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Switch off network’s profit focus

Opinion Piece

Rick Thorpe is Chairman, Tairawhiti Residents Association

Councillor Meredith Akuhata-Brown’s question in The Herald this week “are the beneficiaries benefiting?” is timely.

At the August meeting of Eastland Community Trust (ECT), chairman Michael Muir said beneficiaries wanting to see significant changes to the nature and scope of the trust’s activities should attempt to do so through the annual statement of intent process.

The Tairawhiti Residents Association is asking for a change to the “profit focused” model of Eastland Network (ENL). Our submission demonstrates beneficiaries are being significantly overcharged by ENL. Contact suggests ENL’s network charge now represents 46 percent of a resident’s power bill, the third highest in the country.

Our network made a huge profit last year ($13 million before interest and tax) and yet it still increased its charges. Most community-owned networks (72 percent) pay profits back to their consumers. Ours only paid $3.5m back to ECT.

Power bills in New Zealand have increased 130 percent since 2002, this after we were told the neoliberal reforms of the 1980s would reduce power charges. The profits and assets of our network have been used as leverage by Eastland Group (EGL) to grow its investments (it plans $200m of capital expenditure over the next five years) while the dividend return on asset values, paid to ECT, is an unimpressive 1.6 percent.

EGL is a classic case of neoliberal commerce, focused on maximising its profit and asset values to justify its executives being paid extravagant salaries at the expense of their beneficiaries/shareholders. As Meredith pointed out, it is blatant wealth inequality right here in Tairawhiti.

It is a sad irony that ECT funds community grants and regional development by overcharging its beneficiaries.

Reducing the community’s spending power is not a recipe for prosperity, and it is patronising for ECT to suggest they know how to better spend our money. It now has over $100m in an investment fund, enough to continue the community grants scheme without receiving any further network profits.

There is general agreement that new technologies threaten the future of our network. Cheaper rooftop solar, smart meters, new batteries, electric vehicles and internet trading of energy are combining to revolutionise the sector. If our network does not embrace the new opportunities and shift to a “social enterprise” or “not for profit” model, it will quickly become irrelevant and a burden on the remaining customers — those who can least afford it.

There is an exciting opportunity for our region to have a network that supplies renewable energy, from Lake Waikaremoana, at near zero marginal cost, encouraging many to stay connected. Our isolated rural communities could be transitioned to local generation, reducing the need for urban/rural subsidies. Our network could incentivise those who wish to install rooftop solar to add to the local generation capacity and security of supply.

The days of ENL making exorbitant profits at our communities’ expense are over. Our submission contends there is no viable future for a “profit driven” network model, and if we want it to have a sustainable future, the sooner we significantly reduce network charges the better. Our new “not for profit” model would embrace the principles of manaakitanga, where the common good will take precedence over accumulating surplus profits. As Max Harris urged us to consider, when speaking here in August, “we need the pulse of our social conscience to start beating harder again”.

The coalition agreement has a review of retail electricity prices among the priority actions to be undertaken by the new Government in its first 100 days. Clearly it is time for a change. Our full submission is available at www.tra.net.nz and on our facebook page.

Footnote from Eastland Network (in response to a query on the figure provided for the network charge in Gisborne power bills):

The MBIE survey in May 2017 showed the delivered residential electricity price in Gisborne was 33.9 cents per kilowatt hour against a national average of 30.7 c/kWh. Of the 42 regions, six had higher prices than this. Unsurprisingly, these were regions with similar rural, low-density networks: Buller, Central Hawke’s Bay, Marlborough, Eastern Southland, Northland and West Coast.

Lines charges within the Gisborne region are 45.57 percent of the bill across domestic and non-domestic customers. According to MBIE’s survey, there were seven other regions where this figure was higher.

It’s important to note that lines charges include transmission (Transpower) and distribution (Eastland Network), as well as local government rates and central government agency fees.

The decision to split out the lines charges within a consumers’ electricity bill is up to the electricity retailer. Most choose not to, although Eastland Network’s position is that it supports and encourages this separation.

Rick Thorpe