Same figures, different power point

HAMISH RUTHERFORD
Last updated 05:00 16/10/2012

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A new report by the Treasury claims private power companies offer the cheapest electricity in most parts of New Zealand, using the same survey that the Green Party claims shows the opposite.

Green Party co-leader Russel Norman said last night that the Treasury had manipulated figures to support the Government's case for asset sales.

In August, Dr Norman used figures from the Business, Innovation and Employment Ministry's energy prices survey to claim the private sector, on a national average, charged more than state-owned enterprises.

"Treasury has admitted that private power companies charge more than publicly owned ones," he said then, arguing that privatisation would mean higher prices.

Last week, the Treasury issued a report that said recent analysis of the figures was "inappropriate", because it used an average for the entire country, taking no account of regional price differences.

It also said the analysis also did not take account of peculiarities in the market, such as Contact Energy's 22 per cent online discount, or a dividend offered to TrustPower customers in Tauranga and Western Bay of Plenty.

According to the Treasury's figures, in 21 of 45 regions, private-sector companies were, on average, cheaper than the SOEs, including those in seven of the 11 largest regions.

Private-sector companies had the cheapest offerings in 29 of the 45 regions, the Treasury says, and were the second-cheapest in another six.

"In our view, the assertion that SOEs offer cheaper prices than private companies is not supported by the evidence," the report says. "In any case, what matters is not ownership - it is . . . the level of competition among retailers."

Dr Norman said the figures appeared to be a political attack. "They're manipulating the figures to make it look better for the Government."

It was "silly" to include only Contact's special online discount, but not those offered by other retailers, he said. "That is just a fundamental bias in their figures."

One senior electricity executive from the private sector, who declined to be named, backed Dr Norman. "There is little doubt in the industry that the SOEs subsidise their retail customers because their shareholder is willing to accept lower returns."

However, Major Electricity Users' Group executive director Ralph Matthes said the argument that privatisation would certainly cause higher prices did not stack up to analysis.

Private companies had offered sharper retail offers to households than state-owned rivals and could be more nimble.

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"Whatever the reason, most households are better off because there are privatised retailers in the market."

AS TREASURY SEES IT

Treasury says private electricity companies are cheaper than SOEs in seven of the largest regions:

Northland (by an average 5.4 per cent), Waitemata (2 per cent), Auckland (6.9 per cent), Hamilton (4.7 per cent), Hawke's Bay (1.8 per cent), Manawatu (0.1 per cent) and Christchurch (3.5 per cent).

SOES are cheaper than private companies in:

Thames Valley (by an average 0.3 per cent), Tauranga (19.6 per cent), Wellington (1.1 per cent) and Dunedin (0.1 per cent).

- BusinessDay.co.nz

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