Consumer Protection (Definitions ofGoods and Services) Bill

The National Party in Opposition is strongly opposed to Part 1. We do not support the incorporation of gas, electricity, water, and software in the Commerce Act, nor do we support the inclusion of those items as services for the purposes of the Commerce Act.

We have very real concerns, for example, about including electricity in the legislation. As I think the New Zealand Law Society pointed out to the select committee, of its nature electricity is not the tangible sort of good that the Commerce Commission should be dealing with. The Minister will require such a high standard of electricity delivery that companies will not be able to meet it. Electricity is a good in a less than perfect way. For example, if a lines company fails and one gets an unplanned outage, how can that be deemed to be of an acceptable quality? Yet there will be a liability there for the electricity company. There might be a planned interruption to supply, for which notice has been given, to allow for maintenance work to be carried out. That is not the sort of thing that happens with any other goods.

If members look at what this bill is proposing, they will see that it states that those goods will be fit for the purposes for which they are supplied, acceptable in appearance and finish, free from minor defects, and safe and durable. None of those things can be applied to electricity. Electricity is not “acceptable in appearance and finish”. Can it be free of minor defects, safe, durable, and fit for the purpose for which it is supplied? Maybe, but because of its unique features, electricity cannot be geared to the specific needs of consumers. Electricity is inherently unsafe and can only be made safe by infrastructure and equipment, which are safe services in themselves. It is inappropriate to try to include intangible items like electricity and gas in this legislation. The Government has agreed that telecommunications is an intangible that should not be included under the definition of a good. We say that the same should apply to electricity and gas.

I stand with the New Zealand Law Society, which told the select committee that the provisions in this bill are unlikely to provide any real advantages to consumers. As Mrs te Heuheu said, the extra costs that will be put on electricity companies will be passed on to consumers. When there is an outage and people’s computers lose information, fridges blow, or microwaves fail, consumers and shareholders will pay because of this legislation. It means that prices will rise. Not only will the price of electricity rise because of the special tax that the Government is putting on—that is, one of the 15 new taxes or levies that the Government has applied since it came to power—but there will also be an indirect form of tax from this bill, in the sense that prices will go up.

The concerns we have made known in respect of electricity can also apply to water. In order to get its water quality up to the level required by this bill, the Dunedin City Council is budgeting $30 million in the next 2 years. In Motueka the council is budgeting $6 million—that is, $100 a ratepayer—to get its water up to the sort of quality that this bill requires. We know that Banks Peninsula is bracing itself for a $4.5 million drinking water upgrade under the proposed new laws—Banks Peninsula, $4.5 million; Motueka, $6 million; Dunedin, $30 million. That is what this bill is doing—so much so that Mrs te Heuheu will table a document that estimates that it could cost $750 million for local authorities to bring their water supplies up to the level that will be required by these bills—that is, the Fair Trading Act, the Commerce Act, and the Consumer Guarantees Act. This Government does not realise what it is doing with this bill.

I am rising to speak to Part 1, because I have just listened to National’s Tony Ryall speak about how unstable, unsafe, and unreliable electricity is. Sure it is dangerous, but I have to remind Mr Ryall and the National Party that Auckland suffered huge blackouts during the 1990s. It was not as a direct result of the weather, or of anything other than poor management and poor supply. The poor supply was a case of the companies holding back on their upgrades of the lines because they wanted to retain all their profits, and they failed to see a catastrophe coming. All of a sudden, one line blew. That put extra pressure on other lines, and they blew. As a result, Auckland was without power. Generators from outside Auckland and from overseas had to be brought in. A ship was even docked in the port to supply power to Auckland.

If that is the direct result of bad weather and bad supply, then I really have to question Mr Ryall’s intentions. We all accept that electricity is unstable, but it also relies on the good management of the supply companies. In that case, New Zealand First supports this part. We see it as providing much-needed security for electricity supply as a good and a service. We therefore support this bill.

In speaking to Part 1, I want to pick up on a couple of comments made by my colleague Brent Catchpole, who was on the Commerce Committee right through the process of the bill.

💬 Brent Catchpole: Only the latter part.

Perhaps that explains some of the member’s contribution tonight. One of the interesting things about this bill is that the term “manufacturer of electricity” is not in the bill. “Supplier” is there, as is “provider”, so that captures the lines companies and local energy companies. But the manufacturer—the State generator—is out of it. The reason is that this Government knows that the whole infrastructure of electricity in this country has turned into custard in the last 4 years, and we have seen no new investment in generation. For each of those 4 years we have needed some 150 megawatts of new generation, about 450 megawatts in total, and what have we had? We have had about 100 megawatts. If this bill had been effective on the manufacturers, the generators, from the start of this winter, then the Government would have faced a very huge bill, indeed, as consumers decided to exercise their protection under this legislation against the manufacturers.

So I think we are seeing here another one of the Labour Party’s “dress it up and hope it looks good” types of bills. As our colleague Tony Ryall has pointed out—that is, the Hon Tony Ryall, the last great Minister of Commerce that this country has had—

💬 Hon Tony Ryall: I was never Minister of Commerce; I was the Minister of Justice.

He was the Minister of Justice, but as such he knew more about commerce than the present Minister knows about her own city. It is unbelievable.

The real point here is that in a few minutes Georgina te Heuheu will table a document that outlines the extraordinary costs that this legislation will put upon South Island councils, in places where there is no worry about water quality—although they most definitely have a worry about water quantity. We will see Marc Alexander, Clayton Cosgrove, Tim Barnett, Ruth Dyson, Lianne Dalziel, and quite probably Damien O’Connor all voting for this huge impost upon South Island ratepayers.

💬 Hon Member: How much?

The best I can estimate is that their vote tonight will cost their constituents and mine some $70 million. [Interruption] Clayton Cosgrove sits over there and says his constituents can afford it. The good citizens of Waimakariri can dive into their pockets and pull out $70 million, and he says that it does not matter. Well, it does matter, because Canterbury has some of the best-quality water in the world, and I will keep saying that right throughout the debate on this bill. By the end of it, some Labour members may understand the point that by saying the whole country has to have the same water standard as Auckland’s, some of us will get done. That is just unacceptable.

I return for a moment to the issue I spoke of earlier in the day—telecommunications. Telecommunications is not included in the bill. This Government touts constantly the opportunities that this country will have from the knowledge wave—from the great technological advance that this country is likely to experience at some point. But this bill does not cover broadband Internet access. If we happen to live in the right part of the country, we will receive whatever the provider of the service gives us, and we will have no right to question the quality of that. Worse than that, the people who live in some parts of the country, particularly in rural New Zealand, will be out of luck totally.

I rise for the ACT party to address Part 1, which in clause 4 amends the Commerce Act by including in the definition of goods “gas and electricity”, and, “to avoid doubt, the supply of electricity, gas, telecommunications, or water” in the definition of services in that Act. I would be very interested to know the effect of putting those terms into that Act. That seems to me to be a fair question to ask of the Minister in the chair, the Hon Judith Tizard. The Minister has a whole raft of officials who have been patiently waiting, with very little prospect of being required to give advice throughout this debate. Given that Labour is classically and typically uninterested in the welfare of workers, it does not mind wasting the officials’ time. It knows that they do not have to be paid. They are on a salary and probably do not get either overtime or holidays in lieu, so the Government is therefore quite happy to have them sitting here doing nothing, while the Minister does not ever bother to answer questions or to participate in this debate.

💬 Hon Judith Tizard: I have.

Not in this debate.

In this debate a series of questions has been asked about just how it can be described as protection to add into the various Acts provisions that will require one-size-fits-all liability for standardised services, where there are standard form contracts already in use, and where usually if there is a failure, the loss will simply be spread back across the community. How can that advantage the community?

Mr Catchpole mentioned, for example, the power outages in Auckland. If the bill had been in force and it had been held that there was a breach of one of the warranties, or that in some way liability should flow from the failures he mentioned in Auckland, what would have happened? That is very instructive. The Minister should consider that, and explain to us just how the position would have differed if this part of the bill had been in force during the failure of supply in the electricity industry in Auckland 5 years ago. That would probably help everyone in this Chamber to understand better why we are ramming this bill through under urgency. After all, it was introduced in 2001, referred to the Commerce Committee in October 2001, sat with nothing being done about it right through the election in June-July 2002, and has finally come back to this Parliament to be shoved through under urgency by a Minister who does not think that it needs to be explained to anyone—not to this House and not to New Zealanders.

All that the Government thinks it needs to do is to put a slogan in the title of the bill and then to go ahead with steps that were taken, or were avoided, for very good reason when the Commerce Act, the Fair Trading Act, and the Consumer Guarantees Act were drafted. The amendment of those three Acts by the insertion of these services, most of which are still publicly owned, does nothing except to give an opportunity to shift loss, usually from those who can best afford to bear it to those who cannot. If the insertion of these clauses into the Commerce Act is intended to mean there will be new remedies that are not presently available for anti-competitive conduct, surely someone at some stage could have explained that. Nothing in the select committee’s commentary on the bill even attempts to explain why these provisions are to amend the Commerce Act. The Minister has had officials sitting there all evening, who could easily have been called upon to advise—it may be that only a few words from the Minister could explain to the Committee what this bill is about. But certainly, from my knowledge of the Commerce Act—which at this distance is not as fresh as it once was, but I suspect I certainly have more familiarity with that Act than most members do—I cannot fathom any advantage that Part 2 gives to anyone. I certainly cannot work out from the commentary of the select committee what advantage it gives to anyone.

💬 Brent Catchpole: Part 1.

I thank the member. I could probably say the same thing when we get to Part 2; it will be just as true.

But certainly, it does absolutely baffle me as to just what Part 1 will achieve, other than adding to the advantage of a political slogan that makes it possible for the Government to say it has amended X number of Acts and has added consumer protection Y number of times. The Minister in the chair may well have an easy answer. It may be that I have overlooked something that I should have known. But certainly, after coming to this bill without having sat on the committee it is completely baffling as to what will be achieved by sticking these provisions into the Commerce Act.

I also say that the drafting is a little bit of a puzzle.

I move, That the question be now put.

Two of my colleagues have already signalled that I will seek leave to table some papers, so I shall do that at the beginning of my contribution. First, I seek leave to table a report from the Southland Times of 30 October 2002 headed “Water standards low”, part of which refers to a report that the cost of upgrading all the water supplies in this country has been estimated at about $750 million. The second one is an extract of figures from the Rotorua area that refer to—

Documents, by leave, laid on the Table of the House.

Clause 4, “Interpretation”, is where a lot of the trouble starts. For the first time, water is included as a good. As I said, that is where local authorities see enormous difficulties for themselves, and that is exactly where the National Opposition sees negative spin-offs to consumers right across the country. Clause 4(1)(b)(vi) states: “to avoid doubt, water and computer software”. So they are included, and one knows straight away that that provision is to be regarded with some suspicion. Actually, no suspicion is required, because it signals immediately to water suppliers just exactly what they are in for.

The Southland District Council’s group asset manager, one Dave Adamson, said that the proposed legislation makes the current guidelines become standards, thereby putting an onus on the council to take all reasonable steps to supply wholesome water and all practicable steps to comply with the guidelines. That implies a duty to undertake risk management plans, of course—because that is what it does—and liability for relative penalties should anyone get sick or die as a result of drinking contaminated water. It is clear that countrywide, the water standards are low. That is why we proposed to have the commencement date of this legislation put out to 2006—to give councils a reasonable time to get themselves organised for it. But that is not to be, because this Government is doing what it is good at under urgency, which is bringing in legislation for which nobody is really prepared, and for which the overall impacts are not at all clear.

The Southland District Council had planned to have all 13 of its water schemes upgraded by 2009, at an estimated cost of more than $2 million. Two have been done, but the council’s guess is that this legislation will probably require the completion of all 13 schemes by 2006 or 2007. That is a very tight time frame. As I say, the council had estimated it could do that work by 2009. So clearly this legislation will result in huge, quite substantial, additional costs. Who will carry that cost? The consumers will carry it. That is what this issue all boils down to. As I say, the local authorities have not even estimated what some of their schemes will cost to upgrade. That is a problem.

As I said earlier, and as the paper that I have tabled shows, the situation in Rotorua is not good. It is not a wealthy area, by any means. A number of suburbs register very low on the scale of water quality—at grade D. That standard is deemed to be low quality. So somebody has to pay for that.

💬 Sandra Goudie: Grade E is the lowest.

I am informed by my colleague Sandra Goudie that grade E is the lowest. So grade D is almost up there. Somebody has to pay for this work, and we know who that will be: the poor old consumer. The bill does not give protection to consumers, at all. It will lead to increased compliance costs for electricity and gas suppliers. Once again, the consumer will pay. To include water in this way, when we all know that water standards across the nation are relatively low, is not fair. It is not right, and it does not give councils time to upgrade their schemes.

I move, That the question be now put.

I find it extraordinary that as we debate Part 1, extending the Consumer Guarantees Act to new services, this is occurring on the same day that the Government is passing a law stating that anything that a group of officials within the Immigration Service do that was wrong, erroneous, or mistaken is now to be all OK, but when that situation applies to somebody else, the Government wants to have a different set of rules. I simply ask the Government this evening to show some consistency. It seems to me that it is highly duplicitous to say, on the one hand, that a council when providing water services has to meet these additional burdens about quality and all those things, and, on the other hand, when it comes to a service that is provided by the Government itself, like immigration, to say it does not want that to come into the consumer protection and other areas covered by this bill. Not on your life! This is an example of the double standards that we see over and over again from this Government.

That is also interesting to me because I sat on the Local Government and Environment Committee when it dealt with the new local government legislation around water supplies. We were told water was an essential service, and we should not have any damn private enterprise providing water in New Zealand. It was only late last year that we passed ridiculous laws to restrict the private sector from being able to participate in the provision of water services, even in rural communities. I think we showed at the time that half a million New Zealanders receive such water supplies. But the Government’s ideological view was that water was a public service that could only be provided by councils, and must be governed under the Local Government Act. Then we come to this bill, and notably to Part 1, where it shows the Government has changed its mind. Water is to be just another tradable service. I tell the Minister in the chair, the Hon Judith Tizard that she should get her head clear. Either it is one thing or the other. Water supply is either a monopoly service to be provided through democratically elected local councils, or it is a service to be traded. It seems to me that in this part we have a serious contradiction with the very provisions that were argued with such passion, but with such ideological stupidity, by Labour as recently as late last year.

I also want to know just how much this legislation will cost. My colleagues Georgina te Heuheu and Tony Ryall have been asking questions about the cost—the bill—for this. We have not heard an answer on that.

💬 Hon Tony Ryall: It could be up to $750 million.

My colleague Tony Ryall tells me that the cost New Zealand – wide of this provision is $750 million.

💬 Hon Judith Tizard: He just made it up.

💬 Hon Tony Ryall: Don’t say that. A report was tabled.

The member says that. What does the Minister think the cost is? Can the Minister answer the question of what the cost of Part 1 will be for the water supplies around New Zealand?

💬 Hon Tony Ryall: It’s been reported at $750 million.

My colleague Tony Ryall, without any of the resources that the Minister has, and without the hundreds of bureaucrats—

💬 Hon Tony Ryall: Just the Parliamentary Library.

He has had the Parliamentary Library find out that the figure is $750 million. If the Minister wants to say that figure is not correct, we are prepared to consider and contest it. What is her figure? The silence is deafening; the Minister has no idea! She is proposing that this Parliament passes laws that will impose significant costs on New Zealanders, without having any idea, even faintly, of what it will cost them.

I say to the Minister that is not good enough. Where is the cost compliance report? When will New Zealanders find out the cost—the bill—for this part? I ask the Minister to perhaps seek some advice from the officials who are kindly in the Chamber this evening, and to ask that question of them. Or is she another one of those arrogant Labour Ministers who come down to this Chamber and do not think they have to answer the real questions, to which New Zealanders deserve answers?

💬 Hon Tony Ryall: She’s a mini-Minister.

I am told she is a mini-Minister. I am prepared to give her the benefit of the doubt, and to listen to the answer to that question. I say the public of New Zealand deserves to know just what costs this Minister is imposing on them.

I move, That the question be now put.

I greatly appreciate the opportunity to be able to speak to Part 1, because I too have some further concerns to raise about local government. I acknowledge the fine contribution made by the Hon Nick Smith. He raised a really important point about this bill treating water as a tradable commodity. I understood that this Government did not seek to do that with water supplied by local authorities; that it wanted the ownership to remain with local authorities, for communities. But I do not see that intention being signalled in the tenor of this bill.

In Part 1 we see water described as a good. Local government is concerned about water being identified as a good, particularly with regard to sections 6 and 7 of the Consumer Guarantees Act and the guarantees that are to be provided in relation to goods. Local Government New Zealand outlined in particular the guarantees dealing with goods—for instance, those relating to titles, descriptions, and samples. I guess local government could give the worst water samples in the world, yet its water would be considered safe. As for guarantees as to repairs and spare parts, I do not know where spare parts enter into it, and, clearly, Local Government New Zealand did not know that, either. It was concerned that water that was identified as a good was not excluded from those guarantees identified in sections 6 and 7. Perhaps the Minister in the chair would like to take a call to explain why there was no identification of how water was going to be addressed with regard to those guarantees, or, indeed, why water could not have been excluded from those guarantees. Of course, we have no idea of what is specifically meant by “water” itself, and there is no splitting out of what is provided in terms of an urban water supply and a rural water supply.

In considering these guarantees, we do have a concern about them. For example, we have a concern about the guarantee as to acceptable quality, and ask whether water will comply with that guarantee if it complies with the yet-to-be-promulgated drinking water standards that it is intended will raise the threshold.

The standards are meant to detail how to assess the quality and safety of drinking water, and thereby reduce the risk. The standards are also intended to define drinking water that is intended to be for human consumption. However, there was a court case in which the court observed that those with special needs for water of greater purity than that required by the wider community—of course, we are talking about an agreement entered into by the wider community and the local authority, and that is decided by a majority not by an individual consumer—can actually put in their own facilities to purify the water to a greater degree. Here we have water being identified as a good, and subject to those guarantees under the consumer guarantees legislation.

Similarly, will the guarantee of fitness for a particular purpose be appropriate? We query what the particular purpose would be, when water is actually used for many purposes, such as drinking, home appliances, gardening, washing the car, and washing the boat. Some recognition needs to be given to the effect of the guarantees with regard to water.

In cases where there is a failure to comply with a guarantee, the consumer’s right of redress is to refuse to pay more than a reasonable price. I referred to that before. The Minister did not respond to the challenge that she actually answer which provision would prevail: the ratings legislation or the Consumer Guarantees Act. So I challenge the Minister to take a call to give us some indication as to where local government actually stands, and which legislative provisions are actually going to prevail, because there definitely is some confusion.

I move, That the question be now put.