Electricity Industry Amendment Bill

We come first to the Electricity Industry Amendment Bill. Part 1 of this bill is clauses 4 to 43 and Schedule 1, “Amendments to the principal Act”. The question is that Part 1 stand part.

Thank you, Madam Chair. It is a pleasure to speak on this bill. We in the National Party strongly believe that consumers and businesses and households should have affordable electricity, particularly in this current environment, where electricity prices—the cost of electricity itself; the energy—have gone up considerably under this Government. It has been a quite noticeable impost on households and businesses in particular. Businesses have faced higher energy prices at a much faster rate than domestic consumers. In fact, it has really put the viability of some businesses right on the line.

We note that last year we had businesses having to shut down because the cost of electricity was too high. The Electricity Authority has looked into this and can’t find why just over $30 per megawatt hour is an unexplained extra cost in electricity, and they don’t know where that’s come from. Unfortunately, they haven’t really been looking into that. Hopefully, they will do now, in the future, and find out exactly why we have that extra cost in our electricity.

The electricity sector is actually in a bit of a mess. Next month, even Transpower, the system operator, is predicting that we will run short of generation on a few dates. It’s unbelievable that we would be in this case, in this situation.

💬 Maureen Pugh: It’s Third World.

It is almost Third World. That’s right, Maureen Pugh, the soon to be member for West Coast-Tasman. That is a shameful situation in a country that deems itself to be First World. We are, unfortunately, following in the footsteps of what has happened in Germany in particular, and in Europe, where the value of an open and competitive electricity market has been called into question because of what’s known as the energy trilemma—putting affordability, reliability, and sustainability as the three legs of that trilemma—calling that out and putting it off balance by putting a focus and subsidising intermittent renewable electricity sources at the expense of reliability and affordability. We are going down that path, and this bill does nothing at all to address the energy trilemma.

Unfortunately, the Minister has not explained why one of the main provisions in this—the electricity consumer agency—is needed when we have a Commerce Commission to cover off the issues that it will look at. I’ve met with the new group and they’re nice people and I’m sure they’ll do a good job, but they’re doing a good job of replicating a job that someone else is doing. This is unnecessary red tape, which is something the Government is very good at. I have to give it to them—if this was the Commonwealth Games, they’d get a gold medal in red tape. But, unfortunately, red tape strangles the life out of the economy, and we can’t have that. The Minister has had no satisfactory explanation for that.

So, Madam Chair, I will come to a question in a moment, but I think that it’s very important that New Zealanders understand why there’s going to be another leg of bureaucracy added into a system that has a very good Commerce Commission. They have their faults, and there’s no doubt about that, but, actually, they have the ability and the funding to carry out the necessary investigations to deal with this. It’s another group that’s a feel-good thing, and I just don’t understand the need for that, so I would like the Minister to address that, please.

Thank you, Madam Chair, and I will address a couple of the points as well as the question that the previous speaker Stuart Smith raised. I think it is really important that we do stick to the facts when we’re discussing our electricity industry.

So, first of all, there was a claim by the member who’s just spoken that electricity costs have gone up in New Zealand. I think if the member consults the electricity in New Zealand, the data that’s coming out is very clear about what is happening to electricity costs, both at residential and commercial level in real terms. So if we have a look, what’s happened: actually, for residential, we’ve seen a minus 2.3 percent cost in electricity costs for residential consumers. For commercial, we’ve seen minus 1.2 percent. So I think it’s really important we do look at that.

None the less, there are issues with the wholesale market, and this is a stream of work that the Electricity Authority has been doing a large amount of work on. They’ve done some report backs, and if the member wants to follow that work closely, he will know that actually there will be a further report back, and that’s been well signalled by the Electricity Authority and the depth of the work that they’re doing in that area.

I’d also just like to address some of the scaremongering about the notices that Transpower puts out, which are an absolutely standard part of the way that Transpower operates. What they have signalled is that in the coming weeks, next month, there will be some days when there is tightness in the electricity market. This is standard, and this is something that happens all the time; it is how our market works. That works as a signal to generators to up generation and to bring more on stream.

I’d also like to address the somewhat absurd claim that the member made that New Zealand is in danger of following down the path of Europe and Germany. I can assure that member, after having just returned from a trip to Europe and Germany and talking with those in the energy sector, that the main concern there is actually the situation with gas due to the war in Ukraine. The fact that 40 percent of Europe’s gas comes from a pipeline from Russia which is now curtailed is what is upsetting that energy market. If anything, if you speak to any of the participants in that market, they’re talking about what they can do to stimulate the building of more renewable energy at pace.

But I think it is really important that we look at this bill, because this bill looks to do some very specific things. Many of them are the result of the Electricity Price Review’s recommendations.

The first question that the member has asked is around the role of the Small Electricity Consumers Agency and why we would do it. This has been well traversed. What we do know from evidence in other jurisdictions, where consumer legislative councils have legislated authority, like we’re putting in place with this bill, is that you do see resulted lowered consumer utility bills, compared to jurisdictions that do not have them.

This advocacy council will be funded through any levy regulations being made. That would result in probably a less than $2 per year cost. As to the reason why it was done, the Electricity Price Review panel spelt that out very clearly. Our large participants in the energy market have very clear, very well-funded advocacy services and their voices can be heard. Residential consumers and, indeed, small businesses were a group that the Electricity Price Review pointed to, whose voice is not heard and who don’t have that advocacy in the same way, so there was a strong and persistent need for New Zealand to fill the gap in its network of who it is that has the input into how we make policy in our electricity sector.

This brings us into line with how most countries would seek to protect both residential consumers but also those small-business consumers who are subject to the same pressures as many households and certainly do not have the power of our major electricity users or their industry bodies to lobby on their behalf. Thank you, Madam Chair.

Thank you, Madam Chair—good choice. In relation to this particular bill, I even called out to my colleague Stuart Smith that the very question I was going to ask in relation to clause 11, he had already asked. But in listening to the Minister, I have to say that it was actually not very clear in her answer as to the question that was posed by my colleague.

He did ask why this Small Electricity Consumers Agency was going to be formed, and I would add, further to my colleague’s question, that it actually says in new section 22A(4) in clause 11, “In approving a person or persons under subsection (2), the Minister must be satisfied that the person has (or the persons collectively have) the ability to perform the function of the agency.” That suggests that the Minister will appoint, and I would like to find out what kind of criteria or abilities these people actually have in the industry that they are deemed better than the Commerce Commission which already performs the function. Does she believe that the Commerce Commission does not do what they are actually funded to do, and why is there a need to bring this new agency about? It just seems like it is the Minister who wants to control an agency.

The reason I say that is I go to new section 22A(5) in clause 11, and it says, “The agency may determine its own procedure, subject to any directions given to it by the Minister.” So that is completely contrary, in the sense that on one hand, it is suggesting that it is going to be completely independent, but it is not really.

It seems really typical of this Government to create a perception that it is supposed to be independent, but it is actually not really independent, because it is getting direction from the Minister, so it will only do what the Minister tells it to do. I mean, you would have thought that when they are looking at consumer issues or when they’re looking at investigating where there is a fair price being charged by the electricity companies, for example, and consumers are not being overpriced on their electricity, you would want an organisation or an agency, or whatever is looking into it, to be independent, so they are not influenced by anyone. In this particular instance, it seems that they are influenced by the direction of the Minister, and I would like clarification on that, please.

Thank you, Madam Chair. There are a number of problems to solve with the electricity industry that would deliver better outcomes for consumers and business, and the environment. The problems to solve for electricity are security of supply, affordability, and, of course, the environmental impacts so that decisions we make about how we generate electricity and how we deliver that electricity to consumers and businesses have the smallest environmental footprint. Now, that’s not just addressing climate change; it’s also considering the impact of, say, building wind farms in the sea in coastal areas, which is not something New Zealand has done before. It’s the environmental impacts of hydropower on sensitive freshwater ecosystems.

But the Government has created a whole lot of problems for the electricity sector and consumers of energy that it didn’t need to create through its targets: 100 percent renewable electricity, which the industry has pointed out is going to be a very, very expensive outcome to achieve. It’s that 80:20 rule: the first 80 percent of your goal is usually readily achievable in the time frame, but that last 20 percent is really difficult. Well, New Zealand is often at 95 percent renewable on a good day, when the wind is blowing, the turbines are spinning, and the turbines in the dams are spinning full noise. That last 5 percent could cost billions, or tens of billions, to become a 100 percent renewable electricity nation, and it’s not necessary because there are other ways to solve that issue of environmental impact from these activities.

Then we have interventions that the Government has signalled, like the Lake Onslow dam project, a project that will flood a unique wetland in the South Island high country that could take decades to build. I mean, as an example, the Clyde Dam, announced in 1979, was completed in 1992 at a cost roughly three times initial estimates. There have been no estimates for Onslow, but it wouldn’t be unreasonable to say tens of billions of dollars and decades. If this Government remained in charge for any longer than October 2023, you could probably add a decade to that by their history of failing to deliver.

Other signals: the green investment and decarbonisation initiative—I’m getting giddy and dizzy thinking about it, Minister. It’s spinning me out how much money this Government has wasted on buying new, expensive, electrical boilers for brewers, for multinational companies that make beer and sell it to consumers, who pay them money. Now, who knew that those international brewers need a subsidy from the New Zealand taxpayer? Kids who work at The Warehouse and pay tax through their part-time earnings are subsidising multinational brewers to replace a gas boiler or some other boiler with a brand new electric boiler, courtesy of this Labour Government.

Then we’ve got the Resource Management Act barriers to develop renewables. Now, it’s been decades since New Zealanders and businesses identified the problems with the Resource Management Act in trying to get consents to build stuff, but it’s not just getting consents to build new stuff. If you run a hydroelectric dam on, say, the Waikato River—and there’s many, many dams like that built in the 1950s and 1960s—which underpins New Zealand’s current renewable profile of nearly 95 percent renewables on a good day, and if you need to re-consent that dam every 25 or 30 years—

CHAIRPERSON (Hon Jenny Salesa): Order! Does the member have questions of the Minister in relation to this particular bill?

Thank you, Madam Chair, I do, relating—

CHAIRPERSON (Hon Jenny Salesa): I invite the member to come back to this bill.

Thank you, Madam Chair. So just to close off, there are many problems to solve not helped by the Governments proposals, interventions, and targets. Then we come to this bill, which proposes, amongst other things, widening the objectives of the Electricity Authority to include the additional objective to protect the interests of domestic consumers and small-business consumers in relation to the supply of electricity, and in relation to the dealings of industry participants with domestic consumers and small businesses, the authority is to protect the interests of domestic and small-business consumers. Well, Minister, there a number of ways that the Government could protect their interests. Firstly—firstly—it could leave the market participants to solve—

Order! Order! The member’s time has run out.

Thank you very much, Madam Chair. Well, this is an interesting bill, having been the energy and resources Minister at a time when renewable energy in New Zealand was 84 percent at one stage. I understand that it’s now around 63 percent, or perhaps the Minister will eventually, at the end of my contribution, want to answer that.

I’ve been looking at something, and I heard the contribution from the Minister and I thought she was quite sarcastic towards my colleague Stuart Smith—very unkind and sarcastic. She said, “If only he knew his numbers”. So I went on the look for some of those numbers to update myself, and I found that there was a paper put out by the Ministry of Business, Innovation and Employment—the Minister’s own ministry—called Energy in New Zealand 2022. There was some very good information in there, which probably helps to tell us why we’re in this sorry state when it comes to renewable energy.

So this is what it says: “Coal imports exceeded [exports] for the first time since 1990.”—so this is for the year of 2021. “This meant that New Zealand was a net importer of coal.”—for the first time since 1990, by the way. “Coal imports increased by 69 per cent … the highest level on record. This was due to higher imports of sub-bituminous coal, which was driven by the demand for electricity generation as well as constraints on the ability of domestic producers to supply the required amounts at short notice.”

I also looked to see about the local coal production for electricity, and I noted that it had actually gone up 1.7 percent in the year before—so that is, coal production in New Zealand in 2021 increased by 1.7 percent—and there is now a 12 percent increase in just one year for the production of electricity, 7.5 percent of the New Zealand primary energy contribution. When I was the Minister, that was down to about 4 percent, and that is the difference.

This Government came in and announced “We’re going to be 100 percent renewable.”, and up went the price of coal and up went the production of coal and up went the importation of coal, and now we receive coal from Indonesia. It’s not the sort of excellent coal that we have here, but, apparently, it’s better to ship it over than to sort out the production of renewable energy or to use the natural gas that we have here, which is a far cleaner-burning product than coal. Thank goodness we didn’t actually close the Huntly thermal power station, which was actually something that some people, I thought, more focused on climate change rather than actually having the electricity to pay for that climate change were suggesting at one stage. Thank goodness we didn’t, because if we had, we would now not have electricity sufficient for the winter months. Wait till the summer comes and the air conditioning and the electric vehicles are all being charged up.

I have a question for the Minister on this. Apart from the fact that I’d love to know what the current state is of just how much of our electricity produced is from renewable energy, I’d like to know from her how having another piece of bureaucracy stuck in place to supposedly protect small consumers and small businesses is going to make one scrap of difference other than to add more cost to a sector that already is producing very high rates of electricity prices.

The only thing that’s saving us in the world rankings, frankly, at the moment on electricity prices is the fact that in Europe, in particular, prices have gone through the roof because of a scarcity of supply, and we all know what that issue is. It is not an issue here because I see that our imports also of oil from the United Arab Emirates have gone right through the roof, so, clearly, Emirates will be able to continue to fly in its current state for a very long time based on those profits. So I’d like to ask the Minister this: how’s this going to make one bit of difference other than to put up the prices?

I’ll address the very few issues that have been raised that are actually in scope of this bill.

So I think it is worth actually outlining what it is that this bill does. The bill’s purposes, in particular, are strengthening the consumer voice—I’ve addressed one of the questions around that; I’ll go over the reasons for that again in this contribution—and protecting the interests of small electricity consumers, whether they be residential or whether they be small businesses; promoting competition in evolving markets, and I think that’s a really critical place, and somewhere I would have liked to have actually probably seen some questions in this debate is the innovation there; and also regulating distribution access agreements, which is about how we prepare our electricity sector for the future and for a decarbonised future.

So one of the things that has been asked is around the purpose of the consumer advocacy group and what it will do and how it fits within the network of groups that we have across the electricity sector. Of course, as I’ve said in an earlier contribution, this was identified by the independent Electricity Price Review as a real gap.

And one of the things that I think that it’s really important to note—I think one of the previous speakers, Melissa Lee, said, “Won’t this just replicate what the Commerce Commission does?” Well, the Commerce Commission is not an advocacy group and I think it’s really important to remember that. This is a needed part of the landscape we have. We have our large electricity users who are very well represented in terms of advocacy and their voice being able to be heard in the policy process. This will complement other groups that exist, like the Utilities Disputes. And that is an excellent service that exists within our electricity sector and it can only resolve disputes on certain matters. So it needs to sit alongside that, and it is one of the things that we know makes a difference.

As I said in an earlier contribution, if we look to comparable overseas jurisdictions that do have advocacy services that are legislated, we do see smaller increases in utility bills. There is a very strong correlation between those two things happening.

As for the costs, which the member Judith Collins brought up, I already laid that out in an earlier contribution. It will result in around a $2 a year cost on levies. So this is minimal and the benefit we see to our economy, both at a household level and at the small business level, more than offsets that.

We’ve also seen some other questions that have come through—many of which weren’t in scope of the bill—but one of which was questioning the amount of coal that we used and how that fits with our renewable targets. I’m going to be generous and see this in the spirit of the kinds of things that we have to do to bring the innovation to our distribution systems that is covered off in this bill.

But one of the issues that we have in our energy system—and I would like to remind the former Minister of energy that it is important to differentiate between energy and electricity. We have never had an 80 percent renewable energy system, as she claimed that we have around 90-odd percent renewable electricity system at the moment. Our energy system is only around 40 percent renewable. We’ve got a lot of work to do in that area.

But the whole reason that our coal usage spiked last year is because we experienced a dry year, and at the moment, the only way New Zealand stores energy for a dry year is in the form of fossil fuels. We store energy in the form of coal and we store energy in the form of gas, and this simply cannot continue and is something that this Government is investing in to make sure that we have renewable forms of storage; that we have a plan for our future that fits with a decarbonised world and isn’t just relying on fossil fuels for the way that we store those things.

There’s a lot of stuff being—I can see that there’s a desire in the House to have a more general debate on energy and electricity, but let’s remember what the scope of this bill is. This is very specific, and I think a really important thing that we need to do for our electricity system, and that is making sure it is working for all the users of electricity and that we are seeing that the rights and interests of those smaller interests are also represented—households and small businesses—but also that we are preparing our system and our distribution systems to ensure we are ready for the innovation that we need. And there’s some very interesting clauses in the bill.

Thank you, Madam Chair, and, unlike the previous speaker, I won’t reflect on your judgment on what’s in scope for the debate or not. But the Minister did raise electricity prices. She has talked extensively about that, but she’s neglected to talk about industrial users. I know it can be a difficult concept for people to understand, but industrial users, the price that they pay and the cost that they bear actually flow through the economy—right through the economy.

We’re very aware and concerned on this side of the House about the cost of living crisis that we are currently in, and, actually, the Prime Minister refused to even utter those words for a while, but was forced into it because of us pointing out that we’re living in a cost of living crisis. Energy is a major driver of the cost of living, and I think everyone understands that. But what is causing those prices to rise and what is causing the uncertainty in the electricity sector?

One of the major causes, which Simon Court raised earlier, is Lake Onslow. It’s absolutely correct, what he said, about the likely blowout in costs in that. But what is of concern to us on this side of the House is the impact of that on the electricity sector, and the uncertainty that it raises, because anyone who goes out and talks to the electricity sector, as I have and others on this side have, knows that it’s raised all the time as a major issue for them. It’s driving their lack of willingness to invest in generation. This bill doesn’t go anywhere near that. Why is that? I don’t know.

But I can give the Minister an example of where the projects like Onslow will go wrong. We only have to look at Snowy 2.0 in Australia, which is a pumped hydro scheme first suggested by Malcolm Turnbull in 2017, and is expected to cost $2 billion and to be finished in 2021. This week, they’ve gone back asking for another $2 billion. It’s now likely to cost $10 billion and be completed in 2028. That is why the industry is so concerned about Onslow, because that is what will happen here. It will be well over $10 billion and we can’t afford it, actually, quite frankly, although with the way the Government spends money, who knows?

But I’d like to move on to the regulatory impact statement and the ability to allow the authority to amend the code if the Minister is not satisfied with progress on specified matters. So the bill now gives the Minister the ability to force the authority to make regulations if the Minister deems it necessary. Now, that is against the Ministry of Business, Innovation and Employment’s (MBIE) recommendation; they recommended the status quo. Why is that? So—

💬 Hon Judith Collins: Power and control.

Well, yes, I think, it seems that central control is what is behind all of this, and you would really need the wisdom of Solomon to actually be able to stand up the top as a Minister, no matter how talented the Minister is—or lacking in talent—and that Minister wouldn’t have, I believe, the understanding of the intricacies in the market, and we end up with unintended consequences.

So my question to the Minister is: why is she going against MBIE’s advice on that, and why does she think she’s in a better position to make these decisions rather than officials who are well qualified in this area and across it in great detail, and what was the increase in industrial electricity prices which drives the cost of living for us all? I believe, actually, in her earlier comments, I think she was talking about the total cost of electricity that users pay, and, as the former Minister the Hon Judith Collins will know, that includes delivery cost, that includes Transpower cost. What I’d like to know is: what is the increase of the actual electricity when you strip out the cost of Transpower and lines charges within those costs? So a couple of questions for the Minister.

Thank you, Madam Chair. I’m really pleased to hear the Minister speaking to how the broad kind of impetus behind this legislation is working for all users in making sure that our system is ready for innovation. With that in mind, I have a few questions for the Minister pertaining to the actual legislation, which I’m sure she will welcome.

So to that effect, and perhaps to give some background—because I’m not an expert in electricity or the electricity authority, as probably next to none of us in this Chamber are—a few months ago, I was sitting in Morra Hall on Waiheke in June at the very grandly titled community energy resilience symposium, and, indeed it was grand. It was there to educate the community on Waiheke about something called multiple trading relationships. This pertains particularly to what actually we just heard from members of the Opposition with regard to the electricity code and the opportunity to amend it. So to that effect, it’s worth unpacking what multiple trading relationships are currently by virtue of the 2010 energy participation code. It is the case that you as a consumer can only have a one-way relationship with your energy provider, who you contract and you pay to provide that energy to you. By virtue of the 2010 code, there is an inability for you to also contract with another electricity provider who also has a contract to use those electricity lines. But if you, for example, are somebody who has solar panels on your roof, you are prohibited from having the ability to put the excess power that you may generate back into the grid and potentially sell that off or share it to those in your community or others.

In order to do this, a framework is currently, I understand, being trialled or piloted by Ara Ake. It began in 2020 and is something which would require amendment to the 2010 electricity code if it were to be applied on a broader basis. So here’s a big shout-out to those from Energy Alternatives to Dana and to Silke but also to Vern Whitehead from Electric Island and to all of those on Waiheke Island who have been doing the most when it comes to decarbonising Waiheke Island.

I do ask the Minister if she sees in this legislation that there is the opportunity for smoothing that pathway to making multiple trading relationships legal, more available and, therefore, our energy grid more resilient and more equitable fundamentally by virtue of those opportunities to amend the electricity code.

There’s a couple of questions that I will address that have come through in the speeches. The member Stuart Smith said that what I failed to mention was what was happening in real terms to the cost of industrial electricity. So I’m happy to add to the minus 2.3 percent for residential and the minus 1.2 percent for commercial. Industrial did rise; it rose by 0.1 percent in real terms. So what we can see is that we’re not seeing those elevated costs of energy that we’re seeing in other jurisdictions around the world—particularly, the UK and Europe—and I’d note that that the 0.1 percent increase to the year end of March 2022 is largely driven by spot prices. That isn’t pertaining so much to those that are on contract.

We also had a question around why it is that we’re putting the backstop provisions in this bill. Well, the backstop provisions are just that—they’re there if we need to use them. Initially in the regulatory impact statement that the member read from, the Ministry of Business, Innovation and Employment (MBIE) did give advice that it wasn’t required. They’d like to see the other measures so that we’d hope that we wouldn’t need to use the backstop, but I think if you have a look at the departmental report that followed on there, actually, MBIE recommended bringing forward the dates of when the backstop would apply. So originally it was two years, and in the departmental report we see that MBIE is saying, “Actually, let’s make that one year after enactment.” So it is a time-limited power, and it’s the kind of thing that, when we’re making regulatory change, it’s prudent to put in so that that backstop power is there should it need to be used.

I’d like to thank the member Chlöe Swarbrick for her questions around the multiple trading relationship trial that’s going on with Ara Ake that they’re currently undertaking. Of course, this is one of the reasons why the Government funded and set up the new energy development centre in Taranaki that went on to become Ara Ake. It is because this is the kind of innovation that we need to see. Certainly, this is something that we are following very closely and working very closely with the data coming out of that trial with Ara Ake. Indeed, some of our own Government programmes around how it is that we’re rolling out the trials for solar panels, or renewable energy more broadly, actually, on public housing, and in Māori housing, some of them will utilise multiple trading relationship scenarios.

I think that the member can take comfort that we can see the provisions of the bill that are actually all about promoting competition in evolving markets. There are whole sections of this bill that do look at that, and I think that’s increasingly necessary as we’re seeing the blurring of the traditional boundaries that have existed within our energy and electricity sectors, where we see the idea of what is generation, what’s transmission, and what’s distribution all collapsing into one in many of these scenarios. So, specifically, clause 47 of this bill moves key provisions from Part 3 of the Act into the code, and clause 13 provides that the code may impose obligations on a non-participant for the purposes of restricting relationships between the two classes of industry participants. So, really, this bill is an example of our legislation needing to keep up with innovation that is going to be required for decarbonisation.

Thank you, Madam Chair, and thank you for considering the fact that I have been rising for a little while to ask a couple of questions. But before I do that, I’d like to make a comment and perhaps give some advice to the Minister: insulting the Opposition and members in this House is probably not conducive to a good committee stage. I think there are many Ministers who get up and actually do the process and answer questions earnestly, because, as even Chlöe Swarbrick said, not all of us are experts. Perhaps the Minister is the expert on electricity—I’m not so sure what her PhD is—but the thing is that insulting the Opposition by saying sarcastic comments like “Oh, there aren’t that many questions.”, you know, I don’t know, maybe the Minister doesn’t actually want to be here, but some of us do, and we do have questions, and it would be very helpful and alleviate the question and answer session in this committee stage if she is, actually, so inclined to be kind, like the Prime Minister said—be kind and actually, perhaps, answer some questions earnestly—

💬 Tangi Utikere: Point of order, Madam Chair. Members are aware that if there are particular issues that members might have, there is a point of order process that members can take. I’ve been listening to the debate and it seems to me—my submission is—that many of the contributions have been time bound and out of scope, and on this side of the Chamber, we’re seeking to move some closure motions on that basis. So I would invite you to reflect on that in terms of making rulings.

💬 Simon Court: Madam Chair?

CHAIRPERSON (Hon Jenny Salesa): Is it a point of order or are you seeking a call?

💬 Simon Court: Seeking a call, Madam Chair.

CHAIRPERSON (Hon Jenny Salesa): Can I just respond to this point of order. I’ve been actually listening to the debate as well, and some of the contributions has been out of order in terms of the wider scope that they talk to. But I’ve actually allowed it, in the spirit of the debate, and I will now go back to the call that was being taken.

Thank you, Madam Chair. I will go to clause 15, “Section 40 amended (Urgent amendments to Code)”, which basically talks about “expires on the date that is 9 months after the date on which it comes into force, unless it is revoked earlier under section 40A.” When you actually go through that whole section and you come to 44B, in clause 19, it talks about how the Minister may amend the code to include specified matters. If you go down to subsection (3) of 44B, it actually says, “The Minister may amend the Code under this section as if the Minister were the Authority”, and then it just has a couple of other lines.

I’d like to ask the Minister how she actually sees this particular case. Apart from it being deemed that the Minister’s changing the code on the fly and the Minister is literally—the Government actually thinks that the Government knows best, and it’s almost like this is about Wellington trying to impose rules on people, increase costs on people, and it’s literally dictating. I’m trying to find out in what circumstance will the Minister take on the role as section 44B(3) says: “The Minister may amend the Code under this section as if the Minister were the Authority”. What specific example can she give us in this Chamber, where she will actually do that job and take on the role of the authority?

Thank you, Madam Chair, and thank you for the opportunity to take a call. I have some specific questions for the Minister regarding the function of the Electricity Authority, the ability of the authority to amend the Electricity Industry Participation Code. In the last week, we have seen the Electricity Authority intervene in the market to block a commercial arrangement between an electricity generator and one of their major customers, the Tīwai Point Aluminium Smelter.

I sense the cold dead hand of a Prime Minister past, the sponsor of the Think Big regime, in some of the worst and most harmful interventions in the New Zealand economy, a former Prime Minister, Robert Muldoon, in the way that the Minister of Energy and Resources has proposed this reform package. Last week we saw the Electricity Authority intervene to block the power companies from entering into power contracts with consumers unless certain conditions are met. This must be the most serious and damaging impact on business trust in Government; one of the most terrible things this Government has done to undermine trust in the sovereign, to introduce sovereign risk to our economy.

I want to reflect on the comments of the current chair of the small electricity consumer agency, the current chair who has weighed in on this intervention—and while I have a great respect for the current chair and the work that she does in her community, she appears to be, unfortunately, just another Government comms mouthpiece when it comes to electricity and the Government’s intention to intervene in this absolutely vital part of our economy. The chair has said: “We absolutely support what the authority is doing. It sends a very clear message to the generators that they must not settle on contracts that disadvantage residential and small business consumers.” And yet, residential and small-business consumers switched power companies 400,000 times, Minister—400,000 times—in the last year. There are more than 40 retailers to choose from. It doesn’t appear that business, small business, and consumers have any barriers to getting a better deal. They might choose a deal with a supplier who offers them internet, gas, a television, a fridge. They might choose to go with a power company that offers them prices on the spot market. It might not have been the best choice for those consumers, but they had the choice, Minister.

So I want to come to my proposed amendment to the bill. I’ve proposed Supplementary Order Paper 233, which would delete clause 11, the clause relating to the establishment of a Small Electricity Consumers Agency. Now, the ACT Party—ACT is an acronym for the Association of Consumers and Taxpayers, and we take this role very seriously. But we also recognise what a dangerous precedent this sets; in fact, not really a precedent, just another silly intervention by this Government in business and in relationships between suppliers, consumers, and, of course, the taxpayer who’s going to end up picking up the tab for this unfortunate intervention.

So what I’m proposing is that the small electricity consumers already have access to the utilities disputes service. That’s a service that’s funded through a levy on electricity and gas providers. They can make determinations about disputes up to $100,000, if that’s what they agree. The ACT Party’s proposing to delete the small consumer advocacy component of this bill, because there’s no justification in the legislative statement, Minister, for strengthening the consumer voice when consumers struggle to make their voices heard and exert influence over decisions affecting them in the electricity sector. When those decisions are made about contracts between suppliers, consumers, when decisions are made between maybe suppliers who want to offer different services—it is unbelievable that the Minister believes that consumers, the customer, should have decisions as to what services businesses deliver and how they organise themselves and engage with other customers.

This is not a piece of legislation which will increase the trust that business—

Order! [Interruption] I call on Simon Court—I call on Simon Watts.

Thank you, Madam Chair—too many Simons in this House. Just building on referencing clause 15, the amendments to section 40, I’ve got four questions with regards to this point. I think it’s a theme that’s been carried through by a number of speakers. I guess I’m reflecting and the question for the Minister is around what is the problem we’re trying to fix, or whether this is legislation a solution looking for a problem. I just did quick review in terms of the feedback. The previous speaker talked about the competitive nature of the electricity sector in New Zealand. There are 40 providers. Overall, Consumer New Zealand’s done some analysis, released recently, which articulated that 52 percent of Kiwis are very satisfied with their power company, and it goes on and rates Electric Kiwi at 70 percent satisfied, 77 percent of Powershop, and they mention Flick as well.

The point there is: are we dealing with an industry, a competitive industry—which it is; there are a number of players in that industry and consumers have choice—and therefore what is the problem we’re trying to fix by introducing this new consumer representation group in clause 15 of the bill? So that’s the first question: have we seriously done the assessment around the problem statement, firstly.

The second question is: if we’re just going to ram this through, then what is the cost in order to fund this, and the question around the analysis that’s been undertaken independently around the cost flow-through to consumers in terms of power prices or the bills they get, because you cannot introduce regulation or degrees of bureaucracy without that having a cost, and that cost needs to flow down. In this case it will flow down, no doubt, to consumers, so I’m interested in what analysis has been undertaken around that, what the estimate of that cost is, and what it will cost to actually fund this bureaucracy that will be put in place to try and deal with a problem that I think is yet to be defined.

The third question I have is again in relation to clause 15 a little bit more broadly. How does the Minister see that this new consumer agency is going to work in the context of the authority needing to manage the concept around competition within the sector? I think there is a mismatch, and I think it was mentioned a bit earlier as well. There is a mismatch around what the authority’s objectives are, and, gee, haven’t we seen this with the Reserve Bank introducing “What’s your core business, what’s your focus—inflation.”, and now they’ve got another one. Well, it’s interesting to see the same thematic coming through in clause 15 of this bill in terms of this consumer panel, which in effect—and this has been assessed by external parties as well—creates a mismatch or a conflict in regards to what is actually the job they need to undertake, which, in effect, is to create and ensure that we have a competitive electricity sector.

So I think that the introduction of this consumer panel—and I’m interested in the Minister’s comment on that. One of the unintended consequences potentially of this consumer panel playing in conflict with trying to create a competitive structure is that we need fewer players in the market, because they have the capability and scale—that may be argued, and I’m pretty good at arguing that scale brings benefits. But one of the unintended consequences may mean that we will see less competition as a result of that because of the drive around the consumer panel.

The last question I’ve got is in regards to the analysis provided by the Ministry of Business, Innovation and Employment, and it’s been mentioned before around the fact that the officials have felt that the costs of implementing the entity under clause 15 are going to exceed the benefits. So we’ve now got an official Government organisation telling the Minister, “Nice, but it’s not going to cut it.” It’s going to cost more to put in than any of the benefits.

So what assessment or peer review of that advice from officials has the Minister undertaken to satisfy herself that this is required, and—more importantly in terms of taxpayers’ money—that this is actually going to deliver the outcomes that will make an improvement. From all the assessment that we can see in regards to clause 15 in Part 1 of this bill, that will not be the case. Thank you.

Thank you, Madam Chair. Just before I get into the rest of it, I would like to point out that the Minister sort of dismissed the concern about wholesale electricity prices, which is quite in contradiction to an answer to a written question to me, published on 2 June, that she is concerned about wholesale electricity prices. Perhaps she has short-term memory loss.

The regulatory impact statement was quite an interesting, damning report, really, in places—as has already been alluded to—but the Minister’s power to make code, it said, will temporarily duplicate that of the authority and doesn’t conform to the practice of independent Crown entities. The Minister’s ability to regulate over the top of the authority is inconsistent with independent Crown entities’ status. I haven’t heard an explanation that makes any sense or that justifies that. Has anyone else? No one on this side has. She still hasn’t explained it. I’ve asked questions about this before, and she seems to be more interested in personal attacks than in answering questions—actually, that’s good for us, so that’s fine with me—but it would be quite interesting to find out what the justification is behind that. That would be really helpful, Minister, if you could come to that. But I do also want to go back to the point that she also hasn’t addressed, industrial electricity prices, and simply dismissing it, I think, doesn’t do her—she’s better than that, surely. Or maybe she’s not. And New Zealanders deserve better than that.

I also want to talk about Chapman Tripp’s view on the Electricity Act shake-up, published 10 September. That was quite interesting as well. It talked about: “The expansion of the Electricity Authority’s discretionary powers will introduce significant uncertainty into the sector as it will enable to Electricity Authority to, effectively, restrain market participants from being involved in specified services or activities.”—as my colleague just talked about—“This has the potential to undermine existing investments and to deter future investment in emerging technologies and services. It also expands the Electricity Authority’s role in competition policy, blurring the responsibilities of the Electricity Authority and the Commerce Commission.”—all points that have been raised in this debate, and questions have been asked and not answered satisfactorily.

The Minister also responded to one of my statements about our going down the path of Germany and Europe. This is the path they went down. This is exactly what I was alluding to, and the impact of this on investment into the sector is significant. These things have a long germination time, if you like. From when an electricity company makes its final investment decision, or FID, to the time their generation comes on stream can be quite long. The payback time can be quite long. So those companies are all prepared to sit back there and say, “Well, we’ll take a calculated risk on our customers being able to pay a price that will justify our investment in this generation.” But what they don’t want—and it was alluded to by Simon Court before: that sovereign risk is now on the table in New Zealand because of the actions of this Government. So that puts everything at risk, and this bill is just another straw on the camel’s back of sovereign risk.

Companies are talking to me about this all the time, about their lack of confidence in making investment decisions, because of the sovereign risk that is now perceived. I know from an associate that was speaking to an investment bank in the United States, looking for funding for a project in New Zealand, the bank told them, “You just don’t get it. The one thing New Zealand had going for it was confidence in stable and predictable Government, and now that is gone.” The one thing that we had is gone. This is far more wide-reaching than, I think, is appreciated, and flippant comments from the Minister do her no service, nor do they do New Zealand or our electricity sector any good service as well.

💬 Hon Dr Megan Woods: Madam Chair?

I’ll come right back to you, Minister. I’ll call on the Hon Judith Collins to ask her questions, and then you can answer all of them.

Thank you, Madam Chair. Look, I want to come to clause 19, which inserts section 44B(3) and (4). This is an absolute constitutional outrage. We have an authority that has its job to do, and now have a clause in here—and I’m going to ask the Minister some questions on this.

It says here, “The Minister may amend the Code under this section as if the Minister were the Authority.” Well what’s the point of the authority? What’s the point of having an authority that actually has expert knowledge in it and is immersed in the sector to then have a Minister deciding that she can decide that they can just overrule that authority and actually be the authority?

So this is an extraordinary piece of, essentially, legislation by fiat that the Minister is seeking to give herself—and that that party over there, and its friends, are happy to give her. I have no idea why they’d do that, given the KiwiBuild disaster. I have no idea why they’d do that given the emissions going through the roof for electricity under her. I have no idea why they’d do that when we have this.

This is unusual in the extreme, because there are other options. Number one, the authority is allowed to do its job. The authority has, essentially—it’s sort of quasi-judicial in some of its mechanisms. It’s subject to the Official Information Act, and it would, no doubt, wish to comply with it. It’s also subject to judicial review of its decisions. The Minister is now seeking to make herself judicially reviewable because of this. Why is this not even going to her colleagues in the Cabinet? If she really wants to say that she has no confidence in the authority to make the decisions that she wants, why bother having them? If she really wants to do that, then why is this not, at least, an Order in Council, so that her Cabinet colleagues could look at it and say, “On what planet is she living?” Why would we have the authority?

This is a bit like saying, “Because the authority is very powerful within the industry, and we want the Minister to be in charge of everything.” It’s very clear she can’t even just send it back to the authority and ask them to rethink it. No, no, no; this is as if she is the authority. Why don’t we just get rid of the authority; is that her idea?

So question to the Minister is: how is this constitutionally sound? How is she better equipped than the authority to make these decisions? She has an ability, for instance, to change the authority if she really wanted to. She has an ability through the appointment process to do that. If she’s going to override the authority on issues like this, why would the authority have any confidence in anything else it does, and why should this House have confidence in the authority if she is showing no confidence in the authority?

We on this side have confidence in the authority, because we know that it is actually an expert body with knowledge. We also are concerned with what standard this is, where the Minister is saying that small users of electricity seem to need this agency to be set up to protect them. It’s been ably pointed out in this Chamber already, on this side, that actually there are loads of opportunities for people to change electricity retailers, and many of us do, from time to time. But these big suppliers, their costs—any extra costs—of course, will be added to the cost of what they produce, which means added cost to the consumer anyway. So how is that going to help the consumer?

So there’s two questions there for the Minister. I hope that she’ll be able to answer them without the level of sarcasm we’ve seen already from her.

What I will do in this call is go through clause 15 of the bill. That seems to be where the predominant source of questions are coming from. I’ll go through and I’ll explain what the clause does, why it does it, and where it came from. I think one of the most important places to start is what the legislative etymology of this clause is, and, of course, that was a clause that Gerry Brownlee put into the 2010 legislation when he gave himself a regulatory backstop around the changes he was making to the electricity system.

So the constitutional outrage claims from the Opposition are somewhat hollow, when, actually this is language that has just been lifted from the 2010 legislation, put in place by a National Government—exactly the different specified reasons, but the framework, the idea that you do have the ability for the Minister to act as if they are the authority for specified reasons, is straight from Gerry Brownlee’s legislation. So I think that’s something the National Party might want to reflect on when they’re calling this a constitutional outrage and the end of the world as we know it.

I think it’s worth going through and looking at exactly what this clause says. What it says is that there are some things that is our expectation, and we’ve made our expectation very clear to the Electricity Authority as to what will be done as a result of the Electricity Price Review—that there is a chance for the authority to do this through code amendments, and they’re specified through section 44B(2), which has a very comprehensive list of what those specified activities are. And if anyone want to go through and correlate those to the recommendations of the Electricity Price Review, they’ll see that they match.

So the recommendations that were made include requirements for distributors to offer retailers standard terms for access to their networks, requirements for certain categories of industry participants to make available information directed at improving the performance of the wholesale market, requirements for certain industry participants to act as market makers in relation to the training of some wholesale electricity contracts, requirements for retailers to process consumer requests for information about their electricity consumption in a timely way, limitations on retailer saves and win-backs, and requirements for retailers to provide information to the authority to enable the authority to better direct its efforts under section 16(1)(i), which relates to promoting to consumers the benefits of comparing and switching retailers.

What you will see from that selection that I have read out there is that they are very narrow specified terms, and it is saying that if these are not done in a timely manner, then the Government will come back and regulate. It is just that. It is a regulatory backstop. First of all, the Act sets out that this can be done through code amendments, and, in some cases, with the willing and voluntary participation of the industry. But what we are doing here is putting in place the legislative framework so that if we do need to regulate in the future because that has not been fulfilled, then we have the ability to bring in place the legislation. And, as I said, that is a clause that is based on a similar clause in the 2010 legislation that followed Gerry Brownlee’s reforms to the electricity market in there as well.

One of the things that one of the members of the ACT Party, I think it was Simon Court, brought up was around—and I think what he was referring to was the interim measure that the Electricity Authority was talking about in terms of the wholesale market, and this came from the review that they did do into the wholesale market. And that would prohibit generators from giving effect to a contract of over 150 megawatts or more unless certain conditions are met. This is something that has been put in place to protect our wholesale market. What we know is 150 megawatts is a very, very large contract. There are very few of them in the country. To put this in context for most members in this House, a standard windfarm is 100 megawatts—it’s 1½ windfarms—we’re talking about major use. This is to make sure that our wholesale market is operating fairly.

I move, That the question be now put.

The question is that the Minister’s amendment to Part 1 set out on Supplementary Order Paper 203 be agreed to.

The question is that Simon Court’s amendments to Part 1 set out on Supplementary Order Paper 233 be agreed to.