Electricity Industry Bill

Thank you very much for this opportunity to speak on clause 3 of the Electricity Industry Bill. I will make some introductory comments. Labour will be opposing this bill. We opposed it at the first reading, we opposed it through the select committee process, and we will continue to oppose it now. This bill simply dusts off Max Bradford’s old policies of more market, more privatisation, and more competition in the electricity sector. I can see that Roger Douglas is getting very excited about the bill already, but it will do nothing to address the three fundamental priorities in the electricity sector: security of supply, affordability, and sustainability. It does nothing to address those things, and that is the reason why Labour will be opposing it.

New Zealanders are struggling to make ends meet at the moment. The National Government’s GST increase, which will of course apply to electricity bills, will do nothing to help them with that particular predicament. Therefore, this bill is simply another blow because it does not deal with the fundamental issues that New Zealanders are currently facing. Those fundamental issues concern the cost of living going up, which the Electricity Industry Bill does nothing to deal with, at all.

Labour members took a very active interest in hearing submissions during the select committee process. We were concerned about a number of the issues raised, and we were concerned that the analysis does not appear to have been done that would justify many of the provisions in the bill. I will be talking about more of those issues. We were particularly concerned about the asset swap involving the Waitaki water catchment system, which is something I will talk more about when we get to that part of the bill. The case has not been made for that swap. Treasury raised concerns about it, and so did the Institute of Professional Engineers New Zealand and so forth. So we will be raising a number of concerns regarding that when we get to that point in the bill.

This bill, as I mentioned in my introductory comments, does nothing to deal with National’s major election promise when it came to electricity prices. Gerry Brownlee, John Key, and Bill English went up and down the country saying that power prices were too high, and saying that Labour had let power prices continue to go up and had not done anything about that. But what do we know? Well, here is a bill. What does it do? It does not address the issue of power prices, which is what New Zealanders were all expecting the Government to deal with when it came into office, and when it introduced this bill into the House. This bill is silent on power prices. In fact, it will do nothing to control the exorbitant rise in electricity prices that people have seen. It will do nothing to address the concerns raised by the Commerce Commission in its recent report on the electricity market. In fact, it raises a whole lot of new concerns. It simply goes back to the failed experiment that Max Bradford started in 1998.

One of the criticisms that Gerry Brownlee keeps coming back to the Labour Opposition on is that he says we had 9 years to deal with that so why did we not do something? Well, it is very difficult to unscramble an egg. The Government sold Contact Energy and privatised a lot of the retailers and lines companies, to the point—

💬 Aaron Gilmore: The Government didn’t privatise them.

Well, the local authorities did—under direction from the Government.

💬 Aaron Gilmore: They chose.

CHRIS HIPKINS They chose to? Under direction from the Government they privatised the retailers and the lines companies, and it is very difficult to unscramble that particular egg and get back to the point where there can be any kind of coherent system. So instead the previous Labour Government established the Electricity Commission, which was designed to address some of the failures in the market. But Gerry Brownlee, with this bill, is now stripping out many of the functions of the Electricity Commission by establishing a new Electricity Authority. That authority will look at only a small part of the equation, though, and one of the biggest opportunities for us, if we are talking about more efficient use of energy, is to get people to use less energy if they do not need to. But that function is being taken away from the Electricity Commission; it will not be with the Electricity Authority, and that is just crazy. If we want the Electricity Authority to be the overarching body that looks at all of these things and that manages the electricity sector, then saying to it that it can manage the electricity sector but that we do not want it doing anything about electricity efficiency and the more efficient use of electricity—actually reducing demand on the system—is just crazy. For example, one way we avoid significant capital investment in the transmission system and in the management of that system is to get more distributed use of electricity, more localised generation, and more efficient use of electricity, which is something this bill does not address.

The CHAIRPERSON (Hon Rick Barker): Just before I take the next call, I remind members that we are in the Committee stage, or the “nuts and bolts” stage. This is the simplest clause that one could hope to see in legislation: “This Act binds the Crown.” Members should address their comments to the purpose of the clause, and not have a wide-ranging debate.

Clause 3 is a very specific clause in the Electricity Industry Bill. When we listened to the previous speaker, my colleague Chris Hipkins, we heard him raise questions that were fundamental and germane to clause 3, “This Act binds the Crown”. The question is whether the Crown is capable of achieving what it said it would achieve. We have very serious questions about that, because if this legislation addresses the huge differential between domestic and industrial energy consumers, then the Crown will be bound by the solutions in the legislation. Will it be able to deliver on that issue? I think not. But we can explain that further on in the debate on the bill. Will this be the bill to ensure that there is oversight in terms of fairness of price setting in the electricity sector? The solutions offered in this bill all bind the Crown, so we think not. We can explain that further later on.

Will the asset swaps being promoted be the structural change that increases efficiency in the sector? We have grave concerns about the fact that assets swaps may not deliver what the Government thinks that they will, yet the Government is bound by the solutions it has promoted to the public—that this is the structural change that will increase overall efficiency and, perhaps, price benefits to consumers. However, as the point was made by Chris Hipkins, and also in the first reading debate and subsequent submissions to the Finance and Expenditure Committee, a number of concerns about asset swaps are raised of the structural change not delivering what the Government says it will.

So we have a concern that clause 3 will not be honoured. We have a concern that clause 3 will not at all be delivered on, in terms of ensuring that overall the bill delivers the gains and improvements to domestic consumers. We can debate that ad infinitum in the later stages of the bill, but it is really important to ensure that the Minister of Energy and Resources takes a call at some point to uphold some of the expectations he has created on the solutions from this type of reform, which will deliver benefits primarily to domestic consumers. We do know that there are huge differentials between the rates of increase of domestic energy prices in comparison to industry users. We know that domestic consumers are feeling the pinch and that they want the Crown to be bound by solutions that will work for them and that we do not think that this bill will deliver. So I am sure the Minister will be only too eager to take a call on that particular matter.

It is a short clause but it is the most crucial clause. If the Minister is true to his word to many New Zealanders throughout the debate that this bill will deliver the gains and that it will tackle the price increases that many households have felt, then he should be able to explain that in the Chamber today. We know that if anything is important in this bill to the people listening, it is that they just want to know that it will benefit them in the pocket, where it matters most. Far too many New Zealanders, those on fixed incomes, kaumātua, are paying far too much for their monthly power bill. They want a solution that will deliver a real benefit step change to them at home and in the pocket. I do not think asset swaps will do that, I do not think that the limited role of the Electricity Authority will achieve that, and I certainly do not think in the immediate to medium term we will see a huge drop in price through shopping around. I think there are some huge challenges in the shopping around message that the Government is promoting. It applies to electricity but not gas, if one is swapping one’s providers. I think there are some oversights in the way the Government is pushing through with this legislation.

But, as I said, clause 3 is very short. It binds the Crown. My proposition is that it will bind the Minister in terms of the expectations he has certainly created that this bill will deliver benefits to domestic consumers, and I do not think it will do that.