Editorial: Ready for a headache?

Okay, help me out here.

On Saturday we carried a story saying two of the companies that supply power in South Canterbury are to increase their prices.

Genesis is increasing by an average 15 per cent, and Meridian by about 5 per cent.

To be fair to Genesis, many of its customers apparently haven't had an increase since 1999.

And to be fair to both, the largest supplier in this area, Contact Energy, increased its prices by an average 8.4 per cent in March and Mercury Energy by 5.6 per cent in April.

The increases of course outstrip inflation, but we've grown used to that. Still don't understand it, but certainly grown used to it.

No, what gets me this time around is that Genesis and Meridian are blaming their increases on national grid operator Transpower. On its own, that's fine. But also on Saturday we published another story that said Transpower had just paid the Government a handsome final dividend of $306 million for the year.

Have a guess where most of that came from? Quite right . . . you and me.

And, hold on to your lightbulbs here, from loans.

That's right. It raised its debt levels and so was able to pay the high dividend. It had to. It's gross profit was only $85 million.

How can this happen?

Sure, Transpower is charged with making a profit. But it's also in the middle of a $3 billion upgrade to infrastructure. Ten per cent of which its just given the Government. Mostly by borrowing.

I must try this at home. "Yes dear, I know we're doing up the kitchen just now and you've been working hard to pay for it, but that new motorbike in the driveway won't make much difference at all, the bank was happy to lend us the money."

I wonder at what's going on behind the scenes. The Government is short of a bob or two, no secret there. And it wants to sell off some silverware so it doesn't have to borrow so much. Silverware that happens to include three of the power retailers in South Canterbury.

So on the one hand it's just been given $300 million from Transpower and won't have to borrow that money . . . even if Transpower (effectively you and me) will.

And on the other, the power companies have had to increase their prices so their books look good when comes the time to sell.

Which in the end will apparently benefit us all because the Government won't have to borrow so much.

Yes, I've got a sore head too.

The Timaru Herald