Gareth Hughes

Do you feel power prices are too low?

by Gareth Hughes

Data I tabled in parliament this week shows that power prices have risen 22% since National came to power, yet incredibly the Electricity Authority (EA) have published a report arguing prices have been too low. The EA argue the rampant electricity price rises “since 1985 reflect efforts to gradually lift prices to the levels needed to cover the full costs of supplying electricity.” It’s a fantasy report that would give struggling Kiwis cold comfort.

Geoff Bertram has a brilliant demolition of this fallacy in The Herald:

The central argument the Electricity Authority is making is that if the electricity market had been organised for the past century the way it is organised and run today, with no regulation, then consumers would always have been forced to pay higher prices for their power. It has rewritten the history of the electricity industry since 1907 on the assumption that a 10.1 per cent return on all capital ought to have been charged, and that because this was not done, consumers were supplied “below cost”.

This completely misses the point. Generations of New Zealanders funded the construction of the system on a pay-as-you-go basis and enjoyed lower electricity prices than a commercial industry would have offered, without running up any unsustainable debts. There was no need for higher prices to cover a “return on capital” because that was not how the industry was run in those days.

Past Governments saw no need to make a profit on their electricity expenditure because the big payoffs came not in the form of profits collected but in the form of higher living standards and faster economic development for the mass of New Zealanders, whose interests the Government represented.

 

The EA’s report is a strange, very ideological way to look at history and a ’political shot across the bows’ of the Green & Labour NZ Power plan. They argue that hydroelectricity was costly to construct and shouldn’t have been built to the degree it was in an ‘efficient’ market. The reality is, it was built, we have it now and with very low running costs it is earning super profits for electricity companies. You wonder if in a pique of neoliberal purity some in the EA consider demolishing the dams and starting again because they aren’t the most ‘efficient’ option over the last 100+ years under current models.

I asked Energy Minister Simon Bridges in Parliament this week if he agreed with the Electricity Authority that households have been paying too little for power in the past and how has this issue been corrected under the current Government. It’s a serious issue, with around a quarter of households in energy poverty.  Last year alone 42,600 Kiwi families had their power disconnected and were left in the cold and dark because they couldn’t afford to pay their rising power bills.

Our power system has evolved over the years, and previous generations of New Zealanders decided the dams were the best option at the time. While the EA report seems mired in their fantasy neoliberal status-quo, NZ Power would continue NZ’s electricity system’s evolution.

Instead of focusing on earning super profits it would focus on reducing prices for households, and getting as close to 100% renewables as we can. Rising power prices under National or cheaper, cleaner power with the Greens – I know which future I prefer.

Published in Economy, Work, & Welfare | Environment & Resource Management by Gareth Hughes on Fri, January 31st, 2014   

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