In Monday’s DomPost (not online) was this article by Lewis Evans about the Greens/Labour power scam. Basically it concludes that the only way that they can deliver lower power prices to consumers is to increase taxes on those same consumers.
In other words there is no possibility that power prices will be cheaper, and that they are basically running an electoral scam.
THE Greens/Labour proposal for an electricity single-buyer model with steep household electricity price discounts is economically flawed.
It requires a taxation increase that is similar to the reduction in electricity bills.
Electricity will be no cheaper to produce. It pre-empts the wise use of water within the electricity market as well as between electricity and other uses. It reduces the effectiveness of the ETS scheme in limiting emissions.
The proposal forces generators with existing hydro and geothermal plant to supply blocks of electricity at prices far below the cost of additional electricity production with new plant. Although the electricity market is reasonably competitive, long established firms are profitable. They have low capital costs, and are paid a price set by aggregate New Zealand demand equalling supply.
This is the real cost of electricity to the economy. When demand for electricity is increasing this price is equal to the cost of the next new generator. The electricity market is no different from any market where expansion requires increased establishment costs. In the case of forestry, there is no market power and established firms close to ports may be very profitable compared to plantations established later in the hinterland.
Some 78 per cent of electricity generated by hydro and geothermal plant is owned by the Crown. Adjusting this figure for taxation on private sector activity, a one dollar electricity discount to a household reduces government income by at least 85 cents.
For each household’s power bill reduced by $330 government revenue will fall by at least $280. Either household taxes need to rise by $280 or government expenditure be curtailed. Across all households this has substantial implications for taxation and government funded programmes. Read more »