Power bill levy goes to councils

By BRIAN FALLOW

Disquiet is growing within the electricity industry that it is quietly being turned into tax collector for local and central Government, says Electricity Networks Association chief executive Alan Jenkins.

Increasingly, consumers' power bills contain a hidden charge flowing to local councils, which are now able to include infrastructure assets like electricity, gas and telecommunications assets in their rating base.

"We think it is costing us around $40 million now and rapidly heading for more next year," Jenkins said.

Yet to come is the dry year reserve levy of up to half a cent a kilowatt hour to fund the power stations which are to be kept as insurance against a dry year.

Half a cent may not sound much, said Jenkins, but across the economy it amounted to the best part of $200 million a year.

"The chances are it won't stop there," he said. "Remember the 1982 refinery expansion levy of 2c a litre on petrol? By the time the inevitable Government project construction cost blowouts had taken their toll it had reached 16c a litre, part of which lingers on today as a tax loading on petrol sales, despite the refinery being paid for years ago."

The lines companies are also objecting to the $8 million a year they will have to contribute towards the $50 million annual cost of the new Electricity Commission.

"The commission is essentially a new Government department created by a Government which has a very healthy tax surplus which could well fund any such initiative that is for the good of the whole economy," Jenkins said.

If the commission's remit is widened in future - and Energy Minister Pete Hodgson has already threatened the gas industry with bringing it under the commission - levies will rise further.

Consumers' electricity bills are already rising as the generator/retailers feel they need to raise prices to pay for more generation capacity and as the transition to more expensive fuels as the Maui gasfield runs out.

"What seems to have been overlooked is that power consumers around the country have already been paying a hidden levy to fund new power stations since 1996 when New Zealand led the world in introducing nodal pricing," Jenkins said.

Nodal pricing involves differential loadings added to the wholesale spot price at the more than 200 different points at which electricity is drawn from the national grid.

They reflect the marginal losses involved in getting electricity from remote generators to the end-user. They rise and fall and move around the country as half-hourly power flows change.

"The whole point of nodal pricing was to trigger new investment in parts of the country where it was most needed," Jenkins said.

"Clearly it didn't work very well but it is hard to understand why a consumer in Kaitaia who has been paying perhaps 20 per cent more than the average consumer to signal appropriate investment should now be slugged anew to fund some of that investment."