'Ridiculously high' power prices threatening manufacturers - Shane Jones

Manufacturing and industrial companies are being put "in a perilous situation" by 'gentailers' who show no regard for the country's interests, Associate Energy Minister Shane Jones says.

The announcement that Winstone Pulp International was shutting was "hideous news" that came in the same week as the "stupendously high energy dividends" were being announced by the power generating companies, he said.

The forest products company is planning to shut down its Tangiwai sawmill and Karioi pulp mill and cut more than 200 jobs due to power prices.

It says energy prices have skyrocketed, and now account for over 40 percent of the costs.

Jones told Morning Report: "The energy prices most certainly are making manufacturing and industrial firms in a perilous situation. ... The energy costs in New Zealand for manufacturing and industry are ridiculously high and it is imperilling the viability of industry and manufacturing in regional New Zealand."

Regarding a call from the Ruapehu district mayor for a subsidy to help Winstones, he said "the acid" was on the energy companies which had the option of doing a deal like one supplier had with the Rio Tinto aluminium smelter.

There was no proposal in front of him to pay any subsidy to the likes of Winstones, however, he believed the high energy prices would force others out of business also.

The government recognised the country was facing an energy crisis, however, Meridian Energy did not even believe there was one, he said.

"How on earth does a politician or does industry have any effect on a company that believes there is no crisis?"

The energy companies were not giving any regard to the overarching interests of the country, he said.

The gas industry had collapsed and legislation would be passed shortly to overturn the ban, accelerate some drilling and encourage more gas into the market.

"But that in itself does not solve the deeper problem. The rules and settings and regulations that subsist in the energy sector are leading to these grossly unhelpful outcomes."

Jones said he was due to meet the head of the Electricity Authority on Wednesday to see if an energy conservation campaign was needed.

'Ripple effect' on Ruapehu district

Meanwhile, the government needed to pay a subsidy to Winstone Pulp International while making stable energy prices a priority, the mayor of Ruapehu District Weston Kirton said.

He believed the job losses would have "a ripple effect" through the community as the operation was "the backbone" of the regional economy with $25 million-$30m generated annually.

"I think it's just so bad for the country too to learn that this has come about because of the input costs into their product."

Winstone Pulp exported but could not compete when it was paying around six times more for energy than some of its overseas rivals, Kirton said.

The government was receiving dividends from its shareholding in energy companies that were making millions of dollars annually but on othe other hand, people were losing their jobs and leaving New Zealand, Kirton said.

"That's a sad situation for our country."

The Winstone Pulp workers were highly skilled and some would move to Australia for jobs, he said.

"The government needs to sit up and actually realise that these are real people that work in the community and also in our country."

The government should intervene with a subsidy for Winstone Pulp International to keep it operating.

"We want to see these people at work. We want to see this mill operating and competitive overseas and I think the government needs to step up with some kind of subsidy, some sort of intervention that gives them a lifeline and then resolve the issue of consumption further down the track."

It also needed to get the regulators and energy operators together "to join all the dots" on energy pricing.

The country couldn't supply enough power to meet its energy needs and he was concerned other districts would suffer a similar fate.

'Heartbreaking' for workers

First Union delegate Jude Sinai who works at Winstone Pulp International also said the union was asking the government to step in and help the company lock in a better pricing structure for its power.

"There's too much risk in continuing to try and operate. We're looking for some assurances around being able to give us some long-term operating costs."

Sinai said it would be impossible to find another operator to take over the mill with the current energy prices.

Instead, they were faced with the devastation of job losses and the impact it would have on their communities.

"It's really heartbreaking for all our members and workers. ...The news yesterday to a large degree was unexpected."

It was a "sobering, sad" time for everyone, he said.

Contractors and other support companies would be affected if the operation ceased, he said.