Should Aucklanders Pay More for South Island Power?

by Gavin

I see recently there has been debate around why South Islanders living close to power generators shouldn’t pay the same lines prices for power as say those in Auckland. On first reading this sounds logical. But, there is a catch. By socialising the cost of transmission equally across the country we have a level of fairness that in other areas of society is accepted without complaint. For example, the huge costs of the Christchurch earthquake have been in part born by all New Zealanders and rightly so. No one has complained about that.

Let’s take it to another level. If we are to have user pays where does it end? Why should people who have worked hard and only had the kids they can afford subsidise the life choices of those on lower incomes who have more kids than they can afford? People who end up being subsidised by the state through various mechanisms are being paid for by those who make different choices. I can hear the social outrage from here. But it is the same argument as being applied to electricity transmission costs.

It seems to me that as a society we have accepted that those of us who earn enough to pay taxes and raise families are reasonably ok with supporting those less fortunate as part of a caring society. As much as there is and should be more debated about unreasonable life choices made by some people and a sense of entitleitis.

On another level what are all the other cross subsidies that occur across the country for example, in roading, bridges the Super Gold Card etc. We all remember the bridges promised to Northland for the failed bi-election. Would the funding for these have been proportional to the level of goods, services and taxation coming out of Northland? I would suspect that if a cost benefit analysis of economic activity, earning and taxes versus benefits and other social services paid by the state was done Northland may well be a drain on the national economy.

The same argument would apply to Southland when the aluminium smelter finally closes its doors for the last time as I suspect the rest of the country would chip in to help keep the local economy afloat as it should.

From a different perspective on the same ethos Andrew Little wants to socialise the cost of education so the offspring of wealthy people can be subsidised by working trades people. I think the law of unintended consequences may well come into play.

Today’s discussion in the MSM and elsewhere around whether the 4 wheel drive people rescued from the snow should pay for their rescue. Some argue it was stupid to go there with a storm on its way. But who hasn’t done stupid things? Especially, with the benefit of hindsight, which I think is called learning. I suspect they won’t make that mistake again, and fortunately they have lived to learn the lessons. This contrasts starkly with the latest person still being subsidised by the state to have 8 children and accommodation paid for, whilst still complaining about not being looked after.

To me I think the debate should be around what services etc, should have their costs socialised and what costs should be user pays. What levels of accountability do we expect? Where do we want to go as a society?


THANK YOU for being a subscriber. Because of you Whaleoil is going from strength to strength. It is a little known fact that Whaleoil subscribers are better in bed, good looking and highly intelligent. Sometimes all at once! Please Click Here Now to subscribe to an ad-free Whaleoil.

  • RightofSingapore

    Well, during the failed Clark administration, on 2 occasions petrol taxes went up 5 cents each time to pay for Auckland roading projects. The rest of the country had to pay more for petrol to pay for Auckland’s roads. Generally the further you are away from the source of something, the more you have to pay to get it to your door, eg shipping from America will cost more than shipping form Australia. Auckland is further from the source of its power than the South Island which has had to pay for the cable for years. Its about time Auckland paid more and things were made fairer.

    Of course there’s a wider issue of how high power prices are to start with for everyone…

    • shykiwibloke

      I think that tax rise and the way it was presented was very disingenuous. Designed to get us all fighting amongst ourselves rather than focus on a government raising more tax. For the record – if all petrol tax collected in Auckland stayed in Auckland there would be a lot of dirt roads in less populated areas.

  • shykiwibloke

    There is more to this story than meets the eye. I understand the is often power flowing SOUTH due to the more intensive a dairy farming use of power particularly in Southland. So would mainlanders be happy paying more for power during those periods?

    • Wolfman Jack

      Interesting. I thought the National grid connection between the islands was designed for the North to utilise the South’s generation capability

      • shykiwibloke

        Originally, yes that is true, and in the last twelve months the majority of the flow is northward, but not all. Here is a blurb from the grids operational website.
        The grid includes the inter-island direct current link ( the HVDC link, also known as the Cook Strait cable), which can transport power either north or south. There are a number of factors affecting the direction of flows, but the dominant one is the level of South Island hydro storage. When South Island storage levels are high, flows across the link are typically northward, and when South Island storage is low, flows are typically southward.

    • Dave

      Not really. Farming is not a power intensive industry, a few pumps and motors running for a few hours morning and night, and some lights is about all. The hot water cylinder churning away, and the tank refrigeration unit are not high consumers. It’s industry that consumes the most, places like Tiwai point near bluff can consume up to 640 MW and Glenbrook steel in Auckland which can consume up to 116 MW are large and constant loads. With the national load, the generation companies can switch in and out a few plants in either the north or south to effectively reverse the flow.

      There is more overall generation capacity in the north island, than the south, and Manapouri is almost devoted to supply Tiwai point.

      See the articles on Wiki for detail, and yes, power can now flow either way.

  • HunuaRanger

    Proportionately speaking due to the number of houses in Auckland that are paying line charges compared to say Invercargill, Auckland is currently(no pun intended) subsidizing Invercargill’s line charges (and for that matter any other small city around New Zealand). As Gavin stated the same could be said for the cost Roading, etc.

  • Wolfman Jack

    User pays is the way to change behaviours, encourage innovation, and is fundamentally fair

    • Richard McGrath

      Couldn’t agree more, Wolfman. Everything should be user pays – roads, bridges, the lot.

  • Tim Brown

    You’re missing the fundamental point that line charges are the transport cost for electricity. By evening out the cost across the country you remove any incentive to put generation near consumption. It is that logic that wanted to put wind farms in Otago to supply electricity to Auckland, when the true cost of “transporting” the electricity is included this doesn’t make sense. What we NEED to do soon is put in at least two nuclear power plants near to Auckland. That way we might be able to generate enough energy in the right place to supply the growth in demand as we migrate off fossil fuels.

    Putting increased supply in the South Island is a stupid idea since when the aluminium smelter closes down there will be far to much supply down there and (I suspect) not enough infrastructure to supply it to Auckland.

    • Dave

      The Norh island already has more generation capacity than the south island, then scratch out Manapouri as its total generation capacity is consumed at Tiwai point smelter.

  • Anthony

    Generators should pay to get their power to a consumer.

    • Dave

      I differ, the electricity is sold at the generation gate, it is up to a retailer to pay a transmission company to get the power to their own distribution network. Thus in reality, there are two sets of lines to pay for, the national transmission lines, and the local networks. Either way, the consumers will pay.

  • Asian_driver

    south island does not share in the bounty of taranakis natural gas, seems fair to charge a bit more for their power how many kW’s does it take to deliver a kW to Auckland from the SI lakes?

  • MarcWills

    A small but important point – Christchurch power consumers are already paying more for their electricity network. This is to pay for the costs of repairing and ‘shock’ proofing the structure for the future. So it’s not strictly true to say the rest of the country are subsidising our recovery on their own. There are local policies in place to pay as we go.

  • Simon

    Without a pricing mechanism for things you get the death of free markets and instead you get distortions in those markets – that’s the lesson in why socialism fails, and that’s across the board.

  • omlete

    Surely most of the transmission infrastructure was paid for with taxes. Most tax payers are in the top half of the North Island. If South islanders had to pay for their own lines, the cost per consumer would be much higher, and would need to be reflected in electricity charges. Ergo it all averages out.

  • Interested Party

    I’m sure there are many products either state or privately sold where there is a degree of price flattening across the country, I suspect in most cases if the true costs were applied many things would be cheaper in Auckland. South Islanders be careful for what you ask for

  • Oh Please

    Surely economies of scale means the price of most commodities should be cheaper per capita in Auckland than elsewhere. Perhaps we should raise income tax and GST in the south island as the relative cost of providing services like health care and transport will be more expensive there.

  • Keanne Lawrence

    An absolute no brainer. It is high time the north should be paying for the power cost of transmission and stop being subsidised by other users. The distance and line loss are the relevant elements for calculation so high time to wean the north off the publics tit.

  • Toby

    I’m totally for apportioning the cost of power distribution to the people furthest away from the generators. It makes a lot of sense.
    However I am dead set against making people pay for their own rescues.

    I guess that is where I draw the line in terms of my own moral thinking and what should and shouldn’t be socialised.