Govt reaction to power price rise worries councillor

Press, 3 February 1986, Page 5

Govt reaction to power price rise worries councillor

A 7 per cent rise in electricity prices for Christchurch users from April 1 might discourage Government moves to provide a bulk electricity tariff differential in favour of the South Island, said councillor Rex Lester, at the Christchurch City Council, last evening. "If the City Council is not seen to be totally concerned about its electricity tariffs the Government could be put off from trying to provide a differential,” he said. “In effect we could be putting all the retail tariff rates throughout the South Island at risk.”

The City Council’s planned 7 per cent rise is justified by several costs facing the Municipal Electricity Department, according to Cr Morgan Fahey.

As chairman of the Christchurch City Council’s airport and electricity committee, Cr Fahey was responding to recent criticisms of the proposed increase by the Minister of Energy, Mr Tizard. A 7 per cent increase was described by Mr Tizard as “quite excessive” given that the bulk tariff increase for the year is 4 per cent. This is in line with a new dif-

ferential of 22 per cent in favour of the South Island. Cr Fahey said last evening that the bulk tariff increase, an on-going capital works programme and State-linked wage and salary rises of up to 30 per cent were among the increased costs facing the M.E.D. The others included inflation and a shortfall in the electricity revenue collected for the 1985-86 year. Also, the M.E.D. reserve funds had declined, he said. "Unfortunately several capital works programmes require funding this year and there is no way to spread this out over more years,” Cr Fahey said. “The main M.E.D. building extension must go ahead since it is half completed and we have already made quite considerable cost cuts with it “If we don’t go ahead with the building we are going to be seriously short of space since the M.E.D. does so much servicing for a number of other areas. If we don’t spend the proposed $1 million on computer equipment a tremendous amount of inefficiency will result” he said. Another feature of the M.E.D.’s $14.5 million

capital works programme for the 1986-87 year — its biggest to date — is the first stage of a new $10.5 million ripple-relay system. Cr Fahey said the council had made considerable cuts to its underground wiring conversions programme for the 198687 year. “If we don’t go ahead with the capital works programme it will be much harder to find that money in the future. The M.E.D. runs a tight shop and I have full faith in the advice I receive from extremely able M.E.D. staff,” he said. Cr Lester favours a reduction in capital expenditure for the 1986-87 year, use of loans, and no vehicle or staff increases to help minimise the electricity tariff increase. “We owe it to the public to wait and see what form the proposed electricity authority reorganisation could take,” he said. “The M.E.D. could realise some of its assets to pay off any loans for capital works when the reorganisation takes place.” Salary and wage increases meant that money had to be found from somewhere, Cr Fahey said.

The electricity tariff

had to rise or loans were necessary, but the M.E.D.’s access to loans was limited, he said. The increased tariff would help the council to pick up a 2 per cent deficit in expected revenue for the 1985-86 year, Cr Fahey said. This had been caused by large non-domestic consumers changing to lower tariffs and a relatively mild winter with less electricity than usual used. „ “With the M.E.D. reserve funds falling to dangerously low levels I have been advised that it is important that they drop no further. The 198586 reserve funds totalled $14.6 million and they are projected to drop to $9.7 million for the 1986-87 year,” he said.

Mr Tizard was critical of the council’s record $3.7 million transfer of interest accrued from its electricity fund into its own general funds in the 1985-86 year.

The M.E.D. has raised a $4 million loan to help pay for its capital works programme. Mr Tizard said this looked like “election year juggling” and would add to future electricity prices. Cr Fahey, who says the $3.7 million transfer is too

large, said that if : the electricity fund Interest was not used to pay some council costs its ratepayers would have to pay higher rates instead. “There is a general council view that increasing the electricity tariff is one way that Waimairi ratepayers can contribute towards all the facilities provided by the City Council for all Christchurch residents. The City Council provides far more such facilities than the Waimairi District Council provides for all Christchurch residents,” he said.

Cr Lester said that although the $3.7 million interest transfer was too large it waq. technically within Government guidelines.

“I think it was a bit greedy to transfer so much this time and it is basically in order that the council can have a lower rate increase during an election year,” he said. Each $1 million of transferred interest is understood to equate to a 1 per cent increase in the electricity tariff. If $4 million was retained in the council's electricity fund consumers might face a price rise of aboul 3 per cent