THE PRESS THURSDAY, SEPTEMBER 7, 1989. More power to consumers ...

Press, 7 September 1989, Page 12

THE PRESS THURSDAY, SEPTEMBER 7, 1989. More power to consumers ...

Many?mortths.,iarifl‘;;inillidns of : dollars have beeh’<spent’Xconsideririg: the future, of, the country’s . power,. supply industry. A, pattern has' yet - to ; be determnied and," worse, the decision"'to• corporatise the; New Zealand Electricity Department must now v be reckoned, at besttoo hasty and; at worst, a meniW'to' the interests of the electricity consuihfer.- - '-A ‘Amorigt he; driving forces of Rogernomics was the awareness that Ministers of the Crown were insufficiently able to. judge and control the activities — especially the highly technical decisions — of their departments. The Government also suspected; that the same might be true of the elected representatives who run the local electricity supplies. : A second driving force was.that the value of the N.Z.E.D. assets must be updated; that the returns on the historical costs of power stations, many of them long ago paid for by the consumers, should be increased by pricing the assets at current value. Electricorp;’-'the new creature to own the genefating system on behalf of the State, at least in the .meantime, would ask consumers to pay for the generating equipment again, not just to ensure that capital would be amassed for development, but to ensure that the - State — or some future proprietor of Electricorpshares — would get a dividend. Further, it would ensure that the Government would be able to tax Electricorp’s profits. The dividend, and the taxes, could have been higher had a lower price been fixed for the assets taken over from the N.Z.E.D. More than this, the price of electricity could have been lower. The problem was, of course, that a bargain price would have given Electricorp a big advantage over other producers of energy, who have to face current costs and fix their prices accordingly. All this is history, recent history, and it stands as a memorial to the Rogernomics years of the Government. The memorial could be inscribed with the words: “Efficiency through competition,” and “Good economy through the proper pricing of resources.” Below all this, someone would be likely to scrawl: “And the customer be damned.” In the meantime,' the State scored a handsome return from the sale.of N.Z.E.D. assets to Electricorp.

Already"the:propensity : ’ : produce large profits and increase its - charges in spite of staff redactions is plain enough. Since generating cqsts across the whole country account for about 50 per cent , of the final cost of electricity at the consumers’ meters, the performance, of Electricorp, and its pricing, .is overwhelmingly significant in the general retail prices of electricity. Transmission of the power to the local supply authorities accounts for about 20 per cent of the final charges. The rest — 30 per cent — is the local cost of establishing and maintaining the distribution system. The Electricity Supply Association, representing the retailers of electricity, the power boards and metropolitan councils’ electricity departments, appears to be much more sensitive than is the Government to the interests of consumers. The asspciation has not resisted change. It has long accepted that the amalgamation of authorities could improve their service and, possibly, their pricing. Some amalgamations// have been effected. The association has not opposed competition as a possible means to raise efficiency and to control prices, '« The association has, however, resisted change for the, sake of change, and change of any kind unless the benefits .are demonstrable ;; and reasonably certain. Consumers can be grateful that, albeit almost too late, someone on their behalf is fighting to stall changes based on broad policies and theories rather than on evidence that consumers will get as good or a better deal. Councillors on electricity committees or citizens serving as power board members are not responsible to shareholders who have put up capital and expect a dividend; some have even been scolded by the Government — as was the Christchurch City Council — for producing a profit that has been used for other than reinvestment in power supply. Paradoxically, the Government expects a much higher profit margin from its own electricity enterprise and none of the dividend will be reinvested in electricity. This paradox is a reminder that the consumers, not taxpayers, have financed the building of our power generation and transmission systems.