By Celsias team
The first real fiscal impact to be felt by consumers from the Government’s Emissions Trading Scheme (ETS) has been revealed this morning, with the announcement of electricity price rises to coincide with the transport fuel and electricity production sectors coming under the ETS on July 1.
With the embers of last week’s tax cuts announcements still faintly glowing, power companies Mercury and Contact have somewhat put out the Government’s fire with the news they will lift prices 3.3 percent and 3.2 percent respectively due to estimated costs of the ETS. In dollar terms this would see state-owned Mercury adding an average $5 a month to the average residential electricity bill, and $1.75 (2.4 percent) to the average residential gas bill.
Genesis Energy and Meridian Energy have not yet announced a price rise.
On National Radio this morning Genesis spokesperson Richard Gordon told Nine to Noon host Katherine Ryan that the SOE - which owns Huntly power station, the generator of approximately 5 percent of New Zealand’s total carbon emissions - would be waiting a few months to see what the financial impact was.
He pointed out that there was the combination of other pressures on electricity prices that may result in an eventual price rise, including demand, lake water levels and the cost of new generation facilities.
However, he agreed with Ryan that it wasn’t necessarily the case that 100 percent of the ETS compliance costs would be passed on to the consumer, and that there may be room for companies to absorb some of these.
“That’s right. It’s about being competitive in the market.”
Carbon costs for the power companies are capped for the next two years at $12.50 tonne.
John Key appeared on TVNZ’s Breakfast yesterday morning reassuring the nation that the total impact felt by households from the July 1 changes would be just $3 a week, or $165 a year.
According to Minister for the Environment Nick Smith’s office, the figure had been generated by various government departments. Smith’s press secretary Simon Beattie pointed out today that when readjusting Labour’s ETS, the government had halved the previous government’s estimations, reducing the expected electricity price increase from 10 percent to 5 percent.
It expected petrol and diesel costs to increase by 3.5 cents per litre as a result of the ETS.
Today’s print Herald went with general consumer sentiment, headlining its story on the price rises ‘Green Law to push up price’. Comment was flowing in thick and fast to its website’s Your Views question ‘Will the Emissions Trading Scheme have a negative impact on the economy?’.
While Steve S of Geraldine approved of the move “At last. A clear incentive to reduce electricity consumption”, Wisen of Henderson wasn’t impressed with where his tax cut was going and echoed the concerns of many on the forum: “It seems the government giveth with one hand and then taketh away with the other the hand. All the changes seems to be coming out of the taxpayers pocket, so we'll have increased electricity with this emissions trading scheme and then add the increased GST.”
Brian Leyland, electricity industry commentator who also appeared on Nine to Noon this morning weighed in with his damning assessment of the scheme:
“The emissions trading scheme will provide windfall profits for existing hydro generators, foster massively fraudulent carbon trading and increase worldwide emissions because things that we make efficiently here will be made overseas with even greater emissions.”
The “windfall profits” to be made by state owned power companies also came under the gun from opposition parties yesterday. Act MP John Boscawen claimed the Government was hiding the fact it stood to make up to $150 million from state-owned electricity providers when it sold credits from renewable power generation which would not incur a carbon charge - additional to the estimated $350 to $370 million the Government estimated it will make from selling emissions permits.
However, Environment Minister Nick Smith called the claim “wildly exaggerated”, and said these electricity profits would more likely be in the vicinity of $30 million.
Late last month the Government came under renewed pressure to ditch, or delay, the scheme after Australia announced it would put of introducing an ETS.
The Government has been accused in some quarters of trying to ‘lead the world’ in ETS. However, Key pointed out on Breakfast yesterday that of the 38 countries that signed the Kyoto protocol, 29 have an ETS.
