Subsidies On Gas

Press, Volume XCVIII, Issue 28963, 3 August 1959, Page 10

Subsidies On Gas

The amended subsidies to gas undertakings throughout New Zealand, which will come into force on October 1, may be regarded as the first steps in the plans for the gas industry, promised by the Government last year. The Labour- Party was most unsympathetic to the gas industry during the term of the first Labour Government; and it is not unduly cynical to attribute its changed attitude, in great part, to its belated discovery that gas is fast becoming the main hope for the rescue of the declining bituminous coal industry. The gas industry, of course, is very much more than a support for the coal industry. It is a vitally important unit in the system for supplying the nation’s energy; and earlier realisation of this would have made it possible to avoid many power shortages. Moreover, for many purposes, gas is a more economical source of energy than electricity. Unlike electricity it has no critical peak load problem, and it can be stored.

Last year, there were several signs that the gas industry had won its way to the Government’s favour, one being the commissioning of an Australian expert, Dr. A. E. Bruggemann, to report on New Zealand’s gas industry, and another the passing of the Gas Industry Act. This act set up a Gas Council with a number of administrative and advisory functions, the main administrative function being to distribute money from a gas industry account (to be filled from the Consolidated Fund) for subsidies, loans, and grants to owners of gas undertakings.

When the Minister of Electricity (Mr Watt), who is chairman of the Gas Council, spoke on the formation of the council last October, he said that one of the first aims would be to stabilise the price of coal for a given period. This object is behind the plan announced last week to level out the freight cost of coal among the gas works of the country. The Gas Council found that the average freight rate for gas undertakings varied by more than £2 a ton in the North Island and by £ 1 10s in the South Island. These costs exclude local handling charges. Subsidies will range from 2s 6d a ton to 37s 6d a ton of coal purchased. This form of sudsidy is less objectionable than most because it does not reward inefficiency. Funds for this coal-freight subsidy are to be taken from the consumer subsidy of 2s a thousand cubic feet of gas sold, which will be reduced to Is 8d from October 1, except in Greymouth, Hokitika, and Westport. It is apparently thought unfair to ask these, home towns of bituminous coal, to share in paying for a freight subsidy on their product.

Evidence that the Gas Council is working is welcome. Last October Mr Watt forecast rapid and far-reaching developments when he said that one of the first aims of the council would be “to establish the industry “ financially so that the fixed “ consumer subsidy on gas “(about £500,000 a year) could “be reduced 1 next year and “ dropped entirely in 1960 ”. The public will wait with interest to see the council develop its lines of attack on its main and worth-while task.