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Thread: why are power prices so high?

  1. #1
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    Default why are power prices so high?

    At first they appear to be low but with all the add-on charges they are pretty expensive.

  2. #2
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    Yes, they charge me over a dollar/day meter rental fee. Is it also normal?

  3. #3
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    So the issue is one of number of customers and cost of the infrastructure. NZ has a low population density and some serious geographic challenges. In order to pay for this the 'base' price for untilies is higher than a more densely populated market. In fact when you look at the unit prices they are low by comparison with Europe. The overall prices here I find (with a family) are lower than the UK. Of course the weather is milder.

    One BIG difference in usage is the type of house and heating system. We moved in January between similar sized and located houses. The one we are in now uses 1/3rd the gas of the previous house because it has a modern heating system and is well insulated.

  4. #4
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    Default NZ power is state power!

    So the issue is one of number of customers and cost of the infrastructure. NZ has a low population density and some serious geographic challenges. In order to pay for this the 'base' price for untilies is higher than a more densely populated market. In fact when you look at the unit prices they are low by comparison with Europe. The overall prices here I find (with a family) are lower than the UK. Of course the weather is milder.
    Although I can't speak directly about Europe, I can speak a lot about Canada's power distribution system. If you want to compare apples with apples, consider the province of British Columbia. Sparsely populated like NZ yet has the LOWEST price of electricity in ALL of N. America. So I highly don't buy this argument that NZ has 'serious geographical challenges'.

    Now please correct me if i'm wrong but a lot of kiwis aren't aware that NZ's power generation is state owened and regulated. The private companies you hear like Meridian, Contact Energy, and serveral others have nothing to do with setting the wholesale power rate (set by the NZ gov't). The service they provide is non-other than "power DISTRIBUTION". So if you think electricity prices are so high, don't blame the companies that deliver it - blame the NZ gov't power board that sets these base wholesale rates.

    The carbon emmissions scheme is really going to make power more expensive. The notion that the gov't will subsidize power companies to build 'clean' power generation while penalising those that don't switch to green alternatives. If you ask me, I don't know how much more green you can get by building more dams like they are in British Columbia.

    http://www.bchydro.com/planning_regulatory/site_c.html

    Now when was the last time NZ ever built a dam? I will say again, BC is a fair comparison to NZ as hydro is the main source of power generation.

    I also don't buy the argument that sending power between the North and South Island of NZ is a major feat. It's no more of a feat than BC having to send power over 1500kms away to the south where the bulk of the population lives.

    One BIG difference in usage is the type of house and heating system. We moved in January between similar sized and located houses. The one we are in now uses 1/3rd the gas of the previous house because it has a modern heating system and is well insulated.
    While I agree that modern homes today have a lot lower carbon footprint than old state houses of the 50s and 60s, you're not comparing 'absolute' power consumption figures from abroad. To give you an idea, N. American homes are wholy heated. Because of this, the amount of energy required is in far excess than what any old NZ state house would cost to heat 1 room. It can not even be compared because the carbon footprint is at least 2 - 3 times more than in any NZ house. The harse weather is the key driving factor. My neighbor centrally heats their house with natural gas and during winter it costs him around $700/month (his other neighbor pays around the same using electricity - just to prove that neither energy sources have an arbitrage difference in cost). For similiar size house in NZ, it would be the same cost (and we're talking quite a large house here). The difference in absolute $ is the same but the level of home comfort is still world's apart different (going to toilets at night on a cold seat vs. same temp throughout the whole house).

    British Columbians are moaning about the power price increase of some 10% which will bring it to like 7 cents kW/Hr. Compare that to NZ?
    Last edited by Super_BQ; 9th May 2010 at 07:27 PM.

  5. #5
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    Default House Size

    Oh as a note to consider, houses in N. America are huge by kiwi standards. So to hear $700/month heating bill may be excessive in NZ. But 4000+ sqf 2s story houses are the norm there but just not in NZ.

  6. #6
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    Here in Finland I pay 10.36 eurocents/kWh (careful with the cents, too many currencies use them) for electricity, 5.97 c/kWh is the electricity and 4.39 c/kWh is the local network. This country doesn't have great natural resources to create the energy; 25% comes from nuclear, 15% from hydro, 25% from gas/coil and rest from other sources. Slightly bigger than NZ in area and population, hydro is up in the north so the transmission distances are pretty long. We import electricity from Norway (weather dependent) and/or Russia, usually export to Sweden (right now we're receiving 1454 MW from Russia and selling 1289 MW to Sweden).

    So basicly we're quite similar to NZ but with less natural resources to produce the electricity but more industrial users to fund and use the energy. Other reference country to NZ could be Norway although they have the oil money to fund the long-term investments; 99% hydro, marginal thermal and wind production.

    if I had separate day and night electricity, it would be about -10% for night and +10% for day.

    With today's rates, 0.1036 /kWh is 0.18469 NZD/kWh, including the 22% VAT.

    I can't help thinking that with the potential hydro and thermal energy available in NZ they should invest in dams and make sure that the power network is up to the standards (a power outage is ok every 10 years, not every few months), and make the power very affordable. This helps both the people and the economy in the long term.

    PS. http://www.nationmaster.com/graph/pe...size-of-houses is interesting statistics about house sizes

  7. #7
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    NZ Herald Oct 27, 2009

    The cost of government protection of Anglo-Australian mining giant Rio Tinto from carbon and electricity charges means taxpayers will pay the equivalent of $225,000 for each job at the Tiwai Point aluminium smelter, says a carbon expert.

    "It would be cheaper for the New Zealand taxpayer to pay every single Tiwai Point worker and contractor $200,000 per annum for the rest of their lives to simply stay home," said Kent Duston of Wellington-based Autonomic Consulting.

    ===========================================

    The smelter uses up to 610MW of electricity which is mostly supplied by the hydroelectric Manapouri Power Station. The perceived reliability of power from Manapouri played a major role in the choice of building the aluminium smelter in Southland, with both the power plant and the smelter having been constructed as a joint project. The facility is the largest electricity consumer in New Zealand, and uses approximately one third of the total power of the South Island and 15% of the total power countrywide.

  8. #8
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    One of the biggest problems with utilities here is that they persist in the 70's notion that State ownership is a Good Thing.

    As far as consumers are concerned, it is not. Complete privatisation with well-run regulation is the best answer for us.

    As long as the government has an interest in keeping profits up because it gets most of them, it will have no incentive to improve things like price and service for the consumers.

    Same goes for Air NZ of course - look how low their fares are on routes where they have competition when compared to those that they do not.

    I worked for a couple of utilities in the UK and it was always a nightmare when the 5 yearly round of negotiations with the Regulator was coming up. The Board was grumpy, the senior managers were grumpy - all because they had to spend about 18 months preparing each submission to essentially beg the regulator to let them charge more and spend less!

    Usually the regulator said you can charge 50% of what you asked for and spend 25% more on improving the network than you said you were going to!
    Last edited by Kiwi Mac; 10th May 2010 at 11:50 AM.

  9. #9
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    Quote Originally Posted by Kiwi Mac View Post
    One of the biggest problems with utilities here is that they persist in the 70's notion that State ownership is a Good Thing.

    As far as consumers are concerned, it is not. Complete privatisation with well-run regulation is the best answer for us.

    ....
    The PROBLEM with privatisation is a monopoly or at best an oligopoly on KEY institutions. I've seen this over and over in Europe where things like rail transport would get sold and the first thing they would do is sell the not so profitable lines, which would end up being closed.

    On the profitable lines they would not spend a dime on maintanance, only focussing on maximised short term profit, ending in the GOVERNMENT BUYING BACK the rail road transport at GREAT LOSS.

    I can make a similar scenario for any privatisation, and because I CAN, others WILL.

  10. #10
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    Quote Originally Posted by John Z View Post
    The PROBLEM with privatisation is a monopoly or at best an oligopoly on KEY institutions. I've seen this over and over in Europe where things like rail transport would get sold and the first thing they would do is sell the not so profitable lines, which would end up being closed.

    On the profitable lines they would not spend a dime on maintanance, only focussing on maximised short term profit, ending in the GOVERNMENT BUYING BACK the rail road transport at GREAT LOSS.

    I can make a similar scenario for any privatisation, and because I CAN, others WILL.
    However, if you look at the privatisation of utilities such as water, gas and electricity in the UK, that has not happened.

    It would be illegal to decide that supplying water to the remote village of Upper Plaguetown on the Naze was no longer profitable so you were going to stop.

    In fact, in the UK, the said village would have the right to serve notice on the local water company requesting mains supply (assuming that they did not already have it and there are not many places that do not) and the water company would have no choice but to use it's full statutory powers to plan and lay a main to the village irrespective of cost and be unable to on-charge a cent of it other than their normal regulated water charges.

    Your scenario can be killed at germination by the wording of the privatisation and the regulatory laws.

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