Call for end to power monopoly

Press, 4 September 1989, Page 2

Call for end to power monopoly

By

PETER LUKE

in Wellington

Electricity suppliers have called for an end to Electricorp’s dominance of electricity generation, and its monopoly of transmission.

In a policy document, the Electricity Supply Association says that generation should be broken up into competing entities. Ownership of electricity transmission should be removed from Electricorp and vested in a “club” in which supplier interests would dominate, says the document. But the association also believes that consumer interests would benefit from suppliers being corporatised.

“New Zealanders have always influenced the supply sector by electing power board members and by accepting a contingent liability for supply authorities’ debts as ratepayers. It’s time that the people who pay also have a say in the way electricity is generated and transmitted,” said the E.S.A. executive director, Mr Barrie Leay. The document proposes that competition be introduced to the generation, transmission and supply sectors to reduce prices, and that the costs of each sector be transparent.

Overseas consultants had said that generating costs were 25 per cent too high, said Mr Leay. “Our proposals will enable a substantial reduction in the basic cost of energy. Lower prices will assist in the gradual reduction of cross-sub-sidies,” he said.

The document acknowledges that the removal of cross-subsidies would impact on rural customers. “An industry-adminis-tered levy should be established to provide funds to enable a scheme for some reduction to the distribution charges for the more remote rural customers to be provided,” the document argues.

Local efforts to reduce distribution costs should be encouraged, to help offset the rise in the distribution Component of power prices.

"For the more remote customers, this component may be several times the charge which applies in urban areas,” says the document. The E.S.A. believes that the national grid — the transmission network —

should be owned by a “club” dominated by suppliers, who have a greater incentive than Electricorp to see the grid perform efficiently. But there should also be a degree of public ownership, together- with a “golden share” held by the Government to give a power of veto in the national interest An alternative would be to vest ownership in a club where no single owner group was dominant but a key weakness would be the lack of a single control focus and a diffusion of interests and incentives.

The document said that suppliers had the most to lose if the national grid did not perform efficiently. “Their interest as suppliers is in seeing the lowest possible prices come out of the grid, but as substantial investors in the grid they would also want to see a reasonable return on their investment.”

The E.S.A. opposes the privitisation of Electricorp, but says there is a strong case for breaking up the ownership of generation and injecting an element of competition, into the sector which accounts for 50 per cent of electricity cost. The document says that supply industry entry into generation would help reduce costs, but entry by a dominant generator into the supply area ought not be permitted on competition grounds, as it would create opportunities for cross-subsidisation from generation to supply.