Subsidising Low Electricity Users Unfair

9 July 2004

Media Release

The Potential For Business To Subsidise Low Electricity Users Unfair

The Government’s plans to force electricity companies to give a subsidy to consumers who use less than 8000 kilowatts is “a back door way of potentially hitting business with a price differential, or forcing electricity businesses to carry the cost.” said Auckland Chamber of Commerce Chief Executive, Michael Barnett.

It is poor social engineering for at least two reasons. Firstly, there is no assurance that the scheme will help low income users. Apartment dwellers will clearly benefit through having smaller properties and power usage, but most of these occupants are in high-income groups. However, many low-income families in stand-alone houses tend to comprise large family groups and therefore are higher users and therefore won’t benefit from the subsidy.

Secondly, expecting the electricity companies to carry the cost of the subsidy on the bottom line is a blunt instrument that will distort the market and their performance.

Most domestic customers in Auckland use less than 8000 kW, and the outcome will have the potential for productive businesses to be treated as a cash cow to subsidise unproductive sectors.

“Economically and politically, this is a form of price fixing that will over time distort the economy and need correcting,” said Mr Barnett.

ENDS

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