21 April 2013
 
Labour’s power play
 
Federated Farmers is concerned politics may be behind the Labour/Green policy on electricity and that its implications have not been fully considered. 
 
“Last week, Parliament displayed some of its best qualities but it seems regular service has resumed,” says Anders Crofoot, Federated Farmers Energy spokesperson. 
 
“Whatever the motivation, there is suspicion this policy may be a tactical response to the Government’s asset sales programme.  Cynics may say that at the last election it was milk but at the next it will be the power bill. 
 
“Federated Farmers feels uneasy about this because electricity is a major farm expense.  The Ministry for Primary Industries estimates the annual electricity spend by arable and dairy farmers is both around $25,000 each year, for sheep and beef farmers, it is around $6,000.
 
“Excluding the Emissions Trading Scheme (ETS), StatisticsNZ data seems to indicate that the rate of power price increases has slowed in recent years.  Certainly, they have been eclipsed by run-away price increases in the less productive non-tradable sector, with near triple digit council rate increases since 1998.
 
“But to us, the idea of a Pharmac styled single power purchaser does not add up. 
 
“Pharmac purchases medical products from the global market whereas the proposed buying agency is limited to local power generators.  Unlike with pharmaceuticals, there is no such thing as ‘generics’ when it comes to electricity.  Nor can we do what happens overseas and ‘import’ power from other countries.
 
“The fact for low volume electricity users is this; the line charge now makes up a significant percentage of the final bill and there are no alternatives being proposed for that.
 
“If this policy eventuates power prices may go down on one hand, but due to current Labour/Green policies on the ETS, the other hand takes it back and more.  We believe households and businesses would be worse off under a “robbing Peter to pay Paul” policy mix.
 
“Controlled pricing does not produce innovation or encourage private electricity schemes either.  There is also the high risk of stopping new operational innovations; any innovation which could increase profit margins is likely to be grabbed off companies by the buying agency.
 
“You also risk perverse outcomes like cheaper to build and run thermal stations passing on their large ETS costs to consumers and businesses.  Even if the electricity was somehow cheaper, with lines and ETS charges added on, would the consumer come out ahead?” Mr Crofoot concluded by asking.
 
ENDS

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