Big power companies are competing unfairly against local energy

The big electricity companies consider solar energy “disruptive” and want pricing to suppress it. In contrast, advocates of local energy say that solar, energy efficiency, and other local energy solutions are the cheapest ways to reduce carbon emissions.

Now the electricity industry has declared its vision to double its generation capacity. They would reduce carbon emissions by replacing coal and gas fired power stations with wind and geothermal.

Who will pay for that? Householders now use 31% of delivered electricity but provide 46% of the industry’s revenues. The industry depends on their power bills.

The Low Fixed Charge Regulations have become a battleground. Lines companies say that today’s power pricing makes poor households subsidise rich ones that have invested in solar and energy efficiency and so have low power bills. They want all households to pay a fixed charge of around $2 per day. That is effectively a tax on households that can’t be evaded by using less electricity.

The Electricity Authority calls for increased “fixed-like” charges in transmission pricing. Prices would depend mostly on where you live, not how much you use or when. This again is like an “efficient tax” because it’s hard to evade.

Taxes on essential commodities have a centuries-long history. “Salt taxes” in France, India and China were extremely lucrative, but also widely despised and controversial.

In the same way, fixed charges are simply treating householders as cash cows. The big cross-subsidy is NOT poor householders to rich ones, but all householders subsidising expansion of the electricity industry. Householders are using less and less power, so high fixed charges are needed to maintain the companies’ revenue streams. The companies have been flush with cash for years, and want more of it to pay for their growth vision.

Regulators are supporting the industry’s growth vision. They take for granted the idea of “revenue requirement” which guarantees companies’ access to capital. High fixed charges allow per-kilowatt-hour charges to be cut, thus making energy efficiency and solar investments take longer to pay back. This is essentially predatory pricing.

The regulators are saying it’s economically efficient for consumers to use electricity without constraint. This drives growth in electricity infrastructure, looking backward in supporting centralised electricity. Instead they should be looking forward towards a more localised, diversified, resilient and equitable energy system.

Transpower recognises the benefits of consumers being rewarded for reducing their peak demands. It has bucked the economic ideology of the regulators, and recognises the benefits of solar and batteries in households. It is time to demand that the regulators accept such forward-looking engineering realities – that technical efficiency is more important than so-called “economic efficiency”.

Solar and other local energy solutions create fewer carbon emissions than the planned power station expansion, which includes six to eight new gas peaking power stations. They also make households more resilient to power outages, and create employment in communities. Local energy is very nearly carbon-zero.

The purpose of the 2004 Low Fixed Charge Regulations is to “assist low-use consumers and encourage energy conservation.” These needs have not changed, indeed they are more important than ever. Protecting the low user tariff is pivotal to creating a low-carbon and efficient energy sector and therefore economy.

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