Hipkins Chris: Electricity Industry Bill — In Committee 
Hipkins Chris: Electricity Industry Bill — In Committee 
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CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I am happy to take a call on Part 2 “Electricity industry governance” and in particular I want to talk about the establishment of the Electricity Authority and the regulatory arrangements that are in place. I start by acknowledging the comments the Minister made about what Labour would do and whether we think that everything is perfect as it is operating now. The clear answer is that it is absolutely not. Generally speaking we agree that the electricity market has not lived up to expectations set about 12 or 14 years ago when Max Bradford first established the market through the Electricity Industry Reform Act 1998. So definitely it does not work. The issue therefore relates to the fact that the electricity market did not live up to expectations and it raises the question of what we can do to make sure that it operates more effectively given that we cannot go back. There is no way to go back to what we had before so we must ask what we can do and where we can go from here. 
The previous Labour Government decided that the establishment of the Electricity Commission to provide much more oversight to the electricity industry was the way to go and Labour still believes that. We still believe that the electricity market needs to have a body that provides much wider oversight and that deals not just with the pure functioning of the mechanics of the market but also with issues of affordability sustainability and security of supply. So the three planks that Labour put forward are security of supply sustainability and affordability of pricing. Does Labour think that the Electricity Authority as constituted by this bill will deliver on those things? The clear answer is no. 
Under this bill the Electricity Authority’s objective is to promote competition in reliable supply by and efficient operation of the electricity market for the long-term benefit of consumers but I do not think the Electricity Authority will be able to do all of those things. 
This bill transfers the approval of Transpower’s grid upgrade plans away from the Electricity Commission as it is now to the Commerce Commission. I think that is quite a significant move. One of the reasons that I am concerned about that is that we need overall coordination and an overall approach to the electricity industry. This bill continues to fragment everything in the same way that the Electricity Industry Reform Act deregulated the market in the late 1990s. I do not think that this legislation will lead to a more effective operation of the electricity market. When it comes to the grid upgrade we have to consider the alternatives to approving a grid upgrade. We can do that effectively only if we consider all of the other elements of electricity generation like greater efficiency in the use of electricity and demand-side reduction which relates not just to efficiency but to reducing demand. We need more effective distribution of electricity generation so that we do not have to rely on transmitting electricity from the South Island to the North Island when it is raining a lot or the other way when it is not. We need to consider all of the alternatives to a grid upgrade. The Commerce Commission will not be able to do that; it will have a much narrower focus. So I am concerned that transferring that authority from a body that has a wide overview of the electricity sector to one that is very narrowly focused will not help the Government to meet the objectives that it is setting out. 
The promotion of energy efficiency is transferred to the Energy Efficiency and Conservation Authority. Once again I come back to the idea that electricity efficiency cannot be addressed on its own without reference to other parts of the puzzle like transmission distribution pricing and effective operation of the market. We need to consider efficiency as part of a wider overall package. One of the concerns I have is that the Energy Efficiency and Conservation Authority will become a small body on one side that deals with electricity efficiency and the rest of the electricity sector including the Electricity Authority will therefore think it is not part of their purview. Actually electricity efficiency and the efficient use of energy has to be integral all the way through the electricity system. It cannot simply be parked off to one side with the Energy Efficiency and Conservation Authority. I agree that some streamlining could be done but this bill goes far too far by transferring all of that responsibility purely to the Energy Efficiency and Conservation Authority. 
Another part of the bill that I am concerned about relates to the Minister of Energy and Resources and the Minister of Consumer Affairs being the final arbiters on all issues of fairness. That is concerning because ultimately it will mean that for consumers who are concerned that the market is not operating fairly in that power price increases are not fair the only people they will be able to go to under this legislation are the Minister of Energy and Resources or the Minister of Consumer Affairs. That places a huge burden on the Ministers. It also means that a consumer who wants to complain is less likely to make any traction. Ministers are notoriously difficult to pin down at the best of times. They will not have the time or the resources—and the public will not have access to the Ministers—in order for the system to operate effectively. 
The Electricity Authority established under this bill will not have any responsibility for environmental sustainability. The Government says that it is still committed to the target put in place by the previous Labour administration to have 90 percent renewable electricity in New Zealand. This bill states that the Electricity Authority will have no regard to that and no role in ensuring that happens. So when will it happen? It will not simply happen miraculously. It will not happen by being aspirational and talking about it. We have to put some incentives in place if we want there to be more renewable electricity which was one of the things that the previous Labour Government was focused on. We were focused on ensuring that our electricity system was more sustainable and that there was a higher reliance on renewable electricity. The Minister of Energy and Resources acknowledged that fact in the brief contribution he made just a moment ago. He talked about the fact that there was more renewable energy generation. He talked about geothermal energy generation in particular. When the previous Labour Government was in office there was a big investment in wind generation and geothermal energy. 
In New Zealand we rely on and take for granted our hydro system. It is the backbone of our entire electricity system. We are very fortunate that over the last year or two it has rained quite a lot so we have not had any risk of electricity shortages. Gerry Brownlee I am sure like all Ministers in the previous Government gets the hydrology summary on a daily basis and goes through the changes in lake levels overnight to see whether they are tracking up or tracking down. For all of the time that he has been the Minister of Energy and Resources the hydro levels have been fine. He has had a dream run in that regard whereas Pete Hodgson and David Parker had a bit of a nightmare scenario when it came to rain not making it to the right places in the country. That was a key contributor to why we had those energy savings campaigns from I think 2001 to 2003. 
Overall we cannot ignore the environment when it comes to our electricity system. The Electricity Authority not needing to have any regard to the environment whatsoever is a very retrograde step because we are dependent on the environment when it comes to our electricity generation. If we want to focus much more on renewable energy and if we want to hit that 90 percent target of renewable energy generation which the Government talks about then obviously we will need to continue to focus on the environment and on making sure that our electricity comes from renewable sources. 
I want to talk about the issue of stability of power prices which the Minister raised. Under this legislation the Electricity Authority will have no responsibility for considering issues of power prices at all. Gerry Brownlee’s response to that is that if power prices are going up people can just switch power companies. In Gerry Brownlee’s world when it howls with rain people go outside to look at their meters to see how much electricity they have used and then they go back inside and look on the Internet to see which power company will give them the best price. In Gerry Brownlee’s little fantasyland consumers are supposed to be doing that on a daily or weekly basis. In reality I ask who is going to do that. I ask who will actually monitor their electricity price on a daily or a weekly basis. It is not realistic. In fact it is realistic only if we move to the type of model set up by Meridian Energy’s subsidiary Powershop where people engage in the market and buy electricity on a “pay as you go” basis. The Powershop people thought that this bill was a bad idea until they were muzzled by Gerry Brownlee and told that they were not allowed to speak about it any more. They had to take down blog posts that criticised Gerry Brownlee and this legislation. The Powershop model is actually quite innovative and provides additional choice for consumers but we should not overlook the fact that for most consumers the idea that they will be checking their meters reading every day or every week going on the web finding out what the lowest power price is and then switching power companies all the time is simply not realistic. It is a joke.