Bludging industry and local body numpties want “cost socialisation”

Richard Harman has the story

A self-styled eminent persons’ group of business lobbyists and local body politicians yesterday challenged the Government to abandon its hands-off approach to electricity regulation and “pause” power transmission price changes which would see some parts of New Zealand pay more for their power.

Later in Parliament the acting Prime Minister sounded hesitant when questioned about the charges.

The group – which included Federated Farmers and the Auckland Employers and Manufacturers’ Association — called for a return to the “socialisation” of charges for utilities like electricity, telecommunications and roads.

By that, they meant that the total cost of a network should be spread evenly across all citizens.

Counties Power CEO, Sheridan Broadbent said that for the past 150 years the benefits of cost socialisation had made New Zealand successful.

“This is not a time to be changing the history of cost socialisation,” she said.

“It’s worked for telecommunications; it has worked for roads, and it’s worked for rail.

“So we don’t understand, and our primary producers don’t understand why this ahs to change.”

This row has been brewing since the Electricity Authority published its proposals to change the way consumers pay for the cost of the transmission network.

Simply, it proposed that prices would go up the further away a consumer was from the generators.

It may appear to be fair and perhaps even “natural”, but cost socialisation doesn’t exist in the real market.   Check the price of petrol in Haast compared to Auckland.

Or check how much you pay for insurance.  Is there any cost socialisation on life insurance when you are a heavy drinker, smoker and have had cancer previously?  Of course not.

Instead of it being “unfair” that people further from generation pay more for delivery, it stops distortion.  It would allow Northpower, for example, to justify it’s own generation rather than pulling it all the way up from the South Island lakes.

Cost socialisation is a construct where people do not trust the market to find its own solutions, and by artificially depressing the drivers, the market won’t develop those solutions for itself.


– Richard Harman, Politik

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