Coal, power price rises suggested

Press, 22 September 1984, Page 8

Coal, power price rises suggested

PA Wellington Coal prices as well as electricity tariffs are under scrutiny in the review of the Ministry of Energy’s Trading Division. Besides studies urging a 50 per cent rise in power prices, others made of the Ministry’s Mines Division suggest coal price rises of from 60 per cent to 80 per cent.

The Mines Division has made a profit only once or twice in the last two decades and is insolvent, according to the Secretary for Energy, Mr Jack Chesterman.

“If the coal price is not increased, the division simply becomes much more insolvent than now,” he said.

However, price rises for coal and power, if approved by the Caoinet, are likely to be phased in over several years and not imposed in one lump. The suggestions of increases come from studies

which recommend that the Ministry’s Electricity Division and Mines Division be put on a fully commercial footing.

The Mines Division’s continuing losses have been caused mainly by the high cost of winning coal from new mines in the Huntly district, where output has not been high enough to cover costs.

Over the next few years, more mines will be developed, Increasing the planned Waikato coal production fourfold, mainly for steel and power production. Mr Chesterman said the Ministry was still looking at a figure at which a coal price would cover costs averaged over the life of a mine. It appeared, however, that a rise in real terms from the present $37.50 a tonne to near $46 would be needed.

If prices rose too fast, coal would lose its competitive edge over gas - something the Ministry hoped to avoid.