Profits being gained by electricity companies

Profits being gained by electricity companies

Grey Power is very concerned about the increasing profits being gained by electricity companies. Meridian Energy has just announced record earnings before tax of $642 million. Its net profit of $185 million was twice last year’s profit.

Meridian paid out a $69 million dividend to its shareholder, the Government. Counting the income tax and GST Government receives from electricity, it is no wonder that Government will not control the ever-increasing power prices.

Meridian intends to raise prices further when its price freeze ends in October, but will not say by how much. Its Chief Executive, Tim Lusk, said retail prices are “not currently high enough to support long-run energy costs”.

Further electricity price rises mean even more hardship to older New Zealanders. Superannuation payments are barely enough to keep retired people above the poverty line.

Government supports the “long-run” pricing principle implied by Meridian’s statement. Its electricity price forecasts show prices rising with long-run energy costs, as costly new, wind, hydro and geothermal power stations are built.

Long-run prices are much higher than the cost of generating electricity from existing power stations. This gap leads to “windfall profits”, because generators are all paid the same high price, not the actual cost of their electricity generation.

Meridian is investing much of its recent profits in new power stations overseas, where government subsidies make new generation even more profitable than in New Zealand. Meridian has just signed a joint venture agreement with Australian energy giant AGL to put A$500 million into a new wind farm in southwest Victoria.

Australian power stations wlll not meet growing New Zealand electricity demand. They will not make our supply more reliable, or create a generation surplus that might drive wholesale prices down.

If Government insists on long-run pricing, then Grey Power insists that the resulting profits should be re-invested in reducing energy hardship. The first priority should be energy efficiency retrofits for householders who cannot afford the contribution needed to access the subsidized warm homes scheme.

ENDS