Govt fund for power trimmed

Press, 9 November 1984, Page 3

Govt fund for power trimmed

Wellington reporter

Measures in the Budget reduce Government funding requirements for coal and electricity by about $159 million by 1985-86. To do this it has been necessary to phase out and end by March 31, 1987, the South Island electricity concession to industrial users.

The general differential in electricity prices between the North island and South Island will increase to 10 per cent from April 1, 1985, reflecting the lower cost of supply in the South Island. It is planned to increase progressively the price of State-supplied electricity and coal to the full cost of supply. As a first step, from April 1, 1985, the bulk electricity tariff will increase 25 per cent — this is the price the Electricity Division charges the electrical supply authorities, and bulk comprises about 70 per cent of their costs. It has not been decided — because it is up to the authorities rather than the Government —

how much of the increase will be passed on to consumers.

On April 1, 1985, the prices charged by State Coal Mines for domestic and industrial coal in New Zealand will rise 35 per cent This will not affect export sales. State Coal Mines will discuss individual price increases direct with its main customers.

These decisons have been prompted by the financial situation of the Electricity Divison and State Coal Mines.

The Electricity Divison carries a total debt of $3OOO million on which it is paying an average interest rate of 9.5 per cent. It does not pay a dividend to the taxpayer and is not liable for income tax.

State Coal Mines has a total debt of $283 million on which it pays interest of 10 per cent or less, which is below the true cost of what it has borrowed. It expects to make a loss of $37 million this year, and has made a profit in only three of the last 20 years.