Electricity and Gas Industries Bill

We are now into Part 2 of the bill, and I guess the pattern of the debate has been set where we will see the Greens voting with the Government on this bill, which will put up the price of electricity substantially. They are doing it, I guess, for conservation reasons. They think that if people have to pay more, they are more likely to conserve. We see United Future voting with the Government to put the price of electricity up. I am not quite sure what their reasons are. United Future seems to take an increasing approach of voting against the business sector and the business community, and this is probably part of that approach. It is also their little game that goes on with the Greens as to who will be in bed with the Labour Party on any particular day.

That aside, we are now into Part 2. In this part we have an amendment to delete paragraph (a) of clause 22. Part 2 is a very important part, because the constraint in the electricity industry at the moment is one of availability of power. We do not have the fuel or the generation that we need in this country. We have five major generators, of which three are State-owned and two are privately owned. It is a pretty cosy little club, to be honest.

A whole lot of other potential generators are lines companies. They are sitting out there with an enormous amount of capital, ready to invest back into the industry. This bill increases the amount those companies can generate, up to a maximum of 50 megawatts, or 20 percent, of the total demand for their lines. We say that is just not enough.

The two major lines companies in New Zealand are Vector, which is Auckland-based and supplies Auckland and Wellington, and Powerco, which is headquartered in New Plymouth and supplies the New Plymouth and Tauranga regions right through down to Wairarapa—as the Minister indicated. They are the two largest lines companies in the country. They came to the Commerce Committee and said: “We want to get into generation. We want to build some generation facility, but we won’t do it if you put these artificial limits on.”

That is what New Zealand First members were talking about when they said that we needed some more generation. We might differ with them on how much generation is needed, but National’s view is that given that the Commerce Commission now controls the pricing of the lines business through its consumer price index minus X formula, lines companies are highly regulated and, given that they cannot cross-subsidise—which is the purpose of the Commerce Commission regulations—then why would one restrict them?

The Government has fallen between a couple of stools. Pete Hodgson says: “Well, I don’t want them to generate, but I’ll let them do so much. They can do a little bit of generation, so that ideologically I’m not being totally opposed to them generating.” Then the Greens toddled into Mr Hodgson’s office and said: “We think that the lines companies should be able to generate as much as they like from renewables.”, and the Minister said that was OK.

So a lines company can put up as many windmills as it likes, but it cannot put up a coal-fired unit. The Greens nod and say that that is fine, except if one is cold and the lights go out. I predict that the Greens will feel the political blast of that in the near future.

So there is no principle in this at all. I know that New Zealand First can see there is no principle in it, because its member said so in the House before. He might not go as far as us, but at least he understands the issue. What I would really be interested to see is where United Future members go on this. In effect, they have said that the deal has been done behind closed doors and they will not listen. But I ask whether they will be prepared at least to look at the fundamental principle.

A lines company is either generating or it is not. What we have now is lines companies with abundant amounts of money, and not knowing what to do with it. Powerco is off to Australia with its money. Because we deny the company here, it will invest in Australia. That is smart; really clever. Vector is likely to do the same. That does not seem very smart politics to us.

However, what is even more worrying to me is the small lines companies out there doing all sorts of potty things with their money, because they cannot buy or invest in a local generation scheme. For example, Electra owns a finance company. Well, that is really useful for power consumers. Electra owns Oxford Finance in Levin. I am sure that every power consumer wants to own one of those. Electra also owns an electrician’s business. I suppose one could say that owning an electrician’s business is OK.

The other day Electra’s chairman said to me that it was looking at investing in a winery. I said: “What?”. But there is more. It has just put up its prices. The Government has Electra on a consumer price index minus X formula, which allows it to put up its prices this year, so it has put them up to meet the formula. So, consumers are paying more money, and the lines companies want to invest the money in generation, but they are not allowed to, except if it is wind. Well, it does not blow very much on the Kapiti coast. Electra’s chairman said: “What the hell, we’ll buy a winery.” I hope that he was pulling my leg, but I do not think he was. So that is the worry with the nonsense of this. It is just ludicrous; absolutely ridiculous.

I say to the Minister—and this is genuine—that he has gone out there and staked his reputation on getting new explorers into the country, and good on him. We have two rigs out there at the moment, which is the most we have had for a zillion years, and all of that. God help us if they find anything! If they find something and want to bring it on shore in Canterbury, the major investor to help them would be the lines company, and it will not be allowed to. I bet that if they find something, we will be back in this House changing the rules, because that is what we will have to do.

💬 Hon Harry Duynhoven: It’s a good thing they’re drilling in the Wairarapa.

I do not know why, and I am not sure how that helps, because Powerco still will not be able to invest in it.

We are locking out major chunks of potential capital for no good reason. Why would the Government vote to say that the power companies cannot build a combined-cycle gas turbine plant, but can build a windmill? Why would it say that? Who built the last combined-cycle gas power plants? A lines company did.

💬 Hon Member: Genesis.

No, Genesis Power did not build them, and the Minister knows that. Genesis is about to build one, a little jet engine thing. The one the Minister knows I am talking about, which is the Taranaki one—the one he is proud of and beats his chest about, and for good reason—is a good plant, and he knows that it is. He has been there. He told me that when I was there. It was built by the lines company. Why would we lock them out? Why would we allow windmills to be built but not small, coal-fired power stations or combined-cycle turbines? It just does not make sense. So we have an amendment to take out clause 22(a). Let us tell the lines companies to make their business decisions, go out there, and, if it stacks up, build it. If it stacks up and they can get resource consents, they should build it.

If the Greens think that the answer is in wind, I ask them what happened tonight at 6 o’clock. The Genesis wind farm failed to get consent, because it offended Māori values. That is a Resource Management Act issue, and I suspect that members will probably come to that in the House tomorrow. It is an issue in itself. The wind farm met all the other criteria, but offended Māori values. The proposal was turned down by the Environment Court today.

So wind power is not that easy to get. It is easier for a lines company to buy a finance company, a winery, or God knows what next—a Chinese restaurant or something—than to invest in the infrastructure that we really, really need in this country.

I shall take a call on Part 2 and speak to exactly the same clause that Roger Sowry has just spoken to—namely, clause 22. In some ways I agree with a lot of what he said. However, I also thought that at times he wandered off into a mist of hypothetical, unreal situations. So let us get down to a little bit of reality about the clause. Firstly, when the bill went through its first reading and then to the Commerce Committee, the limitations on lines companies for investing in non-renewable generation were amounts of no greater than 25 megawatts or 10 percent of the maximum demand of the lines owned or operated by the person. The bill, of course, has now been amended to provide for a limitation of the greater of 50 megawatts or 20 percent of the maximum demand of the lines owned or operated by the person—namely, a doubling of the situation, which every party in the House should be very happy about. Why has that happened? It happened in a rather unusual way. When Meridian Energy decided to pull the plug on Project Aqua, we had an urgent debate in the House about that matter. In the course of the speech that I gave on that occasion I asked the Minister, the Hon Pete Hodgson why on earth we had those restrictions on lines companies of 25 megawatts or 10 percent. In response he was good enough to say that I had a good point, and that he would go to 50 and 20 percent. So on the spot he basically doubled the amount. That was obviously a very, very worthwhile move.

Therefore, the question now arises—and this is Roger Sowry’s point—of why we have any restrictions at all. I must say that I have some sympathy with that point of view. I think, though, that he completely overstated the case in a couple of areas.

Firstly, there is nothing to stop a lines company from building a small coal-fired plant or a small gas-fired plant, because those companies can go up to 50 megawatts. Roger Sowry’s was a completely erroneous statement. The second and more important point is, as he has just said, that the situation is very, very simple if a lines company at any point in time does discover gas—and let us hope that they do; I certainly hope that they do, because we desperately need more fuel—or, indeed, if it wants to build a large new coal-fired station, which United Future would support 100 percent. Like Peter Brown, we believe also that coal is a resource that we should exploit in this country. Recently I gave my support to Mighty River Power’s proposal, for example, to try to convert the Marsden B power station to coal, and I hope that it is successful in its resource consent for that. However, the reality right now is that we do not need lines companies to buy up existing plants. There is no point in our just simply reshuffling the pack, and swapping the ownership of existing non-renewable generating companies from the present generators to lines companies.

The urgent need this nation has right now is for brand new generation. We need to have brand new generation, and we need it quickly. We need it to utilise any fuel that is available, frankly. If the day comes when a lines company does want to build above the 50 megawatts or 20 percent level in coal or in gas, then I have the assurance of the Hon Pete Hodgson, who has given me his word, which I am recording in Hansard tonight, that in those circumstances the company simply has to come to him and we will very quickly whip a bill through the House to permit that to happen. Obviously, if we do that we will have the support of every party here, so it should not be a problem. I point out to Roger Sowry that the gap between discovering some new gas off the Canterbury Bight, for example, and actually processing it to generate electricity would, in any event, be several years long, and we would have ample time to whip some legislation through the House to permit that to happen.

A straw man is being set up here tonight. The goal is to get new generation going, and to encourage that. The other example that I gave to Pete Hodgson was that I know Solid Energy will probably go out to tender at some time for a 100 to 150 megawatt coal-fired plant near Westport.

I deliberately waited until after the United Future party had spoken to this part, because I was interested to learn how a party that claims it is centre-right could support such legislation. Let me say to that party that this is one of the most socialist bills I have seen—and I have been in this House for 26 years. I saw Sir Robert Muldoon’s legislation, and I know this is Stalinist, centralised, command-and-control legislation. Then we found that the United Future party boasted that it had a role in the bill. Yes, it has managed to persuade the Government to lift the generation limitation for lines companies from 25 megawatts of power to 50, or from 10 percent of their load to 20 percent. Somehow, that is a justification for United Future to vote for the bill. Then the member gave us another extraordinary justification: he said that if somebody does find some gas, we will whip a new bill through Parliament.

💬 Gordon Copeland: Why not?

The member asks why not. I ask the member, given that that party says it is principled, where the principle is behind voting for this legislation, and where the principle is—whether economic, religious, or from any ideology of any nature—that states it is evil for a lines company to generate 51 megawatts of electricity, and it is evil for it to generate more than 21 percent of its load.

I could understand a split between lines companies and generation if the limitation was set at zero. Or, if we are to say that lines companies should get into generation, why can it not be set at 100 percent? I say to the United Future party that I realise it likes to suck up to the Government, and its members like to be able to get up in the Chamber and say that they made a tiddly little change, so they are good boys.

💬 Gordon Copeland: More than you can say, isn’t it?

The member says it is more than I can say. I say to Mr Copeland that at least one knows the ACT party has a rational point of view. We have a rational point of view, and we are asking why, if lines companies are to be allowed to get into generation, the limitation is set at 50 megawatts? Is there a law that states that generators that generate less than 50 megawatts are efficient? If one listens to Mr Copeland’s own words—which is more than he does—one can hear that he is arguing for a 150-megawatt station to be built by Solid Energy, but not by a lines company. Now, I ask Mr Copeland, what is wrong with that? He cannot give us an answer to that, because the United Future party is on the far, far left of New Zealand politics. It does believe that the Government and the Minister ought to interfere with the industry in that way. United Future does believe in command and regulation. It is on the left in terms of its views, and it ought to be upfront and admit that. United Future ought to be upfront and say that the Government would not be able to introduce this socialist legislation without the support of the United Future party.

It is no good for the United Future members to come along to the Chamber and say that they made a minor variation to the bill and, therefore, this socialism is OK. Either one is in favour of the free market and believes in free enterprise—in which case, one would vote against the bill—or one does not and is a socialist. I say to Mr Copeland that he is a socialist. He is on that side of the paddock, and he ought to be proud of it. He should go out there and tell small-business people that he does not vote in favour of deregulation, but that he gets up in Parliament and supports a Stalinist bill. Yes, the United Future party does belong with the Labour Party. Mr Dunne has not changed his stripes; he is a socialist. He does believe he knows better than other people, and that he can tell investors what they should do. That party believes it knows better than other people, and it is telling the lines companies that it is evil for a lines company to generate more than 20 percent of the generation in its area. I do not know what that evil is, because Mr Copeland has not got around to telling us what it is. Apparently, it is terribly inefficient to generate 51 megawatts, but we are told that if gas is found, then all Mr Copeland’s principles will go out the window and he will come down to the Chamber and rush new legislation through.

I want to follow on from where Richard Prebble left off, although not, perhaps, in such a fierce mood. I say to Mr Copeland that he has let New Zealand down by taking pride in doubling the megawatts, from 25 to 50, that lines companies are allowed to get involved in generating. He has let New Zealanders down. I wish New Zealand First had known that before today. We did not really know where that figure came from; nobody on the Commerce Committee could tell us that. Now we know there was some sort of little backroom—

💬 Gordon Copeland: I wrote to the select committee and told it about that.

I say to him that if he had done nothing but put a representative on the select committee—and I cannot recall a United Future member turning up to the select committee at all, if I am correct—

💬 Gordon Copeland: I raise a point of order, Mr Chairperson. I think that is a breach of Standing Orders. The United Future party does not have representation on that committee, and for the member to announce to the people of the New Zealand that we are not on that committee is against the Standing Orders. That is not fair to—

The CHAIRPERSON (Hon Clem Simich): That is not a point of order.

I have to go on along those lines, because I say to Mr Copeland that, frankly, if United Future had even had someone sitting in the audience to listen to the submitters, and especially to the lines companies, he might have thought then, as we thought, that 50 megawatts was not enough.

The debate tonight has certainly convinced me, in my mind, that there is a stronger case for National’s proposal to totally uncap the limitation on lines companies. The honourable member shakes his head, but I can remember that separating lines businesses from generation was a result of the Bradford reforms. The argument was pretty sound. I thought Labour opposed it at the time; as I recall the situation, it opposed it pretty strongly. But the point now, which Roger Sowry made exceedingly well, is that we now have lines companies investing in generation in Australia. I hope they are not investing in wine companies, but they have to do something with their money. There is a strong case for considering allowing lines companies to get back into investing in generation in this country.

New Zealand First debated that matter at length in our caucus. We were concerned that if we removed the cap totally, one of them—or maybe two—would go out and buy Contact Energy, and we would have not a kilowatt more of generation. But there would be some advantages in that, because Contact Energy would be a totally New Zealand - owned company. We decided that the whole matter should really be subjected to a comprehensive review by professionals, by people who know the industry inside out, with a view to determining the best outcome for New Zealanders in terms of security of supply, a reasonable price, and the availability of electricity at the flick of a switch.

But after hearing the debate tonight, and after listening intently to Roger Sowry and then to Gordon Copeland, New Zealand First has decided it will support the National Party’s amendment. We think there is a lot of merit in deleting clause 22(a) and allowing lines companies back into the scene, so to speak. We know that they are now subjected to regulation, that they are controlled by the consumer price index minus x formula, and that they cannot cross-subsidise. Why we did not do that in 1998, I am at a loss to know. It seems to me that the National – New Zealand First coalition Government at that time made a mistake, because it did not think through that change thoroughly enough, in my view. I know that the Minister, the Hon Pete Hodgson, made very strong representations at the select committee—he was on that committee at the time—along the lines that we should not just split it all off, totally.

So New Zealand First is of the view that there could be some significant benefits to New Zealanders, and to this country as a whole, if we get new generation. It seems we can get that more readily by allowing the lines companies in, and it seems that if we allow them in and allow them to build coal-powered generators with some degree of liberalisation, for want of a better term, we will all be better off.

I raise a point of order, Mr Chairperson. I would like to direct your attention to Speaker’s ruling 24/1, which states: “(1) The convention of not referring to the absence of a member is equally valid when applied to the presence or absence of a member from a select committee hearing.” I could not bring the reference to mind when I raised my point of order, but I think that that Speaker’s ruling makes it very clear that members should not refer to the absence of a particular member from a select committee. I would like you to take that into account.

Mr Copeland should have read out the whole of that Speaker’s ruling, because it goes on to state: “(2) there is no breach of the convention in referring to the fact that a member was not a member of the committee and so did not attend committee hearings when evidence was being heard.”As I understand it, Mr Copeland’s main argument is that he was not a member of the committee, which is exactly what Mr Brown was pointing out to the Committee. Of course, Mr Brown was perfectly entitled to say that United Future members could have gone to the Business Committee and could have made themselves members of the Commerce Committee, but they did not.

The CHAIRPERSON (Hon Clem Simich): I thank both Mr Prebble and Mr Copeland. I tell Mr Copeland that he has no basis to his argument; Mr Prebble is quite right.

I raise a point of order, Mr Chairperson. I agree entirely with the second part of the Speaker’s ruling, which is why I said that we were not there. But if we go back and check Hansard, we will see that Mr Peter Brown said that no member of United Future decided to go to the select committee. Therefore, the second part of that ruling is not applicable—the part that gives him permission to refer to the fact that we were not there if, in fact, we could not have attended because we were not members. He simply said that we did not bother to turn up, and I think that that is a breach of the first part of Speaker’s ruling 24/1.

Well, I was trying to give Mr Copeland the benefit of the doubt, because in fact he interrupted Mr Brown’s speech when Mr Brown had actually made the points he was referring to. I presumed that Mr Copeland would not be relitigating a point of order he had already made, and that he was raising a new matter. Mr Brown, after that point of order, corrected himself and then went on to point out that United Future did not have a member on the committee. In fact, Mr Copeland’s point of order is completely out of order, because it should have been raised at the time, and not afterwards.

The CHAIRPERSON (Hon Clem Simich): I thank members for that. The ruling is that Mr Copeland was out of order, and he should not interrupt a member’s speech when he does not have a proper point of order. That is the way it is. Mr Brown was not referring to any absence from the committee in a way that is covered by Standing Orders or Speakers’ rulings.

I would like to bring the Minister of Energy, the Hon Pete Hodgson, up to speed on what we have heard in the Committee this evening regarding the deal he made, we understand, with Gordon Copeland of United Future. United Future has apparently made a deal with the Labour Party in relation to lines companies having the ability to go into generation, over and above the 50 megawatts as proposed in clause 22.

We would like the Minister to comment and confirm that Gordon Copeland had assurances from him that if there were some discovery in terms of gas, or some huge need or opportunity for lines companies to go into significant generation—by definition, I suppose that means above 50 megawatts—the Minister together with United Future would put a bill through the House—

💬 Hon Richard Prebble: Rush it!

—and rush it through the House, we presume under urgency, to allow lines companies to go into generation well over and above the 50 megawatts as proposed in the bill, which is the current restriction they have. So we would like to hear from the Minister whether that is in fact the case. Will lines companies, sometime in the future, be able to generate well over and above 50 megawatts? We would like to ask the Minister whether he gave assurances to United Future that legislation would be passed. Did he do that verbally or in writing, and does he stand by it? I invite the Minister to take a call on that matter.

In doing that, I also invite the Minister to tell us why he thinks that in the future—whether in the near term, medium term, or distant future—there might be a sudden need for generation that is over and above the need that exists today. We already know that the No. 1 constraint in the electricity industry today is the availability of power. There is constraint through the lack of generation, and through the fact that the Government in no way encourages generation in this country at this time, and certainly has not for the past 5 years. The Government does not encourage coal generation, with the Kyoto Protocol and through the Resource Management Act. It is starting to dismiss wind generation, and we saw that by the cancellation this evening of a proposal for wind generation, because of constraints under the Resource Management Act. We know that the Minister does not support geothermal generation, because the constraints on that for sustainability go way past 100 years—which is unachievable. So why would this Minister suddenly decide that at the moment, with the lack of generation in this country and with poor growth seen into the future, there may be some need down the track? Can the Minister please take a call on that, and tell us whether he has given some assurance that he will whip legislation through the House to allow lines companies to go into significant generation.

We also ask the Minister: what is magical about 50 megawatts? Why has he chosen in clause 22(a) that lines companies are allowed to generate 50 megawatts of energy? We know that 25 megawatts was the magical answer before that, and that is in the bill, and before this legislation came to the House, 5 megawatts was the magical number that lines companies were allowed to go into generation with. So why was it once 5 megawatts—why was that the magical figure? Why did it become 25 megawatts? How come, through this legislation today, lines companies are suddenly limited to a figure of 50 megawatts? In percentage terms it has gone from 5 percent, to 10 percent, and then to 20 percent.

The preceding speaker has asked a number of questions, which basically boil down to: why did we choose 50 megawatts? I will tell him the history. There was earlier in this Parliament a member by the name of Max Bradford, and he came to the view—supported by all the National Party members—that the way we should run our electricity system in the future was as follows. If someone owned a line, that person could not simultaneously own an electron. That was the view of the National Government at the time.

💬 Hon Roger Sowry: We’ve changed our mind.

Roger Sowry has just chipped in, saying: “We’ve changed our mind.” That is good, is it not, because that is proof that the National Party now realises that that was a most extraordinary error. The disruption around the country was amazing. It was astonishing; so much so that by the time we came to the winter 2001 event—

💬 Phil Heatley: Why 50 megawatts?

I have 5 minutes, and I will get to that question. I did not chip away at the member who has just resumed his seat during the course of his speech, which went on and on, and I expect him to stand by and get an answer to the question that he has put to me. If he does not want an answer, he can continue to chip, and I will resume my seat.

What happened then was we went to winter 2001, and we found some reserve generation on the waterfront of Wellington, but the person who owned the generator also owned the line, and we could not turn it on. That is why we needed to get the electricity amendment legislation of 2001 through the House in a hurry. That is how silly it was. At that stage, we said: “Let’s start moving in such a way that lines companies can generate a certain amount.” At that stage the threshold was set at 5 megawatts.

Then we came to this legislation, 3 years later. In the interim, something else had happened. Lines companies were placed under Commerce Commission regulatory review. They are under watch. They may be subject to a Commerce Commission inquiry, or they may be subject to the CPI-x regime, and on it goes. So now, for the first time, we have decent disclosure as to how lines companies run; whether they are making excess profits; and whether they are doing what they were doing in Britain, which was creaming it and behaving monopsonistically, and the answer is, generally speaking, they are not, although there are some exceptions to that. Those exceptions are detailed by the Commerce Commission, and as the years have gone by, we have a much, much better handle on whether there has been monopoly rent taken by lines companies and an ability to reduce that rent if it is taken.

So I put to the House legislation that said: “Let’s raise the threshold. Five is too low, so let’s go to 25. Let’s just quintuple it.” That legislation then went to a select committee. In the course of the select committee hearings, a number of people came along and said: “That’s still too low.”, and the select committee came to the view that it should be raised to 50 megawatts. Then in the House—in front of the member who has asked a question about a so-called secret deal—Gordon Copeland got up during a question and asked: “What does the Minister think about going to 50 megawatts?”. I said: “Well, if the select committee decides that is the right thing to do, it is fine by me.” And that is the end of the story.

I hope Mr Copeland was listening to the Minister, because the Minister basically told us that Mr Copeland’s belief that he is responsible for the 50 megawatts is, as far as the Minister is concerned, nonsense—and Mr Copeland is telling members what a great influence United Future has had. Mind you, the Minister could not actually tell us: “If it’s 50, then why not 100?”. But let us turn our minds to the ridiculous amendment from the Greens.

The Greens have said that line companies can generate any amount they like, providing it is from a new, renewable energy source. I looked at the principal Act to see whether “new, renewable energy source” is defined. The Greens might be interested to know that it is not. I know the Greens do not know anything about physics, but that means that they are in favour of a line company—and there might be one mad enough to do it—generating by nuclear fission, because nuclear fission results in plutonium. The Greens might be interested to know that it is definitely within the definition of a “new, renewable energy source”. So the Green Party is saying it is in favour of nuclear power in New Zealand, and I never thought I would see that day.

💬 Peter Brown: Maybe he’s had a few smokes!

Maybe he had a few. Well, he thinks it is funny, but that is exactly what this clause does. Let me tell him something else. I am a lawyer, and I would be quite willing to go along and argue—as I am sure a line company lawyer will—that a new, renewable energy source does not cover just wind and water but also covers things like coal. Coal is generated over millions of years, and there must be new coal being generated as we speak. It will be being formed, and new gas will be being formed. There is nothing in this bill to say how rapidly the renewal of the energy source has to be, just that it is happening. Well, as a matter of scientific fact, it is happening, so the Green Party is introducing a measure that actually says that line companies can generate any amount of energy, provided that they get a lawyer like me—and I will soon be available—who is quite happy to argue that this clause covers any energy, and it certainly covers nuclear fusion. There is no doubt about it.

💬 Sue Kedgley: Is that renewable?

It is renewable—of course, it is. Nuclear fusion results in plutonium. It is one of those interesting processes where one ends up with more energy at the end. In fact, the Greens ought to love nuclear fusion. Perhaps they do—perhaps I have misinterpreted the Greens. Perhaps the Green Party is really right into nuclear power. I always thought that they were against it, but I see this clause being put in, and I say that this is the sort of clause—like the 50 megawatt clause; if we accept Mr Copeland’s argument—that gives MMP a bad name. Here we have small, little parties trying to prove to their membership that they have some influence, so they put forward this sort of amendment. Even though the clause is nonsense—and both clauses are nonsense; the whole bill is nonsense—in order for the minority Labour Government to have a majority to put through this Stalinist legislation, we have clauses of this sort. It is sheer madness.

The Government ought to realise that the reason it is in this position is not just MMP and its loony, flaky coalition partners like United Future and the Green Party, but that what it is trying to do does not make any sense. There is a Resource Management Act, and it is for that Act, which talks about sustainable New Zealand, to decide those sorts of questions. It is bad lawmaking—and the Minister knows this—to put in a clause that uses the term “new, renewable energy source”—a term that has not been defined by the Greens. The Greens do not know what that means. Nor do the line companies. There will be litigation about this matter. I say to the Green members that the result might be the exact opposite of what they think. We have line companies that are crazy enough to invest in wineries and finance companies, so they are certainly nutty enough to invest in nuclear power, now that they have been told by the Green Party that it is the only form of energy they are allowed to invest in. Why should this Parliament be attempting to make those sorts of guides and rules for the energy companies? It is complete, utter nonsense.

I move, That the question be now put.

I want to take Minister Pete Hodgson’s attention for a while, because he was not in the Chamber for the debate. I say to him, firstly, that the Commerce Committee did not decide to do this in the way he portrays it. In fact, when we in the select committee asked about going to an unlimited amount of generation—and the Labour members were there when we asked the officials—the officials told us it was a policy decision. The Labour members of the committee voted for the Labour policy. One presumes that that was something the Minister decided. We were told earlier by Gordon Copeland that both he and the Minister decided on that new artificial limit. The debate, really, is about why we should have the limit.

I accept the arguments the Minister made about what National did in the 1990s. As I said, we changed our mind; it is not our policy now.

The Minister has here a “get out of jail free” card. We can have unlimited generation by lines companies and, because of the “CPI minus X” regulations and the regulatory environment the Minister has put around lines companies, we can feel confident that the cross-subsidisation the Minister and his predecessors worried about will not occur—or, if it does occur, will be adequately picked up and monitored. We are confident with that.

I think the Minister is confident with that as well, in his heart of hearts. Otherwise, why would he allow lines companies to have an unlimited number of windmills but not to have anything to do with gas? Before the Minister came to the Chamber tonight, I put to members a situation. I was criticised because it was hypothetical, but let us say it is not. We have two gas rigs currently drilling at sea. The Government should rightfully accept credit for having a couple of rigs out there after a long period without rigs. Some of that credit is to do with the Government, and some is to do with the price of Māui Gas being right, but those rigs are drilling now. I have heard the Minister say that he has been worried about finding gas, and that that has been his biggest concern—rightly so. If a company finds gas, for example, in Canterbury, and wants to bring it on and do a deal with a lines company to build a combined cycle plant—the last major one built in this country, in New Plymouth, was built by a lines company—it will not be able to do it. This bill will prevent it from doing that.

Gordon Copeland, who supports the bill, said in the Chamber that that was OK, and that he had talked to the Minister, who said that amending legislation would be brought in to fix that, should gas be found. I do not know whether Mr Copeland is right or wrong—I have no reason to disbelieve a God-fearing man—but I say to the Minister that that is a bit of a silly way of doing it, so National will vote to remove the restriction. We will help the Minister so that he does not have to be a hostage to the Greens. I suspect that if the Minister were to put his hand up to vote for that, even United Future would vote for it. I think United Future is kind of clinging to the fact that it has a small gain, and it thinks that that is about where the politics are on this issue.

The politics are in letting a lines company unleash some of its capital. The Minister will know, as I know, that lines companies are talking about investing in Australia. That is nutty when we need the investment here. It is crazy! If we can guarantee that those companies will not cross-subsidise the investment, why not let them make it? As the Minister well knows, lines companies are also looking at other investments that are way off beam from electricity. I gave the example before of ElectraLines, which owns a finance company.

💬 Hon Pete Hodgson: Who’s that?

ElectraLines. It owns the Oxford Finance Corporation in Levin and I do not think the Minister believes that that is a good use of money for a lines company. That is not what it should be doing. It should be investing in some generation, if it wants to invest, or just giving a rebate to consumers—I do not care what. I know the politics of the industry; I know what has gone on before; I am not trying to walk away—[Interruption] The member can go on about that, but I am not trying to walk away from any of it.

National disagrees with the bill. In fact, it might be made more difficult for us if there were no limit in the bill on lines companies. But I say to the Minister that we should remove that limit and let the lines companies live with “CPI minus X”. Let us have faith in the Commerce Commission: I am glad that that is where the Minister has left the regulatory regime, and we will come to that in the next part. Let us do all that. Let us remove this silly clause that allows a lines company to put up as many windmills as it wants, but does not allow it to put a small coal-fired unit or something else in place.

I think the member raised some good points, but I think he has also told an incomplete story, and I would like to finish the other half, if I may. The issue of whether we should allow generation capacity of above 50 megawatts is, of course, something that people have talked about. It is a matter of fact that with new renewables there is no limit—there has not been one for 3 years. It is a matter of fact that new renewables are defined in the 2001 legislation, and that in that legislation reserve generation can be built without limit.

Notwithstanding those changes, and notwithstanding the fact that the without limit provision for new renewables has been in place for nearly 3 years, there has not been a lot built. That raises the question of why. Because that answer is not yet known to me, in the past few weeks I have asked the Ministry of Economic Development to go and find out. In fact, after discussions with Gordon Copeland and other members—and with myself, one might say—I have asked the ministry to go away and consider whether we should remove that threshold altogether. That work is now under way.

If we were to remove the threshold, we would of course allow all retailers to buy lines companies. That means we would have the prospect of some sort of regional concentration. There might be one Auckland power company or one Wellington power company that would have part of its obligations regulated, etc.—OK? So we will take a look at that and see whether it is the right thing to do.

In the course of the Commerce Committee hearings, one lines company decided that it wanted that to happen now, without the public policy analysis—if we did not mind. Well, we do. That company did not want to build new generation; it wanted to buy other people’s. If only its trustees—or the National Party members amongst them—could stop taking one another to court, then maybe we would see that particular lines company get into the gas business. It did not want to build new generation; it wanted to buy existing assets—and that is a very interesting distinction.

The member asked why we did not release capital for new generation. The answer is that we just did, somewhat—not that much has been built. If we removed the threshold entirely, the capital may not go to new generation for, indeed, the largest lines company in the land has decided that it wants to buy other people’s assets.

That may seem like a very reasonable contribution from the Minister. People listening to the radio, or sitting in their offices around Parliament, would have thought that was a nice, peaceful, little explanation from the Minister, and I suppose it gives us an indication of a Government that is thinking about these things. But the reason there has been no substantial investment in renewables for generation in the last 3 years is that it is so hard, and what is left to people is so unreliable. The Minister would have to concede that if one wanted to do a hydro project in this country—and hydro power is a renewable form of energy—it is almost impossible. He would also have to concede that if one wanted to build a wind project in this country, the economics make it almost impossible. Big companies like the State-owned generators can carry out the nice little exercise of building wind farms everywhere, but everyone knows that on the best of performances, they will be barely 40 percent efficient. So why would a lines company want to risk its consumers’, or its owners’, capital on such a dodgy venture? When it comes to biomass energy, or something else—when it comes to any form of emission—we know immediately that the Resource Management Act will stand squarely in the way.

The fact that nothing has happened in the last 3 years since the Minister allowed lines companies to look at unlimited amounts of generation from renewables, is that all the other conditions that have to be in place are not in place. It does not matter how many times the Electricity Commission meets, sits, and makes decisions, until those other factors are taken care of it is most unlikely that we will see any sort of substantial investment from those companies in new generation capacity.

The Minister said it is interesting that one of the country’s biggest line companies wants to buy only generating assets that exist. Well, it wants to do that because it knows how hard it is to get new generation established. We have seen in the last 12 months the falling over of the very large project on the Waitaki River, and, although one or two new wind farms have opened up, they are just nice little green adjuncts to the generating capacity of the big companies.

I ask the Minister whether he might comment on corporate separation. What exactly is the purpose of having a statement about corporate separation in this bill, and for that matter, the arm’s-length rules that relate to the preparation of, the contracting of, and the purchasing of reserve generation? We need to understand that this Government is proposing to smooth out any possibility of interruption to electricity supply by creating reserve capacity. Well, how do we create reserve capacity when already there is more demand than capacity to deliver?

💬 Hon David Cunliffe: Read the State-Owned Enterprises Act.

What we will see, over a period of time, is the Government encouraging State generators—and there is good evidence of it happening now—to create that reserve capacity, effectively by rationing through price. It is the consumer who will pay for that. I heard a member on the other side of the Chamber interject: “Read the State-Owned Enterprises Act.” I ask his Minister to explain how one’s reading the Act is relevant or helpful in understanding how this committee of well-meaning people is going to work to get reserve capacity in this country.

💬 Hon David Cunliffe: Would the member like me to take a call?

I would very much like the member to take a call.

I move, That the question be now put.

The CHAIRPERSON (Hon Clem Simich): We have had over an hour on this part, but I think the Committee would like to hear some more good sense.

I think that the Greens, despite suggesting they would not, would actually be very interested in what I have to say. I am obliged to the Minister for taking a call—it was very parliamentary of him—and pointing out to me that there has been an amendment in a subsequent Act. Following the 1999 Act, in 2001, “new renewable energy source” is defined. I am obliged to the Minister, and I have now read it. It certainly does not rule out nuclear energy, and it states that a new renewable energy source means an energy source that occurs naturally, the use of which will not permanently deplete New Zealand’s energy sources of that kind. What that means is that an imported coal-fired station would meet this definition. Why that is important, for those of us who know about energy, is that in fact the cheapest way to produce energy in New Zealand is to set up a large coal-fired station and import the coal from Queensland. Indeed, that is exactly what one of the State-owned enterprises did. When there was a coal shortage, it was importing coal from Australia.

I find it simply amazing that the Green Party is saying, and this bill is saying, that a line company—and who would want to do this; well it would be the Auckland line company—can build the 150 megawatt station, providing the coal that it burns does not deplete New Zealand’s coal. So here we have the Green Party saying: “We are in favour of coal–fired stations provided it is not New Zealand coal.” That is what it says, I will read it out. It means an energy source that occurs naturally, the use of which will not permanently deplete New Zealand’s energy sources of that kind. It goes on to say that it has to be replenished if it is in New Zealand. I might point out that this definition clearly allows wood-fired stations, because wood would renew within 50 years. So the Greens are in favour of a wood-fired station, which I assure members has all the attributes of a coal-fired station.

Here we have the Green Party saying—actually, it is more than saying. I think this bill is almost a direction. It is going to become an absolute certainty that the line companies want to get into generation. We know that because they came along to the Commerce Committee and said they wanted to build a station bigger than 50 megawatts. We even had the United Future party telling us that Solid Energy wants to build a 150 megawatt coal-fired power station. Well, if it buys a line company, it will be able to do it because then it will come under the exemption, and then it will be allowed to build as big a power station as it likes, provided it does not use New Zealand coal. That is all the renewable energy sources provision does. It says that we cannot burn New Zealand gas, but we can import it from Indonesia, and there are people who have said: “Let us bring in liquid gas and have a gas-fired station from liquefied petroleum gas.” That is perfectly OK by the Greens because no doubt they read this clause.

I have to say to the Committee that I had not appreciated, until the Minister drew it to my attention, that in 2001, and no doubt it was he who did this, he managed to—I will not say con the Greens—persuade the Greens that somehow we are helping the whole planet if we burn Australian coal and not New Zealand coal.

The odd thing is, of course, that New Zealand coal is dug up and sent to Indonesia, and the Indonesians send their coal here, and that is OK! That is all right; it helps the planet! [Interruption] The Green member, Sue Kedgley, is interjecting from her seat. I ask her to explain to us whether that is what she meant. Is that Green Party policy? Could we have the Green physics that will let us know that somehow or other we help the planet if the Indonesians burn our coal and we burn their coal.

💬 Hon Maurice Williamson: What if they sent ours back?

That is a point, but, no, I do not think that would be allowed. I think we would have to test the Indonesian coal to make sure it is not our coal that has been sent there and brought back again, because I think that would be naughty. Under this provision, that is what “renewable energy” means. Interestingly, what it does not mean is “hydro” and “geothermal”, and Lord knows why that is.

I move, That the question be now put.