Financial Review Debate — Ministry of Economic Development

I shall take a call on the Ministry of Economic Development, but in relation to one specific aspect of the ministry’s wide-ranging interests and that is to do with energy. Although the Finance and Expenditure Committee reported on the Ministry of Economic Development—in fact I thought it was the Commerce Committee, but I stand corrected on that if that is the case—one of the things that the Commerce Committee also covered was a review of the various State-owned enterprises. It is very important to draw to the House’s attention some very serious situations that have arisen around the upgrading of the transmission grid in this country. I refer particularly to the 400-kilovolt line that was planned originally by Transpower between Whakamara and Ōtāhuhu. As members will be aware, that line was announced by Transpower last year. Subsequently, in about April of last year the then Minister of Energy, the Hon Trevor Mallard, who is the Minister now in the chair, asked the Electricity Commission to look again at what Transpower was proposing to do.

I draw to the attention of the Committee the exchange between myself and the Chairman of the Electricity Commission, Roy Hemmingway, about the 400-kilovolt line when he came along to the Commerce Committee. I started off by asking him whether he felt that the responsibilities between himself, on the one hand, and Transpower, on the other, were sufficiently defined, because Transpower had said that it was conscious there was an overlap and it was worried about that. Roy Hemmingway replied—and I want to read these remarks into the Hansard as I think they are very important—“I think they are. We have a set of rules which defines the relationship. We”—that is, the commission—“have a responsibility in respect of approving grid upgrades, to ensure that they are the least-cost approach to the job. That’s what we are required to do.” I then responded to him by saying that I was concerned that in April 2005 the Minister of Energy asked the commission to consult members of the public about the transmission upgrade, whereas in the normal course of things, was it not Transpower’s responsibility to do that.

Roy Hemmingway’s response was as follows: “Yes, I do believe that it was Transpower’s responsibility to fully develop alternatives to its own proposals, to have those costed, and to have consulted the public on them. They didn’t do that.” That was a very important comment, because it suggested that Transpower was not following through on its obligations. In respect of whether Transpower was following through on its obligations his response was: “Well, they didn’t with respect to the 400-kilovolt line from Whakamaru to Ōtāhuhu.” I must say that I was stunned with those responses. It is the first time since I have been at Parliament that we have had the head of the Electricity Commission make such damning comments about one of our largest State-owned enterprises—a State-owned enterprise, I might say, that has no fewer than 156 staff who are paid more than $100,000, 19 staff who are paid more than $200,000, and eight staff who are paid more than $330,000 a year. I have chosen that figure, because that is more than the Prime Minister is paid. Yet the Electricity Commission, through its chair, is saying that Transpower failed to do its job correctly, and that is a very, very serious situation that has arisen. Therefore, we are now reliant on the Electricity Commission getting it right and getting it right quickly, because it is quite clear from the evidence presented to us that that 400-kilovolt line needs to be built and functioning no later than 2010, which is now only about 4 years away.

I might add that if United Future had its way we would completely change the whole thrust of Transpower. We would give it a very simple objective in life, and that would be to get electricity from A to B at the lowest possible cost to the consumer over time. We would have it do that by way of borrowing funds over a 30 or 40 year period, because the grid actually lasts for a period of 30 to 40 years, and therefore it is sensible to take the cost right over the whole period of time to keep that cost as low as possible to electricity consumers. It gets even worse in that the Commerce Commission has also, as one knows, been dabbling with taking price control over Transpower. We have some real problems with that State-owned enterprise.

For reasons that I am happy to explain to the member later and that have to do with State-owned enterprise energy portfolios, which I have now delegated to the Hon Mark Burton, it would be inappropriate for me to comment to the Committee on the matters that he has raised.

Report noted.

Ministry of Health