The politics of power charges - how to provoke Winston
By Richard Harman (author)
The Government is going to be frustrated with the Electricity Authority’s proposal yesterday that one of the few areas in New Zealand where prices will go up under its new pricing proposals for Transpower, which were announced yesterday will be Northland.
NZ First Leader, Winston Peters, is currently in the United Kingdom.
This comes at a time when National is trying to find a candidate to stand against him and is talking of selecting a woman.
And the proposal is sure to incite him to once again portray the Government as hostile to his electorate.
But not surprisingly NZ First have been firing off press statements complaining about the proposals.
“The government needs to decide if it wants to help Northland and the West Coast, or sabotage them,” said Energy spokesman, Fletcher Tabuteau.
“If the authority is serious about smoothing transmission line costs, then the answer is obvious, and that’s to use the $194m plus in profits generated by Transpower itself.
“It is totally wrong to expect Northland and the West Coast to bear the burden of poor infrastructure decisions.”
Then Mr Tabuteau noted that Ashburton’s consumers Ashburton’s 18,709 electricity consumers would face the largest average price increases in New Zealand at almost $449 a connection under the proposals.
“It’s a nasty shock for dairy and arable farmers given larger power users will pay more than smaller ones,” he said.
“Dairy farmers will be looking at their budgets again as they face a third season of losses, with the dairy payout still down.
“Where is the supportive government when an unelected body, such as the authority, which purports to be acting to benefit the consumer, proposes such harsh increases?
The Authority explains this by saying that the Ashburton district has low offtake in energy terms, but high peak demand caused by the massive use of irrigation pumps during the summer. Ironically current charging systems base charges on winter peaks which means Ashburton’s are low but its peak use is during the summer which is not included in the charging calculations.
In another piece of reasoning which is also likely to be controversial, the Authority compares the cost of supplying the New Zealand Aluminium Smelter's plant at Tiwai Point with the cost of getting electricity to Auckland and of upgrading the distribution system there to try and prevent black outs.
“NZAS was located in its current position to allow for port access and to minimise the need for transmission,” says the Authority.
“With a high load factor, NZAS is an ideal transmission customer as the transmission assets are continuously utilised.
“Auckland, by comparison, grew organically because of the natural advantages the location has for residential living.
“These advantages did not include nearby economic energy resources.
“As a result, considerable expense has been, and continues to be, applied to transporting electricity to Auckland.
“With a large residential base, Auckland demand is 'peaky' and the transmission capacity built to supply Auckland is only fully utilised for small proportions of a year.
“Because of these characteristics, the economic cost of providing transmission services for NZAS is considerably lower than the economic cost of transmission to Auckland".
The Authority has also challenged the current practice of charging a flat rate across the country for the shared national grid which it argues benefits Auckland at the expense of other regions.
As an example, it says current pricing hinders low growth regions by requiring them to effectively fund fast growing regions.
“For example, transmission charges have increased significantly over the last five years for transmission customers to fund growth in the Auckland region.”
And it also says that if Aucklanders want their transmission wires underground then they should pay for them.
“Recently consumers in parts of Auckland have been petitioning for the undergrounding of all urban transmission lines,” it says.
“ This is despite undergrounding often being 7 to 10 times more expensive than overhead lines.
“ With the current interconnection charge spreading this cost over New Zealand, there is little incentive for those advocating for the investment to factor in its cost. “
And that is the essence of the thinking in the proposals that costs should be paid where they fall rather than having flat charges across the country.
Under the proposals starting in 2019, there would be electricity price increases in Otago, Waitaki, Ashburton, Buller, Westland, Eastern Bay of Plenty, Counties, Auckland, Far North and Northland districts.
The Authority says the overall increase would average out at $50 a year --- but in Ashburton, it would be $117 for residential consumers.
Everybody else would get price drops --- the biggest in Southland, Invercargill, Dunedin, Central Otago and the North Island's East Coast.
But the political problem with is that the regions which have benefited most from the current flat charges are Auckland and Northland --- two of the Government's biggest political headaches as it heads towards the 2017 election.