Call for 40 per cent power price drop

Press, 24 September 1980, Page 7

Call for 40 per cent power price drop

Energy Reporter South Islanders are subsidising North Island electricity consumers by about $3l million a year, and should have their power charges reduced by 40 per cent, supply authorities have been told. At the same time, North Island bulk power charges should be increased 10 pet ■cent, according to Mr J. D. Thompson, the management sendees officer with the Dunedin City Council’s electricity department.

.The effect of these reductions on retail charges would be to reduce South Island tariffs 24 per cent, leaving .North Islanders to pay 9 per cent more on their power bills. In a paper delivered to the Electric Supply Authority' Engineers' Institute in Christchurch, Mr Thompson said, that the Size of the South Island .“subsidy meant that 'the 25 per cent concession to South Island .industry was no con- ■ cession at all.

North Islanders gained over all by about $73 million a year from the fact .that they received , power at a price well below what it would cost to generate in the North Island.

.. Mr Thompson based his figures on a • comparison of the costs of producing electricity in each island.

■■ According to his calculations, the South Island electricity at a cost 40 per cent lower than the cost of power generation in the North Island.

However, bulk power tariffs charged by the Government were based on an average cost, putting the South Island at a disadvantage.

“As a result of this averaging of costs, the South Island, consumers are subsidising consumers in the .North: Island to the extent of $3l million annually,” said Mr Thompson. North Islanders also benefited from power .transferred across Cook Strait at $42 million a year less than it would cost to generate the same power in the North Island, “The South Island has a natural resource which is i being used to produce chtap. power and it is reai sonable that the North Island should benefit from ! .the South Island power transferred north,” said Mr Thompson.

“But it is not reasonable that the higher North Island cost should be averaged over the whole of New Zealand as is the case at present. “Any proposal that does no more than give South Island consumers the benefit of this sum could not be termed a concession.”

The 25 per cent industrial concession was based on a regional development policy, and not on a pricing policy. It cost about $l4 million a year, which was little compensation to South Islanders, he said. The subsidy should continue if the Government was serious about encouraging industry to the South Island — even if power charges were changed to reflect the different.costs of generation. In ahswer to a question, Mr Thompson said that Sweden applied differ*

ential tariffs on a regional base, but the difference in production costs was only 10 per cent. Mr Thompson’s arguments were applauded by many engineers, who are holding their annual meeting before the Electrical Supply Authority Association meets today. The Minister of Energy (Mr Birch) is expected to announce increases in power charges, effective from next April, when he addresses the meeting.

However, some engineers took issue with Mr Thompson, arguing that he ignored the fact that other commodities,, such as petrol. were priced nationally, rather than regionally. Mr P. B. Priest, of the New Plymouth City Council, said that Mr Thompson’s argument could be used to Justify a different bulk tariff in the 61 power supply authorities.