Energy pricing plea

Press, 12 June 1987, Page 3

Energy pricing plea

PA Wellington The Government must be prepared to challenge energy pricing to protect consumers from exploitation, said a quango set up to advise on energy, yesterday. Releasing a report on the role-of the Government in the energy sector, the chairman of the Energy and Mineral Ad-

visory Committee, Mr Brian Tolley, said the Government should also keep a single State agency to handle long-term en-

ergy planning. Energy was too important a resource to be left entirely to the vagaries of the marketplace. The allocation of resources such as geothermal energy and water rights was an ex-

ample, Mr Tolley said. “It has to be the responsibility of Government through some mechanism to allocate that re-

source.” Mr Tolley said that when it came to. pricing there was a collision course between economic theory and reality. , The Treasury had promoted the philosophy of long-run marginal costing as the basis for Electricorp to calculate an electricity tariff. This was not used as the basis for day-to-day selling of electricity anywhere else in the world, he said. "Long-run marginal costing is supposedly there for planning, but also to create competition. It won’t create competition because in the case of electricity it’s a natural monopoly and is impossible to be challenged. "It is too strong. It is the biggest corporation in New Zealand. Therefore how can anybne choose to .challenge it? They would lose their shirt in the process,” Mr Tolley said.

“You are therefore on a collision course between economic theory and practical reality.” ■