The Labour Party’s claims of reducing annual household power costs by $700million through their newly proposed crown entity power company have been rubbished by Papamoa resident and National Party activist Steve Morris.
Labour and the Green Party recently unveiled plans for a Crown entity – NZ Power – they say will bring down power prices, stimulate the economy and create 5000 jobs, if elected next year.
Papamoa resident Steve Morris says it will be the community that loses out in Labour’s power proposal.
The proposal would see the entity acting as a single buyer of wholesale electricity with the power to set prices, along with a pool for electricity where prices would vary regionally, reflecting transmission costs and line losses.
Steve says the two parties are not looking at the big picture, which is ratepayer’s dependence on cost effective power pricing from companies including TrustPower and Contact.
It is estimated Tauranga Energy Consumer Trust (TECT), which owns 33 per cent of TrustPower, will lose a further $185million on top of the $67.5million lost in last week’s capital plunge in share prices, says Steve.
“The loser is the little guys working for the Tauranga community who depend on TECT funds, and consumers relying on their annual rebate.
“TECT exists for consumers and a lot of these are community groups. It’s just one of those unnecessary policies.”
A research note from Forsyth Barr analyst Andrew Harvey-Green, published by Fairfax Media this week, says the power policy could wipe up to $1.4billion off the values of Contact Energy and TrustPower.
Andrew believes the scheme will cut revenue and profits for Contact and TrustPower, reducing their value by up to $869m and $555m respectively.
Adjusting for risk and time, Harvey-Green estimated the proposal amounted to a hit on Contact’s share price of 25cents a share and on TrustPower’s 38cents a share.
The effect on the companies’ share prices should not as hard hitting because the Labour/Green parties may not win the next election and would take four or five years to implement the plan if they did.
TECT chief executive Michael Cooney admits it is almost too early to speculate on what the proposal will mean for the energy sector.
“The price share drop was an initial reaction to the announcement but they have now stabilised. There is so little policy detail that has been announced.
“Some aspects such as the suggestion that the price be paid on historic cost seem innocuous and is like saying a landlord will be paid on the initial cost of his building 50-60 years ago. And all of that will amount to a disincentive in the sector.”
He says company income depends on the ability of TrustPower to succeed and trustees have resolved to distribute a minimum of $400 per consumer this year which will be going out for consultation later this year.
“However, the continuation of these sorts of payments into the future will be jeopardised by disruptions like this in the market.”