Power prices hit another factory, with pain set to continue

Wednesday, 7 August 2024

Government concerned about rising power prices, and in part blames the Labour government for stopping exploration for natural as.

A paper and recycling mill in Penrose is the latest casualty of sky high electricity prices.

Oji Fibre Solutions chief executive Jon Ryder confirmed plans to close the mill on Wednesday, which would put 75 people out of work.

“Energy costs have approximately doubled in the past year and are sky rocketing,” Ryder told Stuff.

Why it matters

The workers at Penrose aren’t the only people whose jobs could be lost because of the record-high cost of electricity in New Zealand.

Earlier this week, Stuff heard from anxious families in Ohakune. The 300 workers of the Winstone pulp and timber mills, who come from across the Ruapehu District, were told to lay down their tools and turn off the machines. That’s because the soaring price of electricity. The company said it was too expensive to keep the mills running.

The rising price of wholesale electricity is likely to hit households soon, according to industry experts.

Oji’s Penrose Mill could close in December.

The production shutdown was already having ramifications for the district, with transporting companies and contractors out of pocket and stressed about their own livelihoods.

The Winstone pulp and timber mill workers were told to shut down for two weeks, with the company hoping that meetings with the Government would find a way to remain open.

Ruapehu's Winstone mills, facing soaring electricity prices, have halted operations, putting 300 jobs at risk. Electricity costs have surged 600% since 2021. The company seeks solutions while local jobs hang in balance.

Winstone chief executive Mike Ryan said their electricity costs were up 600% since September 2021.

Regional Development Minister Shane Jones said last week’s wholesale electricity price was the highest in the developed world, sitting at around $600 per mega watt hour.

The breakdown

The Penrose mill had been running at a loss for three years, Ryder said. During that time, wholesale electricity prices have been steadily increasing.

“These losses are caused by several issues, including dramatically rising energy costs,” he said.

“We’ve looked at different options to improve the mill, including technology to save input costs. Unfortunately, these efforts have not been successful to date.”

On Wednesday, he said they would be discussing any alternatives to closure with the workers and unions - but he said they had tried to consider all options before proposing the closure of Penrose Mill.

The mill uses pulp and recycled paper as a “fullcircle paper recovery facility”.

Oji employs 75 people at its Penrose facility.

First Union organiser Justin Wallace said the Penrose workers were told at 8am that the mill would likely close just before Christmas.

Who said what

Penrose Mill machine operator Ben Wolferstan said they had been told they were running one of the most efficient mills in the country.

'Orders are piling in and we’ve been repeatedly told that we’re efficient, and that our plant is profitable - did something change overnight,“ he asked, shortly after receiving the proposal.

'I don’t know what’s next but there has to be some way to save the mill, bring down energy costs, and make sure that wastepaper isn’t going overseas or sent to landfill instead of being recycled.'

The unions called on the Government to address the rising cost of electricity.

'More and more manufacturing sites are closing, with large scale worker redundancies,' said E Tū union organiser Joe Gallagher

Energy Minister Simeon Brown blamed the previous Government for New Zealand’s electricity woes.

'If this continues there will be no manufacturing left in New Zealand.'

Ryder said they had discussed these issues with the Government before announcing plans to close Penrose Mill.

The arguments

John Harbord, chairperson of the Major Electricity Users Group, said most manufacturing and logistics companies were struggling.

He said those companies were having to compete with nations such as Australia, where the wholesale electricity price was below $100.

Energy Minister Simeon Brown said low rainfall and low gas reserves had driven up the cost of electricity.

“The tight gas supply is a direct result of the last government’s reckless energy policies. They banned oil and gas exploration,” he said.

The Labour, NZ First, Green coalition banned new oil and gas exploration in 2018.

But Labour energy spokesperson Megan Woods said the Government had no credible plan to lower the cost of electricity. She said there hadn’t been any profitable gas or oil supply found in New Zealand for decades, so the ban had no effect.

“Simeon Brown, after nearly nine months, is not across portfolio,” she said.

“It's time for that minister to stop blaming the last government and get on with his own work program, which is missing in action.”

What next?

Winstone and other timber and pulp industry figures were set to meet with ministers on Wednesday, with the price of electricity a top issue for discussion.

Finance Minister Nicola Willis is seeking urgent advice on sky rocketing electricity prices.

Electric Kiwi chief executive Luke Blincoe said households should prepare for steady price rises, as the wholesale costs would be passed on to everyday customers.