Simeon Brown: Energy Minister on the Government pressing on with LNG Import Facility

The Government is pressing on with their proposed LNG Import Terminal build, but they're binning a proposed levy to fund it.

The Energy Minister says says gentailers are being consulted on a fair funding model, but Kiwis can be certain they won't be charged in their power bills. 

Simeon Brown explained it's the job of the big power companies to manage the dry year risk - and the Government's sending that obligation over to them. 

"We've gone through a process, we've identified LNG importations as the fastest and cheapest way to deal with it, but ultimately, the power companies are profitable companies and they should be the ones managing that risk." 

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Episode Transcript

Speaker 1 (00:00):
So the government's scrapping plans for a levee read tax
to pay for the billion dollar LNG import terminal. They
haven't been very clear though on how it will be funded.
It expects to sign a contract with a provider later
in this year. So to talk about this and the funding,
I'm joined by Energy Ministers Simeon Brown. Hello, Simeon, Good evening.
First of all, why no levy well risk?

Speaker 2 (00:22):
The dry year risk, which is the issue that we're
dealing with here, sits with the electricity sector, with the
big power companies. It's their job to manage the dry
year risk, and we are putting the obligation very much
in via camp to make sure that they manage it.
We've gone through a process, we've identified LNG importation as
the fastest and cheapest way to deal with it. But ultimately,

(00:45):
the power companies are profitable companies and they should be
the ones managing that risk and paying for the new facility.

Speaker 1 (00:51):
Yes, so when you say the electricity sector will builders,
you're basically talking about the gent tailors.

Speaker 2 (00:58):
Yeah, that's correct. So the big power companies are the
big gent tailors. They are the ones who have a
responsibility to manage the dry year risk and to make
sure that you know that risk, which is when the
wind isn't blowing, the sun's not shining, and we have
a dry year, that cost is not just being passed
on to consumers. And you know, what we've seen is

(01:18):
that at the moment, we've had a thirty to fifty
dollar per Mega what our cost being added to the
price of electricity because there's been a dry year risk
in our bills. Everyone's paying for that on their bills.
And what we're saying is, actually these companies need to
manage it.

Speaker 1 (01:33):
Okay, I get all that, but now these companies are
going to have to build an energy import terminal at
the cost of a billion dollars, and the question is
when they just passed that cost to us the public
through higher power.

Speaker 2 (01:43):
Since well, since we announced the Lergy Importation terminal back
in February, the forward price for electricity has reduced because
the risk premium that is being passed on to consumers
has gone down. And so we've actually seen the forward
price go down by about twenty dollars a mega what
hour since that was announced. That's actually a saving to

(02:04):
the New Zealand economy of about eight hundred million dollars
per year, and so the whole point of pursuing this
is to take that risk out of our energy system
and put downward pressure on power bills because we will
have a more secure supply of energy due to the
fact at the moment we've got this risk built in

(02:24):
because we've got dwindling natural guests supplies here in New Zealand.

Speaker 1 (02:28):
That's all well and good, but then we throw a
billion dollars on top of that to build the terminal
in the first place, and suddenly the power ends out
exactly where it is before. I mean, is there any
way that is not correct?

Speaker 2 (02:38):
Because it is not correct because what we've seen is
the forward price has reduced, oh I see by about
twenty dollars a mega what hour, and the cost would
have borne out over a period of time. But ultimately
that the responsibility to fix this issue sits with the
big power companies. They are profitable companies, and ultimately what
we're doing as a government is playing a coordinating role

(02:59):
to ensure that New Zealand has a secure energy future.

Speaker 1 (03:02):
Simon, is there any way you can ensure that they
will not take the billion dollar cost of building the
terminal and put it onto the power bill because you
can't do that.

Speaker 2 (03:09):
Can you. Well, what we're seeing they get, what we've
seen in the forward price of electricity is the forward
price go down.

Speaker 1 (03:17):
Including the costs, including the cost of the terminal.

Speaker 2 (03:20):
Well, Ultimately, the cost of the cost of the cost
of an energy facility would go into their cost of
operating their business, just like the cost of them building
any other form of generation. Ultimately, they can only earn
and receive the funding that or the revenue that comes
from what they can sell power for. And so we're
seeing reduction in that forward price that means and that's

(03:43):
an eight hundred million dollar per year reduction in the
cost of energy to the New Zealand economy. The whole
point of this is to take that risk premium off people,
off businesses, make our energy more affordable by dealing with
the security supply issue. And the challenge here and the
challenge the challenge I've got here, Andrew, is that we

(04:03):
have dwindling gas supplies, not helped by the previous government
having band oil and gas exploration, but we have dwindling
gas supplies and when we have a dry year, the
power companies at the moment are taking either taking guess
from industrial users, or the price goes up significantly for
a company totally at a cost which is borne by
the economy and risks thousands of jobs. So we said, we.

Speaker 1 (04:26):
See, you've said that a lot, and we understand that.
What I wanted to ask was you're increasing the powers
of the electricity authority. You're also planning to increase fines
for power companies. Is this partly to make sure that
the power companies don't start gouging us again with the
power prices because they have to fund the construction of
a terminal.

Speaker 2 (04:46):
This is about making sure that the responsibility sits very
clearly with the peak the big power companies. These are
profitable companies who have not and we have not. We're
increasing the fines because we want to get very clear
that the responsibility sits with them, and we want to
increase the power of the electricity authority so that they

(05:07):
can where the big power companies don't manage that responsibility.
There are serious consequences if they fail to do so.

Speaker 1 (05:13):
Simeon, I thank you very much for your time. Understand
your logic. We'll wait and see if it works.

Speaker 2 (05:18):
For more from hither, Duplessy Allen Drive.

Speaker 1 (05:21):
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