I’ve been reading a report the OECD released this morning, and it’s occurred to me that, if we want our businesses to survive, there is a very simple thing we could or should be doing to help.  

When I say we, I’m meaning the government upfront. But, for this to happen, I think we’d all pretty much have to agree to it as well.  

That’s because it would mean giving businesses a better deal on something that all of us have to pay for —whether we own a business or not— and that’s electricity.  

So this report I’m talking about is the OECD’s 2024 economic outlook. There was one earlier in the year and Volume 2 came out at 5 o’clock this morning.  

It assesses how things are in all of its member countries and one of the key messages that comes through loud and clear is that, if we want to see better economic times here in New Zealand, we need to do something about the electricity market.  

You’ll remember how earlier in the year some manufacturing plants shut their doors when wholesale electricity prices went up so much that they were seven times higher than what they’d been 12 months earlier.  

This report seems to focus on futures electricity prices – or “forward prices” as they’re also known. Which is when electricity users can sign-up for a set price for their electricity for a certain period of time.  

The idea being that big businesses especially know what their power bills are going to be, and they don’t get surprised or caught out by “spot prices” - which are the prices charged for electricity that vary from hour to hour.  

So the futures market is a bit like fixing your home mortgage instead of having it on a floating rate.  

Interestingly, this OECD report talks about futures electricity prices being a problem but my recollection of the manufacturing closures this year is that they were forced by spot price increases.  

Either way, the OECD says electricity prices are a significant problem – which is why I think all businesses, big and small, should get government subsidies for their electricity bills.  

In fact, one of the headlines in the report —in bold— says it is essential to tackle high electricity prices.  

Here’s a direct quote, and bear in mind that these comments are specific to New Zealand. The report says: “High futures electricity prices for industry will exacerbate productivity problems by weakening business investment, especially in the green and digital transitions, as electricity is a core input for both.” 

“The electricity regulators and the government have launched reviews of the electricity market. Despite previous reforms to improve competition, electricity futures prices are high and above the threshold considered sustainable for the economy in the long run.”  

The OECD report also says: “These reviews should re-examine separating the generation and retail operations of large electricity companies to boost competition in the futures market and provide industry with more hedging options.”  

For me, what it says there about separating the power generation and power selling arms of the big power companies is a no-brainer. And Associate Energy Minister Shane Jones has already been making noises about that.  

But can you imagine how long that is going to take? Which is why I think that, in the more immediate term, we should all be subsidising businesses for what they pay in power.  

We should be doing that because businesses are vital for the economy. We should be doing it because businesses keep our smaller communities, especially, alive. When small-town businesses go, so do the people.  

And not just for the big outfits, we should be subsidising the power costs for every business. More than 90% of all businesses in New Zealand are small-to-medium enterprises.  

Now I know the way the tax system works, businesses already get subsidised power in some respects, being able to claim back the GST they pay on their power bills.  

But I don’t think that goes far enough.   

And I know that business is all about the free market and making a go of things on your own, but when you’ve got the OECD saying today that power prices have been and will continue to be an impediment to economic growth in this country, then you have to listen to that.  

More importantly, you have to do something about it. Which is why I would be more than happy for all businesses in New Zealand to have cheaper power bills ASAP through electricity subsidies. 

I’ve been reading a report the OECD released this morning, and it’s occurred to me that, if we want our businesses to survive, there is a very simple thing we could or should be doing to help. &nbsp;
When I say we, I’m meaning the government upfront. But, for this to happen, I think we’d all pretty much have to agree to it as well. &nbsp;
That’s because it would mean giving businesses a better deal on something that all of us have to pay for —whether we own a business or not— and that’s electricity. &nbsp;
So this report I’m talking about is the OECD’s 2024 economic outlook. There was one earlier in the year and Volume 2 came out at 5 o’clock this morning. &nbsp;
It assesses how things are in all of its member countries and one of the key messages that comes through loud and clear is that, if we want to see better economic times here in New Zealand, we need to do something about the electricity market. &nbsp;
You’ll remember how earlier in the year some manufacturing plants shut their doors when wholesale electricity prices went up so much that they were seven times higher than what they’d been 12 months earlier. &nbsp;
This report seems to focus on futures electricity prices – or “forward prices” as they’re also known. Which is when electricity users can sign-up for a set price for their electricity for a certain period of time. &nbsp;
The idea being that big businesses especially know what their power bills are going to be, and they don’t get surprised or caught out by “spot prices” - which are the prices charged for electricity that vary from hour to hour. &nbsp;
So the futures market is a bit like fixing your home mortgage instead of having it on a floating rate. &nbsp;
Interestingly, this OECD report talks about futures electricity prices being a problem but my recollection of the manufacturing closures this year is that they were forced by spot price increases. &nbsp;
Either way, the OECD says electricity prices are a significant problem – which is why I think all businesses, big and small, should get government subsidies for their electricity bills. &nbsp;
In fact, one of the headlines in the report —in bold— says it is essential to tackle high electricity prices. &nbsp;
Here’s a direct quote, and bear in mind that these comments are specific to New Zealand. The report says: “High futures electricity prices for industry will exacerbate productivity problems by weakening business investment, especially in the green and digital transitions, as electricity is a core input for both.”&nbsp;
“The electricity regulators and the government have launched reviews of the electricity market. Despite previous reforms to improve competition, electricity futures prices are high and above the threshold considered sustainable for the economy in the long run.” &nbsp;
The OECD report also says: “These reviews should re-examine separating the generation and retail operations of large electricity companies to boost competition in the futures market and provide industry with more hedging options.” &nbsp;
For me, what it says there about separating the power generation and power selling arms of the big power companies is a no-brainer. And Associate Energy Minister Shane Jones has already been making noises about that. &nbsp;
But can you imagine how long that is going to take? Which is why I think that, in the more immediate term, we should all be subsidising businesses for what they pay in power. &nbsp;
We should be doing that because businesses are vital for the economy. We should be doing it because businesses keep our smaller communities, especially, alive. When small-town businesses go, so do the people. &nbsp;
And not just for the big outfits, we should be subsidising the power costs for every business. More than 90% of all businesses in New Zealand are small-to-medium enterprises. &nbsp;
Now I know the way the tax system works, businesses already get subsidised power in some respects, being able to claim back the GST they pay on their power bills. &nbsp;
But I don’t think that goes far enough. &nbsp;&nbsp;
And I know that business is all about the free market and making a go of things on your own, but when you’ve got the OECD saying today that power prices have been and will continue to be an impediment to economic growth in this country, then you have to listen to that. &nbsp;
More importantly, you have to do something about it. Which is why I would be more than happy for all businesses in New Zealand to have cheaper power bills ASAP through electricity subsidies.&nbsp;

Every weekday join the new voice of local issues on Canterbury Mornings with John MacDonald, 9am-12pm weekdays.

It’s all about the conversation with John, as he gets right into the things that get our community talking.

If it’s news you’re after, backing John is the combined power of the Newstalk ZB and New Zealand Herald news teams. Meaning when it comes to covering breaking news – you will not beat local radio.

With two decades experience in communications based in Christchurch, John also has a deep understanding of and connections to the Christchurch and Canterbury commercial sector.

Newstalk ZB Canterbury Mornings 9am-12pm with John MacDonald on 100.1FM and iHeartRadio.

Every weekday join the new voice of local issues on Canterbury Mornings with John MacDonald, 9am-12pm weekdays. It’s all about the conversation with John, as he gets right into the things that get our community talking. If it’s news you’re after, backing John is the combined power of the Newstalk ZB and New Zealand Herald news teams. Meaning when it comes to covering breaking news – you will not beat local radio. With two decades experience in communications based in Christchurch, John also has a deep understanding of and connections to the Christchurch and Canterbury commercial sector. Newstalk ZB Canterbury Mornings 9am-12pm with John MacDonald on 100.1FM and iHeartRadio.

Every weekday join the new voice of local issues on Canterbury Mornings with John MacDonald, 9am-12pm weekdays.

It’s all about the conversation with John, as he gets right into the things that get our community talking.

Canterbury Mornings with John MacDonald

John MacDonald: Here's one solution to the power price problem

https://api.omny.fm/orgs/7784f840-c291-422a-924b-ad9000bbad71/clips/039085a9-001b-4212-afe8-b23d0180f640/transcript

Advertisement