MAC: Mines and Communities

Comalco defends power subsidy, while citizens protest

Published by MAC on 2004-02-19

Comalco defends power subsidy, while citizens protest

The longest-enduring eco-political controversy in Aotearoa/New Zealand centres on the power price paid by Comalco, the wholly-owned subsidiary of Rio Tinto which operates the country's vast Tiwai Point aluminium smelter. Even before the plant was constructed in the early sixties, there were nation-wide protests at its intention to harness for power the pristine waters of sacred Lake Manipouri. And the vast subsidies secured by Rio Tinto, at tax payers expense, have never been properly divulged.

The debate over power prices erupted again last month with allegations that a government cost-benefit analysis shows Comalco continues to drain the country's economy and power supplies - a view not surprisingly disputed by the company.

Meanwhile Comalco has - for a third and record time - been cited as one of the "worst transnationals operating in Aotearoa/New Zealand, by a panel of leading citizens.

Smelter closure 'won't end power shortages'

By Marat Steeman, Dominion Post (New Zealand)

19 February 2004

A view that New Zealand would have no power shortages if the Tiwai Point aluminium smelter was not using 15 per cent of all electricity has been rejected by its owner Comalco as "short-sighted".

New Zealand's biggest energy user, the New Zealand Aluminium Smelter, 79 per cent owned by Comalco, will be fighting next year to rein in a substantial increase in its power bill when its negotiates a new power supply contract with Meridian Energy for the 10 years from 2012.

A media report this week suggesting a government agency's cost- benefit analysis on the smelter showed a negative contribution to the economy indicates the rhetoric before the negotiations has already started.

A spokesman for Energy Minister Pete Hodgson said the minister had been told no one in the Economic Development Ministry or the Treasury was aware of any cost-benefit study.

Brisbane-based Comalco chief financial officer John Strachan said yesterday that a suggestion New Zealand electricity shortages would disappear if the smelter was not operating was "a short-term solution".

"Any economy needs business to provide income and export revenue for balancing the books, so we argue that would be a short-sighted approach to the power situation in your country.

"And you'd find many people in Southland would be out of work," Mr Strachan said.

The smelter employs 960 full-time equivalent staff. Its exports of aluminium were $1 billion last year.

The amount of electricity it uses each day would provide power for about 700,000 homes.

"We still remain very committed to the investment in New Zealand," Mr Strachan said.

"But we are hurting through power prices and exchange rates."

However, he was hopeful of being able to influence policy to create a more transparent and better functioning market place with price determination.

Stronger regulation through the new Electricity Commission was a good step.

Last year Comalco NZ director Barbara Elliston said a move to generating power using liquefied natural gas could see Comalco quit New Zealand because the cost of electricity would be too high.

The smelter buys about 10 per cent of its power on the wholesale spot market and 90 per cent under long-term take or pay contracts with Meridian Energy.

The price for the 90 per cent was recalculated yearly and was linked to the movement in the spot price.

Mr Strachan said that in the past three years its power price had increased 50 per cent.

"So we are exposed to the spot price quite significantly in all of our power pricing."

Comalco would contribute $3.65 billion to the New Zealand economy from its start in 1971 to the end of its present power contract in 2012, he said. That included salaries, taxes and buying goods and services.

The following judgment was delivered on Comalco by the "Roger Award" panel selecting "the worst transnational operatingi in Aotearoa/New Zealand) in 2003:

"Comalco takes 15% of New Zealand’s electricity at a very cheap and secretive rate. They continue to milk our power supply, despite power shortages. Their long-term contract at a fixed price was made in 1961 and still has 22 years to run! During 2003, Comalco campaigned for an exemption from its $25 million share of a levy for electricity supply in New Zealand in “dry years”. Such freeloading is an abuse of its privileged position and displays an arrogant disregard for ordinary consumers who subsidise their cheap power".


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