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Progressives want $200 winter energy rebate

Hon Jim Anderton


Progressive Party leader

11 August 2008 Media Statement


Progressives want $200 winter energy rebate

Some of more than a billion dollars a year in power company profits should be returned to New Zealanders who need it most through a $200 winter power rebate, Progressive leader Jim Anderton says.

Power companies made profits before interest, tax, depreciation and other items of more than six hundred million in just six months at the end of 2007.

Jim Anderton says a winter power rebate that went to half of New Zealand homes would cost $140 million and make a huge difference to households on low and fixed income.

"A winter power rebate would use the strength of our publicly-owned companies to care for people who need it most. If you are a superannuitant, on a benefit or earning a modest wage or salary, your winter power bill can play havoc with a family budget.

"When I ran advertisements around New Zealand last month talking about New Zealanders who are struggling to make ends meet in the current world economic climate, one consistent response that came through was that many households, who are living from week-to-week, struggle to cope with winter power bills.

"Most energy generation in New Zealand is owned by the public. As profits of those public companies rise, it's logical for the owners - the people of New Zealand - to achieve a dividend for their ownership.

"Paying out a return on public ownership as a direct rebate to those most in need of assistance is a highly progressive way of helping families. $200 means a lot more to someone whose income is low and fixed. It ensures the cash goes to pay for a necessity."

In previous terms in government, the Progressives have advocated and achieved high profile policy priorities, such as Kiwibank, four weeks paid annual leave, paid parental leave, and a $700 million science and innovation fund to strengthen the backbone of our economy.

Jim Anderton says a winter energy rebate would have a similar priority.


"The government has done a lot to reduce the pressure on struggling families and New Zealanders on low incomes. While the consumer price index has moved by some 20% since 2000, the average wage has increased by 33.7% and the minimum hourly wage rate by more than 70%. Working for Families and other measures have made a difference, too, such as reducing the cost of visits to the doctor, income-related rents for state house tenants, and a significant increase in the threshold of the 'rates rebate scheme'.

"But we are strong enough to care about those New Zealanders who still need a helping hand. $200 off the winter power bills would make a substantial difference for those household budgets."

--

Progressive Party $200 Winter Power Rebate
What is the rebate policy?
The rebate is a refund from government from the proceeds of its ownership of power companies.

Low income households, and especially those on fixed incomes, would get a rebate of $200 on winter power bills.

$200 is an average monthly power bill for many of the homes in question, so the effect for many homes would be a month's free power.

Who would be eligible?
At a minimum, we want all low and fixed income households to receive the rebate - superannuitants, beneficiaries, low income wage earners, for example.

Middle income households often find winter power bills tough too. Subject to further analysis of power company profits, we would like to see the rebate extended to other households.

Why a power rebate?
In July, Jim Anderton ran a series of ads around the country expressing concern about New Zealanders struggling to make ends meet in the current world economic climate.

One consistent response that came through was that many households, who are living from week-to-week, struggle to cope with winter power bills. Suddenly, household budgets come under pressure just to avoid a basic necessity like keeping warm.

At the same time, power companies are making strong profits. Most energy generating in New Zealand is owned by the public. As profits at those public companies rise, it's logical for the owners - the people of New Zealand - to achieve a dividend for their ownership.

Paying out a return on public ownership as a direct rebate to those most in need of assistance is a highly progressive way of helping families. $200 means a lot more to someone whose income is low and fixed. It ensures the cash goes to a necessity.

How much would it cost?
According to Statistics New Zealand, there are about 1.4 million households.

Assuming half were eligible for a $200 winter power rebate, that would cost around $140 million.

A $200 winter power rebate for every household would cost $280 million.

How would it work?
A winter power rebate would be administered by the energy retailers.

Households would register their eligibility by advising their electricity supplier.

A power company might enclose a letter to consumers with the monthly power bill advising that a rebate is available and inviting consumers to register.

Consumers would have to certify that they met the eligibility criteria. The power company would apply a credit to one power bill during the winter months and the government would refund the power company.

How much are publicly-owned power companies making?
A lot.

In the six months to the end of 2007, the three publicly-owned power companies reported earnings before interest, tax, depreciation and financial instruments of over six hundred million dollars.

Meridian: Half year profit of 93.7 million, on EBITDAF of $253.7 million.

Mighty River Power: Half year profit of $83 million profit on EBITDAF of $175 million.

Genesis Energy: Half year profit of $61 million on EBITDAF of $175 million.

Total half-year publicly-owned power company earnings: $604 million. EBITDAF. Some rounding.


How does this fit with the Emissions Trading Scheme?
This is completely separate from the Emissions Trading Scheme.

The Emissions Trading Scheme will increase the cost of power that produces climate-changing gases. This helps consumers to make a choice for cleaner energy.

However some consumers will not easily be able to switch to clean choices. And although clean energy will be relatively cheaper, there is a risk that the costs of clean energy will also rise as demand increases. There is therefore a risk that vulnerable households will face increased costs, at the same time that power company profits will increase.

Paying out a flat $200 rebate helps to shield eligible households from the increased cost of energy but still leaves in place an incentive to switch to cleaner energy sources.
Would diverting some of those profits into a rebate reduce much-needed investment in new energy?
The largest investment in new electricity infrastructure since the seventies is underway. Over $7 billion is being spent on generation and transmission in the next few years.

The more that is spent on new infrastructure, the more power companies have to earn to achieve an acceptable return on their investment.

Does a winter energy rebate exist anywhere else?
Yes. Victoria, for example, provides low-income households with more than $1 billion a year in concessions for essential services such as energy and water. It pays a rebate to concession households of $19.50 for households who spend between $82 and $122 on LPG (approx cost of an LPG bottle); $97.50 for households who spend between $123 and $609; and$145 for households who spend more than $609.

In the United Kingdom, the government provides a winter fuel payment of 250 pounds for over 60s and 400 pounds for over-80s.

Is this policy a realistic policy alternative?

In previous terms in government, the Progressives have advocated and achieved high profile policy priorities, such as Kiwibank, four weeks paid annual leave, paid parental leave, and a $700 million science and innovation fund to strengthen the backbone of our economy.

Progressives have shown that when a coalition party makes a policy a high priority in government, it can achieve real and lasting gains.


ENDS

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