Energy Minister Simon Bridges is promising not to interfere with the Electricity Authority’s new proposals on transmission pricing.
The proposals, which would apply from April 2019, call for an end to transmission charges being averaged across the country and instead propose that they should lay where they fall.
The upshot of that is political dynamite.
The biggest increases would be in Northland, Auckland and Ashburton.
Northland is held by Winston Peters and National would love to end that while Auckland is a must-win if the party wishes to retain Government.
But the Authority’s modelling shows that power prices for Top Energy in the north could rise by 4.4%; Northpower, 4% and Auckland’s Vector by 3.9%
Meanwhile, prices for Wellington and Christchurch consumers would fall by 2.1%.
But Mr Bridges is adamant that those recommendations are the Authority;’s and it is not for the Government to interfere.
He said the Government had established the independent Authority to explicitly take the politics out of electricity.
“We couldn’t stop the Authority even if we wanted to short of some sort of legislative change,” he told POLITIK.
“What the Authority is seeking to do is ensure that one region isn’t picking up the tab for another and that’s fair.
“And by ensuring that subsidies are not going from one area to another, they encourage much more efficient decisions about investment in big transmission projects.”
Which is all very well but the Auckland Chamber of Commerce argued that
the current approach of charging a flat-rate across the country for the shared national grid “appears to work well”.
Mr Bridges concedes that he has a political challenge because of the proposals.
“In terms of selling it, it is true no one ever wants to be on the wrong end of a winners and losers debate,” he said.
“But I wouldn’t overestimate the volume of debate from the likes of those players — yes, they’ll have a view but I think in terms of the many things the Government is doing in Auckland this would be nowhere near the top of their list.
That leaves Mr Peters.
And he claimed yesterday that crony capitalism was embedded within the Electricity Authority’s Transpower Pricing Methodology.”
This is a reference to what will be a reduction in price to New Zealand Aluminium Smelter’s plant at Tiwai Point because it has been built much closer to its generator (Manapouri).
“It is all there in black and white that when a large electricity user cries hardship to the Prime Minister, Transpower or the Electricity Authority, they’ll get price relief paid for by struggling households, small businesses and farmers.
“Why should consumers in Northland and elsewhere be frog marched into massively higher prices so that Transpower can gold-plate its infrastructure while this government feathers its nest from the huge profits Transpower generates?
“Our view is that government should use Transpower’s huge profits to smooth pricing across the country.
“These proposals provide no incentive for new generation technologies but a lot of disincentives to protect Transpower’s legacy infrastructure.”
Mr Bridges seems willing to take this on the chin.
“Of course, New Zealand First will jump around,” he said.
By it’s very definition this process does create winners and losers.”
Mr Bridges said that the proposals were a much more moderate and realistic from the Authority than those they originally proposed.
“There’s a free lunch in this for Winston inasmuch as many parts of regional New Zealand will benefit quite significantly.
“What it means for households outside of Ashburton is that none will pay more than $50 — I don’t dismiss that — but it is equally true that any consumer can switch their provider and save many multiples of that off their power bill.”
Mr Bridges accepts that the pricing proposals could well feature in the run-up to next year’s election.
So is he tempted to get the Authority to delay the implementation date?
“I’ll leave that up to the authority,” he said.
It’s not often Ministers in the Key Government are prepared to let an independent authority implement a more market solution to an economic problem.
And with memories of Max Bradford’s electricity reforms of the 1990s still haunting National, the fact that Mr Bridges is prepared to do this will go down well with many of National’s core supporters and party members who worry that Ministers like Steven Joyce stray too far from the market from time to time.