Power crazy is use more, pay less

HIDESIGHT

The Green/Labour power plan saves rich families $2-plus for every dollar that it knocks off the power bill of poor families. That’s because rich families use more than twice as much power as poor families.

The widely reported $6-a-week saving is for the average household. The savings for the bottom 10% of families is only $4. And that’s Labour’s “upper-end” scenario.

The rich get more dollars out of the policy than the poor. That’s because they have big homes and don’t have to fret about switching off heaters and lights. The poor don’t enjoy that luxury.

The result is that the Green/Labour power policy on its own analysis gives more money to the rich than to the poor. It also reinforces how poorly the policy has been thought through.  

But it’s worse than that. The analysis backing the policy assumes that the wholesale price of electricity can be knocked back 30% without any impact on electricity use or production. That’s a foolhardy assumption.

Electricity prices encourage both electricity conservation and electricity production. Some part of the Green/Labour policy brain must grasp that first purpose.

After all, they have been beavering for years to hike power costs so that we will all use less and, therefore, they argue, stop the planet from overheating. That’s why we must suffer the emissions trading scheme.

Some part of their policy brain must also get the second purpose. Their argument for taxing fossil fuels through the ETS is also that it discourages the burning of fossil fuels and encourages alternative energy generation.  

So price hikes discourage use and price cuts discourage production.

But somehow the bits of policy thinking don’t sum to a coherent whole. The Green/Labour policy now assumes that prices can be cut and cut dramatically without consequence.

Worse, we now have the ludicrousness of two political parties simultaneously campaigning for (a) higher power prices to combat global warming and (b) lower power prices to help the poor and to assist business. It doesn’t add up.

The effect of the government forcing down the wholesale price is clear: more people will use more power. The incentive to switch off the swimming pool heater will be diminished.

Forcing down the wholesale price will also mean less power produced. The stations with the high operating costs that now keep us afloat will be switched off. The 30% cut in the wholesale price will render them unable to cover their operating costs.

Let me write this clearly for the policy’s supporters reading this column. A greater quantity of power being demanded. A lesser quantity being produced. That means shortage. And shortage in the electricity system means rolling blackouts.

Businesses will be out of power for parts of the day. So, too, will be homes. There will also be no new investment in power plants. The incentive to invest in power production will have evaporated.

No doubt the Green/Labour government would attack the electricity generators for their failure to supply power. And then take them over.

You might be thinking that it would be a whole lot easier if Green/Labour just promised the poor the extra cash. You would be right. The government could give poor families that $4 a week for a total taxpayer cost of $38 million.

That would be way cheaper and a lot easier than up-ending the entire electricity industry. Poor families would have their $4 guaranteed and the country would still have an assured supply of electricity.  

But then this policy is all about what works for politicians. Not what works for the country.