Electricity costs attacked

Low hydro inflows are expected to add to electricity pricing pressures.
Low hydro inflows are expected to add to electricity pricing pressures.
Low headline inflation figures hide significant rises in electricity prices, Green Party co-leader Russel Norman says.

Inflation for the year ended March stayed at 0.9%, right on the Reserve Bank's forecast but lower than the 1.1% forecast by most economists.

Quarterly inflation was 0.4%, again meeting the Reserve Bank's expectations.

Statistics New Zealand figures showed continued aggressive business practices by retailers contributed to the ongoing low inflation.

However, Dr Norman said the data showed that electricity prices were up 5.2% in the year.

''Families are paying too much for power. Power prices have gone up 5.2% this year, which means the average family is paying $100 more this year to stay warm and dry. For low or fixed-income families, that's the difference between turning the heater on or off.''

Dr Norman used the latest consumer price index figures - the official measure of inflation - to continue his campaign against the sale of state-owned energy companies.

The Mighty River Power share offer opened last Monday and closes on May 3.

The Green co-leader complained that under National, power prices had gone up 19% even before the asset sale programme. The Government is disputing the figures, claiming that power prices went up much more under the last Labour-led government.

A separation out of the Statistics NZ figures showed electricity prices going up 5.2% in the year, gas prices falling 0.4% and solid fuel prices rising 2.4%.

Dr Norman said that on average, privately-owned electricity companies charged 12%, or 3c per kilowatt hour, more than publicly-owned electricity companies.

Privately-owned power companies charged around $275 a year more for the average household, he said.

The Green and Labour parties will announce new policy to reduce electricity prices for families and businesses today.

ASB economist Jane Turner said Dr Norman had a valid point on power prices but the increase did not appear to have come in the latest quarter.

There was a large spike in power prices in the June quarter of last year.

The drought in the North Island would not help subdue power prices, as hydro lake levels continued to fall, she said.

Data released by Contact Energy on Monday showed hydro storage in the North Island at 43% compared with 75% in the South Island.

Ms Turner said lower lake levels meant generators would turn to more expensive generation of electricity, which could cause prices to rise.

It was more likely retail prices would stay lower for longer but wholesale prices to businesses would rise. Generators tended to absorb higher costs for a period before lifting the price of retail electricity.

ANZ chief economist Cameron Bagrie said inflation was likely to remain off the radar of the Reserve Bank for the time being.

''It is hard to envisage the April official cash rate review diverging materially from the spirit of what was said in the March Monetary Policy Statement, despite the obvious sabre-rattling towards the property market.''

Concerns over the Auckland housing market were likely to stop any OCR cuts. High food prices looked set to make a positive contribution to inflation in 2013, but those were likely to be offset by the strong New Zealand dollar, he said.

Without a ''very large'' and sustained fall in the value of the dollar, it would take evidence of a concerted strengthening in medium-term inflationary pressure to prompt the Reserve Bank to lift the OCR from the current 2.5%.

''A low inflation starting point, the still high New Zealand dollar and high degree of policy traction suggest a high hurdle to OCR moves, with the Reserve Bank set to remain on hold over the remainder of 2013,'' Mr Bagrie said.

- dene.mackenzie@odt.co.nz

Add a Comment

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter