Electricity Industry Amendment Bill

Members, we come now to Part 2. This is the part where we debate clauses 44 to 48, and Schedules 2 and 3, “Amendments to other enactments”. The question is that Part 2 stand part. I call on Stuart Sm—Smith.

Thank you, Madam Chair; it is quite a difficult one to get your tongue round!

We now know what drives the Minister of Energy and Resources. We just heard it in her last contribution: it’s that she is an admirer of Gerry Brownlee’s work. I think that it is a pity that she didn’t actually support him during the Christchurch earthquake, instead of standing on the sidelines and sniping. But we now know that she admires his work, so much so that she’s included it in this bill.

I think that I’ve really probably said enough on this; we oppose this bill. We think it’s actually not—

💬 Hon Scott Simpson: Tell us why again.

Well, I can tell you why, yes. We don’t support the Minister having the power to make regulations over the top of the Electricity Authority. We don’t think she is the source of all knowledge on electricity. She would have to have the wisdom of Solomon, and I don’t think anyone does, so—

💬 Hon Scott Simpson: The Minister certainly doesn’t.

Well, I couldn’t possibly comment on that. And so with that, I’ve said my piece on this bill.

Thank you, Mr Chair. So I think, based on the Minister’s response to the first part, it’s quite clear that the Minister wishes to take charge of the electricity market in New Zealand by directing changes to the code and that the concerns that ACT has about the role of the small consumer advocacy agency are now confirmed: that that agency would be the mouthpiece for the Minister.

Schedule 1, which inserts new section 6, “Regulations regarding Small Electricity Consumers Agency”—under this part, the regulations allow for the recovery of costs incurred in the year ending 30 June 2022 even if the regulations come into effect after that date. That’s because the Minister, without waiting for this legislation to pass, has appointed a person to act in the role of the small consumer advocate, and that individual, who’s done wonderful work in their community, unfortunately has become the mouthpiece for the Minister.

Now, we know that the Government has declared a 100 percent renewable electricity target. We know that the Minister shares the aspiration for New Zealand to decarbonise. Now, when you consider the intervention of the Electricity Authority in the proposed agreement between Meridian, which runs the Manapōuri power station, and their client, Rio Tinto, who makes aluminium, let’s consider it in the context of other Government policy and how this bill relates to that. Tīwai Point is New Zealand’s sixth-largest emitter of carbon dioxide. They are the sixth-largest emitter of carbon dioxide. And, if you look the Government’s other policies, how they relate to this bill, it’s quite clear that the Government would prefer the Tīwai smelter to be closed and the thousands of jobs associated with that industry be lost. Of course, we know what would happen even though they use 100 percent renewable electricity to make aluminium here in New Zealand. It’s quite clear that that aluminium production would simply go to another jurisdiction, probably China, where they would use coal, not free-flowing hydroelectricity, to make it.

So we think about the regulations concerning the small consumer—

💬 Tangi Utikere: Point of order, Mr Chairperson. Thank you, Mr Chair. It’s very clear that what the committee is currently considering is, effectively, clauses 44 to 48 and the relevant schedules. The member who is speaking is well outside of the scope, which seems to be a bit of a trend—

CHAIRPERSON (Ian McKelvie): I’ll just remind the member that the reason we have a Chair in the committee is to make those judgments. I thank you for your advice.

Thank you, Mr Chair. So, coming back to the schedule and the regulations regarding the Small Electricity Consumers Agency, it’s easy to understand why industry participants, including those who use electricity and those who generate it, are very, very concerned that this agency will simply become a communications mouthpiece for the Minister’s policy rather than actually working on market-based solutions to make sure that consumers of electricity, whether they be small business or domestic consumers, get the best deal. We do know that 400,000 consumers changed power company in the last year. We know there are 40 retailers available to choose from, Minister. So it’s not clear why this agency is necessary and, if it is, what the regulations that will be made regarding this agency will attempt to do.

You mentioned, Minister, in response to a previous question, the intervention—which the agency’s current employee claimed was going to be of great benefit—in a deal for over 150 megawatts of electricity. That’s a huge amount of electricity. The Manapōuri power station supplies 800 megawatts of electricity—800 megawatts of 100 percent renewable electricity—designed to supply exclusively the Tīwai Point aluminium smelter, which uses all of that electricity. So I would like to ask the Minister: what will the regulations regarding the Small Electricity Consumers Agency do? What are they designed to do? What effect will they have? And will this involve the Minister intervening through the code and through this agency to direct commercial arrangements between suppliers and consumers of electricity?

First of all, I’d like to start off by reassuring that member that under nobody’s stretched imagination would Rio Tinto ever fit the classification of a small consumer of electricity, so I’d like to say that it would not be caught by these regulations at all.

The member asked what the effect of these schedules would be, in terms of regulation. It’s very clear. It’s spelled out in the schedules: the ability for this, in terms of regulation, is the ability to levy. It is not there at the moment. Of course, this is being funded out of Budget 2020, out of some of the initiatives that we funded around energy hardship. I’ve already said, in earlier contributions, what the impact of that levy would be. It’s been calculated to be the sum of around $2 per year for a consumer to fund that. But I’d like to stress that this is not a levy that is currently in place; what this bill merely does is provide the provisions for that regulation to be made.

Thank you, Mr Chair. I just want to go back to a point that was made previously about the multiple trading arrangements, and just looking at Schedule 2, which inserts new Part 6A, the “Separation of distribution from … generation and retailing”. We do have a major problem in New Zealand in that at peak times there is not enough capacity on a cold, still night in winter to deliver electricity to all of the communities that suddenly turn on their heat pump or come home and plug in their taxpayer-subsidised electric vehicle. One of the ways that this could be achieved which has been proposed by electricity distribution companies is that they would like to be able to install, for example, energy storage devices in place of where the current transformers are located on many street corners. But the problem that they have is that the Resource Management Act doesn’t allow them to do that.

Then we come to issues of microgrids. There are communities around New Zealand—and the member for Auckland Central, Chlöe Swarbrick, mentioned Waiheke, where, in fact, communities want to generate electricity, store that energy, distribute it, and have agreements between themselves in the same way as many people have agreements through the Uber app with many, many drivers, that doesn’t require a central regulator, say of taxis, to work out what the relationship should be between the customer who wants an Uber and how they get their taxi.

So I’m interested in the Minister’s comments about how new Part 6A, “Separation of distribution from … generation and retailing”, will foster the development of microgrids in communities which currently find it hard to navigate through the regulation so that if they wanted to, say, set up a solar array or a wind power array or a little hydro dam in their subdivision, that they could then store and distribute electricity to each other, and sometimes in reverse, depending on which way the wind is blowing and where the sun’s shining. And, Minister, will the regulations allow under this bill and under these schedules for communities to come to their own arrangements about how they generate, distribute, store, and exchange electricity in the absence of having to engage with a company or a regulator. Minister?

Simon Court.

Thank you, Mr Chair. So I just want to come along to this point under new Schedule 6A.3, “Corporate separation and arm’s-length rules applying to distributors … generators and connected retailers”. Now, it says here that a connected generator has a capacity of more than 50 megawatts connected to any of their networks, and a retailer is involved in retailing more than 75 gigawatt hours of electricity in a financial year to consumers. One of the problems that we’ve got at the moment with our energy market is that it’s very difficult to understand what is the regulatory pathway if, say, I wanted to use the gas that I find on my land if I was a farmer in Taranaki and I wanted to put down a bore and collect that wonderful natural gas and supply it to my neighbour. The regulatory pathway sounds very complicated, Minister, and yet we have so many natural resources in New Zealand that we should be able to exploit for the benefit of our communities and to ensure that we do have a healthy economy at some point in the future.

So I’m interested whether the Minister wants to seek the advice of officials. Firstly, will new Part 6A, and will this bill and the regulations and schedules that it’s proposing, allow for communities to generate their own electricity and distribute it freely amongst themselves?

With respect to corporate separation and the arm’s length rules, will it be possible—say, for example, when I worked at a big landfill and we generated 30, 40, 50 megawatts of electricity from collecting landfill gas. Would it be possible for us to simply connect that electricity to the neighbours who were running their own industrial operation, and supply the neighbours with electricity? Will the regulations still force us to go through a lines company and then have a supplier, one of the big retailers, buy the electricity off us and then sell it back to consumers, or can we come to our own arrangements between willing sellers and willing buyers, Minister? Thank you.

Thank you, Mr Chair. Just to address the specifics that the member has brought up in his contributions, one is around new Part 6A and the provisions that are contained in there. This is about making good the Electricity Price Review recommendations around flexibility that is required there. These are existing provisions in the Act. Many of them that have been moved into the code, and so I think that what we’re seeing is this is about actually just shifting where we do have a number of those provisions around there in that respect.

In terms of some of the other points that the member has raised: in terms of the multi-trader arrangements—which I think is a really important part of the scope of what our electricity system and our energy system will look like in the future—this is of course something that we are actively seeking. These are exactly the kinds of arrangements that through our network of legislation and regulation we are looking to enable, because the future of energy in New Zealand is not only decarbonised but it is also decentralised and it is also digitised.

The question is that Simon Court’s amendment to Part 2 set out on Supplementary Order Paper 233 be agreed to.