your piece that MRP turns over billions of dollars from the millions of cumecs so $10 -13 million may seem a little light.

This levy would along with the need to raise prices to pay hungry shareholders in the efficiently run, privatised power companies, can only serve to burden the consumers of electricity with bigger bills.

by Tobias Barkley on September 06, 2012
Tobias Barkley

I read today that the first recognised privatisation programme was in the 1930s run by a group of National Socialists.

http://www.lrb.co.uk/v34/n17/james-meek/how-we-happened-to-sell-off-our-...

 

by Rich on September 07, 2012
Rich

private Genesis board discussions were not for public consumption


How awful that the private details of a publicly owned organisation should be passed to the people that own the business.

by Richard Aston on September 07, 2012
Richard Aston

As you point out Mike its the movement of water that powers the power stations , no one owns gravity right? Ownership seems the wrong word is this case, its more a right to use the flow of water. Drawing on the water for comsumption - irrigation, drinking or manufacturing must be close to an ownership right, that water is not just "passing by" you consume some of it.Collecting what grows in the water, fishing, fish farming etc is another right again.

How do we come up with a water rights "map" to gives us a good handle on who has rights to what, what are the consequences of each right on others and what is it all worth. 

 

 

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