Government may soon decide electricity pricing policy

Press, 17 July 1979, Page 1

Government may soon decide electricity pricing policy

Energy reporter

A Government decision on electricity pricing in the South Island appears imminent.

National Party caucus members from the South Island met in Wellington last week to discuss power pricing amid strong pressure from local bodies and industry for further concessions.

According to one source, the issue is “as hot as it ever has been,” with pressure for concessions “across the board” to existing industry and even to domestic consumers. The Government now offers a 25 per cent concession to new industry or to expansions within “ existing industries that use electricity.

Local bodies and manufacturers have argued that the concession is not broad enough to act as an incentive to industrial growth in the South Island and that it should be expanded to include existing industrial consumption of electricity. National Party members of Parliament are known to be well aware of the manufacturers’ arguments. They may be ready to press the Government for further concessions, but they want to know if the South Island is aware of the full implications of reducing power charges. The argument is that, just as the South Island

subsidises the North Island’s low power charges, the North Island subsidises the cost of other services in the South Island. These services are said to include roading, petrol, telephones, and television: would South Islanders be willing to pay more for these if they were to get cheaper power? The manufacturers’ reply is that electricity concessions would be only temporary. “We have asked that any power concessions should apply only until such time as the South Island has an equal opportunity of getting natural gas,” said the director of the Canterbury Manufacturers’ Association (Mr I. D. Howell) last evening.

Mr Howell said he was aware of the caucus meeting last week at which members of Parliament had been under considerable pressure from South Island groups.

“They are certainly well aware of the problems of power,” he said. “There are two problems really: one is the peakloading, where, because of our weather, we have higher peak loads and consequently pay more for electricity. The other problem is one of local body politics.”

Mr Howell said that within the National Party there was a feeling among

North Island members that pricing was an issue that could be solved by local bodies, and not by the Government.

The issue has gone beyond South Island members. The Prime Minister (Mr Muldoon) is believed to have asked Treasury officials to look at differential pricing. It is unlikely that domestic consumers would receive much, if any concession from the Government, and even big existing industrial consumers are few in the South Island. But industries could be given help by way of depreciation on capital costs of furnaces and some contribution towards transport costs. Transport is still acknowledged as the

main problem facing South Island manufacturers. The lack of industrial growth throughout New Zealand is a worry to power authorities and planners. The economic recession has constricted industrial growth, lessening the demand for electricity. The result is a slower growth rate in power demand. Several years ago, power planners expected an annual growth rate of 7.5 per cent. In the last two years growth has amounted to between 2.5 per cent and 3.5 per cent, and this year so far has reached only 2 per cent.

The general manager of the Electricity Division of the Ministry of Energy (Mr P. W. Blakeley) said last evening that the concern

to power planners was whether this fall in growth was a permanent trend. Negative growth in population, price changes and conservation measures had all contributed to the fall in demand, Mr Blakeley said.

Mr Blakeley’s comments raise the question whether further concessions to the South Island will encourage industrial growth, and, therefore, better use of the hydro-electric resources which are in oversupply. FOOTNOTE: The annual report of the Electricity Division, the power requirements report and the power planning report are all with the Government Printer. They are due to be tabled in Parliament in August.