Labour: Plan to bring down power prices is affordable

Photo / Mark Mitchell

Labour says its plan to bring down power prices is affordable despite losing out on state-owned power company dividends.

Both Labour and the Greens announced plans this week to establish a new agency, New Zealand Power, which would act as a single buyer of wholesale electricity.

The parties claim the plan would cut the nation's power bills by up to $700 million a year, which would lower household power bills by as much as $330 a year and give the economy a $450m annual boost.

However, those savings would come at the expense of power companies, including Mighty River and others earmarked by the Government for partial sale.

It would also mean a loss of dividends to the Crown from state-owned power producers.

The Government has attacked the plan, saying competition is the best way to set power prices and a single buyer would result in higher prices over time.

Labour finance spokesman David Parker today said the plan was affordable despite the loss of dividends.

Speaking on TV3's The Nation this morning, he said the net cost of the plan to the Crown was less than $100 million.

``It's not like the money disappears from the economy, just that people have more money in their pockets. Instead of spending it on inflated power prices, they're spending it somewhere else in the economy.''

Mr Parker said the plan would not only reduce power prices, but it would improve the economy overall as the savings were spent elsewhere.

``Yes, we lose dividend revenue. We actually get more tax revenue.''

Mr Parker denied other parts of the public sector would end up subsidising cheaper power.

``At the moment what is happening is people are subsidising power companies because they are paying too much for their power. That's what will stop.''

Labour's plan differs from its policy partner's in that the Greens want a Government dividend and progressive retail pricing.

Green Party energy spokesman Gareth Hughes told The Nation that progressive pricing would allow families who ``shiver through winter'' to afford to use power.

It would also allow households with efficient heating and insulation to save from using less power.

Mr Hughes denied the policy was an attempt to derail the Government's partial privitisation of state-owned Mighty River Power, shares of which went on sale this week.

New Zealand First leader Winston Peters told The Nation he did not support the Labour-Greens plan.

His party's policy is to buy back shares in Mighty River at a cost of about $1.5 billion.

Mr Peters said the money could be drawn from the Government's superannuation fund, KiwiSaver investments and international borrowing.