THE PRESS TUESDAY, FEBRUARY 4, 1986. Paying for power

Press, 4 February 1986, Page 20

THE PRESS TUESDAY, FEBRUARY 4, 1986. Paying for power

The Christchurch City Council is finding — yet again — what a rod it made for its own back when it started diverting profits from the Municipal Electricity Department accounts to general funds. The practice has brought the council into disfavour with successive Governments and with M.E.D. customers living outside the city. The transfers are being severely curtailed now; but the council is likely to find that the new limitations carry little weight in the present argument over what will be a fair and reasonable increase in power charges in April. The council’s airport and electricity committee proposes a 7 per cent increase in retail tariffs; the Minister of Energy, Mr Tizard, maintains that the increase should not be much, if anything, above the 4 per cent increase in bulk power prices. The transfers from M.E.D. profits serve only to confuse the issue. The council says that a 7 per cent increase in electricity charges is required to meet costs, including wages, and a part of the extensive capital works programme. This may be so; but is is difficult to argue the case for a $4 million loan for capital works, or plead poverty because of declining reserves when, in the same budget, it is proposed to transfer $3.7 million from interest earned on M.E.D. funds to the council’s general coffers.

The council has valid arguments to post an increase in retail tariffs greater than the 4 per cent Mr Tizard suggests. Quite apart from the increased cost of bulk power, the M.E.D. must also meet an average increase in wages — all linked to State rates of pay — of 30 per cent. The M.E.D. also faces costs for an extensive range of capital works. The wisdom of proceeding with some of these projects at present might be arguable; though deferring them would not necessarily mean a saving in costs because they take

their place in the works programme only at the expense of other items. As an example, almost $2 million worth of conversion from overhead wiring to underground cabling, planned for this financial year, has been deferred.

In recent years the council has been spending M.E.D. cash reserves as a matter of policy. The reserves will be below the $5 million regarded as the prudent minimum when allowance has been made for next year’s capital works programme. Simply passing on the increase in the bulk tariff would not replenish these reserves and would limit works programmes in the future.

The council cannot count on another mild winter this year. A cold winter not only would increase the amount of power required; it would increase the demand factor, on which the bulk tariff is calculated. The result of even an average winter is expected to be an increase in the cost of bulk power to the M.E.D. of almost 8 per cent. These arguments tend to lose some of their force whenever the public is reminded that more than $l5 million has been transferred from the M.E.D. accounts to other uses in the last 10 years already, and that the transfer of a further $3.7 million is contemplated this year. However these figures are presented, and in whatever light the transfers are viewed, they undermine the case for a power price concession for South Island consumers.

Christchurch City councillors have every reason to be concerned that they may be putting the South Island differential at risk. The council now has some difficult explaining to do, whether it persists in trying to justify a 7 per cent increase, or decides instead to explain away a change of heart and a lower increase. In any event, the transfers of money between accounts will make it difficult to be altogether convincing.