Yesterday’s initial report on the cost of electricity pricing is but the first step in a process that will not see any government response until next May, after the Electricity Price Review’s final report has been presented. However, yesterday’s document available here has usefully shown the extent to which the cost of electricity has been shifted off business and onto consumers, regardless of the social costs that this transfer has inflicted on vulnerable households.
Moreover, the scale of the transfers/price rises involved has dwarfed the relative pittances that can be obtained by consumers shopping around between suppliers for bargains – like rats in a maze searching frantically for crumbs of cheese – while the overall cost of power inexorably rises. No doubt for those willing and able to devote the time and expertise to this hunt for electricity price savDua Lipaings, the process of constantly shuttling between suppliers can deliver some savings. Yet in the bigger scheme of things, this amounts to only a figleaf of competition – given the relatively puny savings that accrue for the effort expended, and given the larger forces that are pushing prices ever upwards.
Supposedly, the levels of profit taking we’ve seen over the past couple of decades have been required to enable re-investment in the grid, but these technological advances – oddly enough – never seem to result in productivity gains and subsequent cost reductions for consumers. The bit on the power bill that reflects the fixed cost of getting the power to the door never seems to go down, despite the cost savings you’d expect from the application of technology to a sector likely to benefit from it. Instead, as yesterday’s report indicates, every advance being made elsewhere – and the expected take-up of electric cars is the latest example coming down the pike – gets treated as yet another rationale for jacking up the prices.
The scale at which costs have been transferred onto residential users – and removed from business users –has been shameful. As Consumer NZ has pointed out, residential prices for electricity have risen by 79% since 1990, while commercial prices have dropped by 24% over the same period. Similarly, as RNZ has reported, the lines charges – ie, the cost of getting the power to the door – have risen since 1990 for households by 550% and dropped for business firms by 60%. This shift has had serious social consequences. Reportedly, some 100,000 New Zealand households now suffer significant levels of “energy hardship” and devote 10% or more of their income to paying their power bills. As a result, the rate of disconnections has gone up from 19,106 in 2015, to 25,317 people last year. Evidently, a growing number of New Zealanders are unable to pay the cost of cooking their food, heating their homes, and keeping the lights on.
If anything, worse is yet to come. Yesterday’s report (at pages 49-52) nervously skated over the vexed issue of the changes being mooted by the Electricity Authority to transmission pricing (TPM) – a process that has been simmering away for several years. Essentially, this is the cost of getting the power from its source to the distributors.
The delay in arriving at a final formula for TPM reflects what a political hot potato it has become. TPM, in its most recent iteration, has some winners but significant losers. It would deliver major savings (as much as $56.3 million annually) for enterprises like the Bluff aluminium smelter while increasing the cost of electricity for several low income parts of the country – including Northland and the West Coast – and also to Auckland as well, all of which has obvious political ramifications. Generally speaking, South Island consumers would gain from the mooted changes and North Island consumers would end up paying more. The Electricity Authority has no statutory obligation to consider the social impact of what it will end up proposing.
Clearly it was not up to yesterday’s Electricity Price Review to make any substantive call on the final form that the TPM process should take. Ominously though, the Review ends up by endorsing the ‘user pays’ principle – which is why those isolated, low income regions were initially being expected by the Electricity Authority to bear more of the costs of transmission, regardless of their ability to pay.
As things stand, New Zealand seems to have the worst of both worlds – it is on track to impose further “user pays” costs for an essential service (electricity) on households that cannot afford to pay for it, while carefully NOT applying a “polluter pays” principle on the farming sector over discretionary practices for which it could afford to pay the cost of clean-up. Come next May, the Ardern government – and Energy Minister Megan Woods – will have some difficult calls to make, either way they choose to go.
Power, People etc.
An obvious link, but here’s Eugene Record and the Chi-Lites with one of their 1970s hits that traded in their usual silky harmonies for a bit of agitprop pop. For God’s sake, we’ve got to give more power to the people, people:
And from this week, here’s the latest single featuring Dua Lipa (with blonde hair this time) on a track called “Electricity” co-produced by Diplo and Mark Ronson…As you may recall, Ronson and Bruno Mars got sued for copyright infringement over the resemblance between their mega-hit “Uptown Funk” and an early 1980s track by the group Collage. It may just be me, but this cut “Electricity” has a segment that sounds identical to Haim’s recent track “Want You Back.” Check it out. Here’s “Electricity”:
And here’s Haim’s hit “Want You Back.” The similarity occurs in the section where the Haim sisters sing about “ give you all the lovin’ I never gave before…” People have sued successfully (eg the Marvin Gaye estate over “Blurred Lines”) for less.