Green Party energy spokesperson Gareth Hughes checks out a wind turbine

Electricity transmission pricing proposal – put it in reverse

If you believe the tale some economists tell that we’re all rational individual profit maximisers navigating our way through the market of life you’d be very surprised to read a survey just out. A collection of chambers of commerce, electricity lines companies, Federated Farmers, and businesses have just released a survey showing 56% of Kiwis wouldn’t want to pay less for power if others had to pay more. It may leave the economists in conniptions but I’m not surprised because Kiwis are a caring, egalitarian people who know we’ve built our country by building everyone and every region up.

The survey was released in response to the Electricity Authority’s (EA) proposed changes to the way the national electricity grid is paid for. Basically the EA has picked an arbitrary date and said everyone who ‘benefitted’ from electricity supply improvements since then should pay more. The rub is consumers in places like Auckland and Northland will pay substantially more.

I absolutely agree with the Employers and Manufacturers Association who say:

“The proposals are divisive. They pit region against region, business against business and community against community. They will negatively impact around 2.5 million New Zealanders, largely from the central North Island to the Far North, Mid Canterbury, Waitaki, parts of Central Otago and Kapiti/Horowhenua.”

Meanwhile the Tiwai Point aluminium smelter is the big winner and can apply for further discounts at the expense of struggling consumers.

It’s bad economics, because markets are a good way to influence decisions and allocate resources but in this case the new price signals won’t and can’t change an iota of infrastructure investment because the actual investment has already happened years ago. No one can or would rip up the transmission lines in response to these price signals. As a Wellingtonian, I sympathise with the majority of the survey respondents and don’t begrudge Auckland or Northland having secure electricity supply, in fact I’m rather glad they do.

The proposed pricing changes have been years in the making and sadly quality hasn’t improved over time. It’s time to call time and go back to the drawing board. I believe in cost-reflective pricing for important infrastructure like this, but the way the EA has gone about it is all wrong.