Of course as long as Shadbolt is Mayor down there he might want to set up a massive indoor hydroponics operations and grow a very big quantity of high quality weed.

You know, I actually think that all the electricity should be run on PPP basis with 60-40 government-private ownership ratio. In that instance, their books would have to be transparent, and there would be less scope for corporate welfare that the rest of us have to subsidise.

Currently there’s a lot of ologopolistic behaviour in the NZ electricity market because of the vertical integration of the five main companies. I say that if we’re going to pay too much for power it should at least come back to us in taxes/government spending.

The problem with a small utilities market like NZ is that you get profit-gouging oligopolies or monopolies that need to be constrained by the government. But at the same time I want utilities run efficiently so their price is kept down. That’s why I support a PPP arrangement for all utilities companies in NZ.

If you were that concerned about corporate welfare you should support the privatisation of Meridian to ensure all teh risks fall on their shareholders and that a fully commercial as opposed to political negotiation is carried out.

I note the Govt has just announced some corporate welfare for an electric motor company and you were happy with 700m of corporate welfare to NZ’s wealthy farmers

Even if you believe the unconfirmed number that the coup-backers supply it’s still far below spot-price projections, and is still corporate welfare.

Infused:

Yep I agree with the sentiment. But have you seen Idiot Savant’s Kyoto equation. With the possible savings under Kyoto, combined with the savings in corporate welfare taken into account, it sure seems like the negatives outweigh the positives – if you look at it on a nation-wide basis anyhow.

RT’s prices are no more secret than Kinleith, NZ Steel, NZRC, Pan Pac, etc.

I love the debating strategy “prove those numbers are true but even if you do they don’t count…”. You accept an unsourced number on Scoop but not the one in the same report quoted by I/S.

Below are average annual prices at Benmore (a good proxy)for the last 10 years starting in 97 taken from http://www.electricityinfo.co.nz/media_releases/April_2008_Reference_Prices.xls.

This year is going to be much higher but it is a dry year and that;s what happens occassionally.

$42.02
$29.88
$31.50
$29.58
$80.14
$35.78
$78.72
$29.91
$71.78
$78.86
$50.75

Having something like that go would hurt.

Captcha: floor aluminum

“There will be a bean counter some where that can crunch the numbers”

The problem is that contract is secret, and the government doesn’t have to make a profit. No one knows if the “bean counters” are even trying to turn a profit on this one.

What we do know is that from 2013 onwards Meridian could be selling that power on the spot market for 6.7c kWh – 10c kWh instead of selling it to Rio Tinto for 4.7c kWh. We’re talking many millions of dollars that the government’s giving away in corporate welfare here.

my point is that the “below cost-price” is a myth.

Having been privvy to operating budgets of hydro stations my view is that there is no ‘below cost price’ at all. Whilst the SPOT market is currently high, a medium user could access $5 MWh electricity in the South Island only 12 months ago, this without long term commitments to take the electricity and underwrite investment in generating assets.

There will be a bean counter some where that can crunch the numbers, but a 30 year power station should have been written off by now (especially when the design life of HV electrical equipment is 25yrs). MPR had a 200M tunnel added in 2001 & a similiar expense on a half life reburbishment in recent years. at worst case it has $0.5B on the books, an annual operating budget of <20M and a revenue of $240-290M+. In the old NZED days MPR was known internally as the ‘jewel in the crown’.

“If Meridian isn’t making a profit from this arrangement then sell them off!”

You know, I actually think that all the electricty should be run on PPP basis with 60-40 government-private ownership ratio. In that instance, their books would have to be transparent, and there would be less scope for corporate welfare that the rest of us have to subsidise.

Currently there’s a lot of ologopolistic behaiour in the NZ electricity market because of the virticle integration of he five main companies. I say that if we’re going to pay too much for power it should at least come back to us in taxes/government spending.

“People who buy things in bulk ALWAYS get a better price.”

Of course, but we’re talking about below cost-price. Doesn’t matter how much you buy. That’s never profitable.

“Firstly you are turning speculation re 4.7c into fact.”

Well that’s what scoop has reported, and that’s what myfriend has said he has seen in a document leaked to him. Why would you beleive RT when they refuse to let anyone check if they’re telling the truth?

That is the long run marginal cost which is effectively the cost for building the next MW of power beyond what you already have, so not a reflection of the operating cost but for investment decisions so can be a good guide for the price needed to get a return to build that plant, but it is differnt from generating cost

.

A bit of an academic point. If Rio Tinto are paying a unit price below what it costs for Meridian to turn a profit we’re still subsidising them. Which has been my point all along.

“If you look at prices in NZ there are extended periods where market prices are well below 4 cents, ”

Can you show me these magic numbers? I’ve never seen anything like what you’re talking about. Even if you can produce those number they would be irrelivant however. The contract is for 2013 through to 2030 and no one’s forcasting anything 4.7c kWh for that period.

Indeed from present through to 2020:

“Business As Usual’ scenarios see
LRMC trending towards 6.7 7.0c/kWh,
reflecting the likely upper cost of
extensive new coal-fired capacity;
• “Kyoto’ scenarios see LRMC trending
towards 8.0c/kWh in the longer term,
reflecting the likely effect of a $15 per
tonne emissions tax, but still capped by
coal-fired generation.

http://www.coalnz.com/index.cfm/3,138,370/nzier51-60.pdf -

alusaf.pdf

will all kiwi’s stop drinking from aluminium cans because they are made from chinese aluminium which has 2 to 4 times the carbon footprint?

[lprent: corrected link to make it clickable]

But if you want a capitalist solution – well, let them f*** off, then buy the assets up cheap, and start undercutting aluminium smelters elsewhere. If Rio Tino go, they’ll drop a bundle on their sunk construction costs, and enterprising Kiwi’s could benefit. Or alternatively, the government could buy the assets and operate the plant for $650 million. Er, I mean $850 million. Oh, hang on, how about $1 billion…

(Just teasing – mostly)

People need to understand that the so called discount is a reality of every day life. It’s happening every day and its all around you. Petrol Station, Grocery Shop, even at the pub.

Example . You consume 3 loaves of bread each week and each loaf costs you say $2. What would be a reasonable price if you purchased 1,000,000 loaves (& guaranteed to do this every week for 10-15 years)? Half, Quarter, less??? The numbers may seem ridiculous but they are relative. People who buy things in bulk ALWAYS get a better price.

the so called “windfal in retail profits” from no smelter is also a nonsense. This requires an energy intensive industry (which the govt is now discouraging) or 350,000 new households; neither of these is going to appear overnight. I wonder how the govt will replace the revenue lost from taxes & Meridian’s reduced profits? income tax?

Having that much extra power on the market would crash prices not increase them and could make the Cook strait cable harder to justify economically.

I must admit I chuckled when I heard the breaking news that Rio Tinto was threatening to give NZ 15% more power. Given the rate they pay for the power it would be an absolute windfall in retail power profits. It will push along that idea of a second cook straight cable though.

It really looks like NZ is slowly, or perhaps not so slowly, loosing it’s manufacturing and heavy industry sectors to places with a more favourable mix of labour costs, resource costs (power, water etc), tax rates and simplicity of tax compliance. Additionally our distance to market is about to start having serious impacts on our viability as anything other than a highly wired society.