Here we go again asking all three local MPs a question that they have to answer in 150 words or less. We’ll be doing this until the election.
Once again, we’re being asked to conserve power so the hydro lakes don’t run out. Yes, there’s been dry weather inland, which is nice for tourism but not nice when you depend on that water for your electricity over winter. Power companies announced there might be shortages. Predictably, the Opposition announced the Government was leading us into a power crisis. Predictably, the Government announced that the last time there was a big power crisis was when the Opposition was in government. Well, here in Dunedin we need to know for sure that our electricity’s going to take us through the next few months, so we had to ask:
"In a worst-case scenario, how should government ensure that electricity does not become unaffordable this winter?"
Pete Hodgson (Labour):
Electricity is bought and sold on a market, every half hour, at what is called the "spot" price. It is then retailed to householders at a slightly higher "contract" price. In periods of shortage the spot price rises a lot but the contract price doesn’t change. This causes expensive electricity generation plants to start up, such as the diesel plants, because it is economic for them to do so. Also some large electricity users like Comalco, who choose to buy on the "spot" market because it is usually cheaper, simply reduce their production if the "spot" market goes way high. In that way supply and demand are (nearly always) balanced, without householders facing high winter "spot" prices.
Katherine Rich (National):
While the Government does not set electricity prices, a sensible Government would be encouraging new power generation to ensure prices stayed down (law of supply and demand). The Government could also consider instructing state-owned generators to investigate price-smoothing mechanisms. There are indications that there will be shortages this winter and so the Government should be encouraging Kiwis to conserve energy now. The Prime Minister said on Agenda February 2008 that there would be something in place this winter for low-income Kiwis facing high electricity prices, but so far there has been nothing but silence.
Metiria Turei (Greens):
Electricity prices are already "unaffordable", whatever that means. It’s not even winter and we know that too many New Zealanders already live in fuel poverty. In Dunedin around 30% of households are likely to suffer from fuel poverty. The government owns all but one of New Zealand’s electricity generators. It could intervene to control high prices, but if those prices are the result of supply limits, this would only make demand worse. Over-building generation also leads to high prices. It would be far better to lift wages, increase benefits and allowances to reduce inequality between rich and poor. Our $53.4 million to insulate all state homes is the kind of positive measure needed. More practical solutions like this and less hot air will solve the problem.
Gyro:
Well, I get letters from my electricity supplier every few months apologizing for putting the price up yet again, so forgive me for wondering whether Pete’s spot price/ contract price thing is all it’s cracked up to be. Katherine and Metiria have opposite approaches to the problem. More power would indeed mean lower prices, but there’s a limit to how much energy you can suck out of the environment before you start to damage it. I like the idea of lifting wages and benefits, but wouldn’t that make demand worse too? And will the money for insulating state homes be extended to low-income family homes and rental households? Like, ooh, most student flats?
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