Electricity (Disconnection and Low Fixed Charges) Amendment Bill

I will take just a very brief call on this one—the low fixed charges and the tariff option for domestic consumers. Let us look at the eligibility threshold for the low fixed charge. Coming from the West Coast of the South Island, I have to say that the telephones have been running hot in my little blue office with questions about why the coast has not been included in this particular strategy. Having looked at it, and having put the ruler across it, I guess that the West Coast should be delighted that it has not been included, because the strategy will not work at the present rate. Indeed, I think the Minister is on record as saying he would speak to power companies and others to explain how it should work.

There is rather a nice aspect to this in terms of the way in which economists think and express themselves. It would appear from the spin of the Minister in the chair, the Hon David Parker, that the scheme will address inequality, but let us remember that it does not talk about discounts or amounts; it talks about margins. Yet although lower-use consumers who have not yet signed up to the low fixed-charge scheme might get a slightly lower power bill—perhaps by $20 a year—everyone else, including people who are already on the scheme, will probably pay more as the power companies simply raise tariffs across the board to make up the lost revenue. I understand that economists call this the waterbed effect, which is rather a nice economic expression, and is one that, even without being an economist, I can understand—if we push down in one part of the bed, something else lifts up to compensate.

Meanwhile, residential power prices are up compared with industrial ones. I gave those figures a little earlier.

💬 Phil Heatley: What were they?

I shudder to read them out again. But, seriously, in the last 5 years residential power prices have risen by 48 percent compared with a 25 percent price rise for industrial and commercial users, so people should be entitled to wonder what the hang is going on. Increasing the threshold for the lower South Island may not be needed. Given this Government’s inaction over climate change, its mismanagement of deforestation, and the amount of carbon dioxide currently being pumped out, I ask whether there will be enough power.

When I travel throughout the West Coast - Tasman electorate I normally at some stage pass through Reefton if I am going from north to south. Reefton was the first town in New Zealand to have electricity. Its residents are proud of that, and they have signs up, saying it. Its residents generated it themselves. They have done a lot of work re-establishing their historic streetlights, and that sort of thing. I think it is sad that Reefton could well be one of the first towns in the southern hemisphere not to have regular power, unless it gets one of the handy-dandy generators that, I understand, the Minister is bringing in in groups of 100 to supplement power when our current power supply is not capable of keeping up in the way that it should. Thank you, Mr Chairperson.

Mr Auchinvole has said two things recently that I think need to be corrected. The first is the suggestion that we are not building enough additional generation capacity. New Zealand’s need for additional generation capacity increases by around 150 to 170 megawatts per annum. Last year a capacity of more than 500 megawatts was built, which is substantially more than 1 year’s growth in capacity.

💬 Phil Heatley: How much wind was that?

There was not much wind power in that, and the effect of wind load factors is taken into account in that 150 to 175 megawatt range. This year we are building over 300 megawatts of capacity.

💬 Chris Auchinvole: Was this to catch up from previous years?

Some of it was to catch up on previous years; that is correct. Of course, the member’s party, I believe, is supportive of the market in the electricity sector—and if he wants to take a call to say that National is no longer in support of an electricity market, he may. The effect of the market is that one lets the market determine when it is necessary to build more capacity rather than building it before it is necessary. But maybe the National Party is changing its policy on that, like it has on so many other things recently.

The second point I would make is that it is true that electricity prices have gone up. The main reason they have gone up is that gas prices have gone up. Gas prices have not gone up as much as petrol and diesel prices, but they have gone up substantially, and they have gone up substantially as a consequence of the Māui gasfields running out and of our other gasfields being more expensive, essentially. That has been the main determinant of the increases in gas prices.

In terms of some of the things that have been said in respect of this bill by National members, one would think that they were going to oppose this bill, and my understanding from their votes earlier is that they have voted for it. They have indicated they are likely to vote for this legislation because they think it is necessary.

Clause 4 deals with low fixed-charge tariffs for domestic consumers. I have never oversold the benefits that the low fixed-charge tariff gives to low-use consumers. It gives them a benefit, but it is not an enormous benefit for most of the people who qualify. None the less, the benefit that does arise ought to be fair throughout the country, and at the moment it is not, because the entitlement relies upon a threshold that is currently the same for Auckland as it is for Invercargill. Plainly, if people live in Auckland, which is a warmer city than Invercargill, then they do not have to use as much electricity to heat their houses. Accordingly, a lower quantity of electricity, on average, is used in Auckland, and more people qualify for the low fixed-charge option in Auckland proportionately than do in Invercargill, notwithstanding the fact that, if anything, the need is greater in Invercargill. That is why we are fixing this—it is plainly unfair.

The low fixed-charge option eligibility should be based upon regional use patterns rather than on one New Zealand - wide average. This change to the Act changes the regulation-making power under the Act to enable that anomaly to be fixed.

I rise to take a call on clause 4, “Low fixed charge tariff option for domestic consumers”, and to pick up where the Minister in the chair, the Hon David Parker, left off with regard to the prices of Māui gas and their impact on that low fixed charge. I would like the Minister to listen to two points that I have heard in my constituency around low fixed charges. I had a meeting, funnily enough, on Friday with a constituent, Mr Ralph McKenzie, who wanted me to go to the Unison lines company with him to question Ken Sutherland from Unison about the low fixed-charge rate. His concern was about the way that pricing is disclosed in the low fixed-charge tariff. The Minister will appreciate that both a fixed and a daily charge appear on everyone’s bill. Well, my constituent’s concern was that in the 2006-07 year his entire power bill went up by 7 percent, which was quite a bit above the rate of inflation. But when he started to get down to brass tacks and tried to uncover whether the rise was due to the fixed portion or the daily charge portion, he contacted Unison because he figured that the fixed portion of the low fixed-price charge was to do with lines companies and the distribution of power.

In fact, he found that the fixed portion had gone up. Overall, it had gone up by 24 percent, but Unison claimed that its daily rate had gone up only a couple of percentage points from that, and that overall the increase of the fixed charge was due to Contact Energy and to the increase in prices for gas from the Māui field. I am not sure how the average consumer is supposed to get to the bottom of that, because it is not disclosed very clearly. When my constituent got in touch with Contact Energy, the company wrote him a letter stating that the price rise was due to the Māui gas field running out, and the explanation the company gave him was that the costs were increasingly becoming a fixed cost and not a daily use charge. So I would like the Minister to explain that to me, because I am still not sure how that was not part of the daily rate but became part of the fixed cost. So that is something for the Minister to answer, and I would be interested in knowing that.

The second thing around the daily use charge, which impacts low-use users, is something that happens particularly with a lot of my constituents in Hawke’s Bay. Although Hawke’s Bay presents a go-ahead sort of image, we have an underbelly of people who are struggling. I have constituents in Maraenui. I was at a meeting with members of the Māori Women’s Welfare League the other day, and their biggest concern about this low fixed-charge tariff industry, with regard to Housing New Zealand Corporation properties, is the double energy use they have. People have a gas line plus an electricity line into the house and they have fixed daily charges on both those units. The problem is that all the appliances in Housing New Zealand Corporation homes are geared to both gas and electricity. It is a situation where people who are not making a lot of money, who are on benefits or low wages, are having to pay a double fixed-use charge. Right now the Housing New Zealand Corporation is not looking to do anything to mitigate that situation, but it is another issue that I would appreciate the Minister’s comments on. It presents issues, under clause 4, to do with the low fixed-charge tariffs.

Those are the two things I would appreciate the Minister’s comments on. How does a company like Contact Energy justify those price increases and make that a part of the fixed cost as opposed to the variable daily charge—I would be really interested in the Minister’s comments on that—and how do we enforce better disclosure of that information to consumers? Secondly, I would like him to comment on the charges that poor, underprivileged people are having to deal with in Housing New Zealand Corporation homes with regard to the two sources of energy going into those homes—the reason for which, for the life of me, I cannot understand. Thank you.

Clause 4 agreed to.

Clause 5 Electricity governance regulations