Electricity (Disconnection and Low Fixed Charges) Amendment Bill — In Committee 
Electricity (Disconnection and Low Fixed Charges) Amendment Bill — In Committee 
[Volume:646;Page:15532] 
Electricity (Disconnection and Low Fixed Charges) Amendment Bill 
In Committee 
Clause 1 Title 
CHRIS AUCHINVOLE (National) 
: 
 Mr Chairperson— 
Sitting suspended from 6 p.m. to 7.30 p.m. 
CHRIS AUCHINVOLE 
: This bill has an interesting title: the Electricity (Disconnection and Low Fixed Charges) Amendment Bill but one has to wonder whether the bill is true to its label. If we reflect back on the introduction we had from the Minister David Parker on the bill I think he said himself that it would not be expected to achieve a great deal and that it is principally regulation. It is hardly a surprise to members on this side of the Chamber that the Minister is introducing more regulations; the Government seemingly has a fixation with them. Someone was telling me the other day down on the West Coast that when he was in the army they had a saying: “If it moves salute it; if it doesn’t paint it.” The present Government has a different solution which seems to be to regulate it. 
This is a time of unprecedented wealth none of which is Government-created. This Government over the last 8 years has overseen a complete cycle of wealth that was generated by the Nats’ policies of the 1990s— 
Hon Members 
: Oh! 
CHRIS AUCHINVOLE 
: Oh yes it was the Nats’ policies; that is where the money came from. The money was seized by the ever-grasping hands of Labour which spent it in establishing big Government. Labour largely distributed the money without regard for infrastructure productivity or future wealth development. 
Now the cycle is back into increased mortgages increased fuel costs increased food costs and hugely increased electricity costs. I have some figures here. Residential power prices have risen 48 percent in the last 5 years—48 percent compared with 25 percent for industrial and commercial users. 
Phil Heatley 
: How much? 
CHRIS AUCHINVOLE 
: It is 48 percent for residential users and 25 percent for industrial and commercial users. The big problem in New Zealand with regard to electricity prices is that we have a scarcity of supply—and we will be speaking about that in other parts of the debate on this bill—which has driven up power prices. Power stations just have not been built fast enough in the last few years to cope with the growing population and growing economy and the subsequent increase in demand. 
Peter Brown 
: What’s that got to do with this bill? 
CHRIS AUCHINVOLE 
: Well we are talking about the title of the bill and we are talking about electricity disconnection and low fixed charges so charges are in there I tell Mr Brown. Charges are in there. 
This winter will be particularly interesting. At the moment lake levels and inflows are approaching 1992 levels. The Taranaki Combined Cycle Power Station at Stratford is still out of action. The system is at its limits at the moment; demand always goes up in winter. 
We will be speaking as I say on other parts of this bill but I would just like to remember the tragic and untimely death of Mrs Muliaga last May. This death occurred in a situation that should have been avoided; it should not have come about. I mention it as a reminder to all of us of the genesis of this particular piece of legislation. We all went into shock because the circumstances were needless and it should not have occurred in New Zealand. Much was made of the communication disconnect that occurred. The really hard-hitting bit though was that Mrs Muliaga’s death lifted the lid on an aspect of New Zealand life that most people would not want to know about—an aspect of an unfeeling cold corporate countenance. That this matter was addressed promptly was as much a tribute to public dismay as it was to media attention. The corporates addressed the situation and although I am not a betting man I would be prepared to wager that most of the energy companies have protocols in place to cover the distressing circumstances of last May to prevent them from ever occurring again. If that is the case why do we have this legislation and why is it coming so long after the event? Thank you. 
Clause 1 agreed to. 
Clause 2 Commencement 
PHIL HEATLEY (National—Whangarei) 
: 
 Mr Chairman—[ 
Interruption 
] I do not stand up and rush the Committee and yell and carry on. I take a sensible call and I take my time and explain to the Committee my position. 
The commencement clause which states: “This Act comes into force on the day after the date on which it receives the Royal assent.” is something that we in the National Party do support. Members will recall that we had some reservations initially when the bill was brought to the House. But we were thoughtful we had done our homework and we were confident that the bill should go to the Commerce Committee and that we would make the improvements necessary to be able to support the bill at this stage—and of course we do. So we will be supporting the commencement date which is “on the day after the date on which it receives the Royal assent.” We originally had some— 
Peter Brown 
: Sure? Say it with some conviction. 
PHIL HEATLEY 
: The New Zealand First immigrant from I think Britain is chipping. He is the last guy off the boat. The last guy off the boat is chipping. 
National members do support the commencement date. We did have some reservations when the bill was introduced because members will recall that Mrs Muliaga went through that quite stressful time when she was disconnected and that drove this whole legislation. Helen Clark said that the answer to the problem was to regulate. That is what the Labour Government does. Essentially if there is a problem it regulates and if there is a bigger problem it taxes. If there is an even bigger problem it does a U-turn and changes its mind. 
In this case the Government did not tax and it did not do a U-turn. It decided to regulate and we had some reservations at that time. But we were happy to support the bill’s referral to the Commerce Committee and I know that Labour members have been quietly thanking us in the corridors and lobbies for the changes we instigated at the select committee. 
So National members are in a position where we will support this bill and we will support the commencement date which we are talking about now. We will round in beside the Minister of Energy David Parker because the Labour members are not. They are all quietly turning away I guess from supporting Mr Parker. But National members will support him. 
Chris Auchinvole 
: We’ll be there. 
PHIL HEATLEY 
: We will be there and we will support the commencement date. I wanted to make sure that the Committee was aware of that. 
Hon LUAMANUVAO WINNIE LABAN (Minister of Pacific Island Affairs) 
: 
 Kia ora talofa lava and warm Pacific greetings. It is my pleasure to speak in support of the Electricity (Disconnection and Low Fixed Charges) Amendment Bill. 
The bill has two unrelated purposes. Clause 4 amends the definition of “low-use consumer” in the Electricity Act 1992 so that regulations can be made to enable an increased number of low-use electricity consumers to benefit from the low fixed-charge tariff option for domestic consumers. There is also the matter of the commencement date. So we are very very thrilled with this issue. 
I thank all my colleagues for doing the good work on this bill and I especially thank the Minister of Energy the Hon David Parker. I thank him for his vision and for bringing leadership on this bill to the House. 
Clause 2 agreed to. 
Clause 3 agreed to.  
Clause 4 Low fixed charge tariff option for domestic consumers 
CHRIS AUCHINVOLE (National) 
: 
 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? 
CHRIS AUCHINVOLE 
: 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. 
Hon DAVID PARKER (Minister of Energy) 
: 
 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? 
Hon DAVID PARKER 
: 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? 
Hon DAVID PARKER 
: 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 Maui 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. 
CHRIS TREMAIN (National—Napier) 
: 
 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 Maui 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 Maui 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 Maui 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 Maori 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 
PHIL HEATLEY (National—Whangarei) 
: 
 This clause addresses the issue of governance regulations where retailers are looking at a customer who cannot pay the bills. It looks at billing options or payment options over time—spreading the load through the year rather than having big winter electricity charges and low summer electricity charges—and what happens when a retailer goes through the process of a disconnect because someone is not paying the bill. That is what this is all about. 
The deal is quite simply this. What is happening in a typical New Zealand household? The first thing that is happening is that taxes are going up. Personal taxes are going up petrol taxes are going up accident compensation levies are going up—if one is out there working— 
Chris Tremain 
: Working to clear the mortgage! 
PHIL HEATLEY 
: Well I am going to get on to interest rates but I will just talk about taxes. The Government is introducing health taxes and it nearly introduced the “fart tax”—so one told one’s wife to stop buying onions. All those taxes are going up. That is one side of the balance sheet—expenses are going up and taxes are going up. 
Interest rates are also going up; they have been going up every year for the last 10 years—about half a percent each year—so they have risen from about 5.5 percent to about 10.5 percent. So taxes are going up and interest rates are going up. We jump into the car in the morning because the bike has a flat tyre and we discover that petrol prices have gone up yet again. They have gone up every month for the last year or two. We are dealing with petrol prices interest rates and taxes. We are upset so we think about going home for lunch because we cannot afford to go down to the local cafe. We pop into the local supermarket to buy some cheese milk eggs and bread and what do we find? A 25 percent increase. Cheese is 17 bucks a kilo and we are paying $3 for 2 litres of milk. 
Everything is going up. Food is going up petrol is going up interest rates are going up taxes are going up and what does one do? A father walks into the house and the family says: “Dad you’ve got some mail.” He thinks: “Thank God someone loves me.” What is it? It is an electricity bill. They say: “Dad you’ve got some mail.” He thinks: “Somebody loves me.” The petrol station does not the supermarket does not the bank with its interest rates does not and the Inland Revenue Department certainly does not but someone loves him. The family hands over the mail and it is the electricity bill. An average New Zealander—an average Kiwi—cannot afford to pay it. 
What the Minister of Energy David Parker has done for people under this sort of pressure is pass regulations that will not help them with their interest rates will not help them with their tax bills and will not help them with their block of cheese or tank of gas. What they will help them do is pay their electricity bill over 12 months instead of having to pay it outright. The Minister is dead right that it does not help very much. He is right that it helps a little bit but it does not actually help where it really matters and that is what I say to the Minister tonight. On behalf of New Zealanders I say “Thanks for your help.” It is not much. It is not really what they need. They want the increases in interest rates groceries petrol and taxes to be addressed. But they thank him for giving them the opportunity to pay their electricity bill over 12 months instead of paying it this month. They appreciate the small help that he has offered. 
Perhaps if everybody in the Labour Party team contributed and did something little like this measure it might add up to something. That is what clause 5 is all about. It is all about being able to pay one’s big electricity bill over the course of the year. It has one extra bonus. The electricity companies say that if people cannot pay they will cut them off but they are going to give them a few extra weeks’ notice before they do. 
Bob Clarkson 
: Winston Peters’ card gives you 10 percent on your funeral. 
PHIL HEATLEY 
: Oh there we go. Winston Peters’ card gives 10 percent off the cost of a funeral. 
So that is what clause 5 is about. The electricity companies are still going to bill people but they will let them pay it over a period of a year not a month. They are going to cut them off but they will give 2 extra weeks’ notice. Thanks very much to Labour. We wish it could look after interest rates petrol prices grocery prices and our tax bill but thanks for not cutting off our electricity for an extra 2 weeks. That is what this clause is all about and National will be supporting it because at least it is something. 
Hon DAVID PARKER (Minister of Energy) 
: 
 I suppose that there is one answer to a lot of the irrelevant statements made in the previous speech. It is of course that real wages—wages adjusted for inflation—have increased very substantially under this Government. In addition there has been substantial tax relief for families with children— 
Bob Clarkson 
: What about my tradesmen? 
Hon DAVID PARKER 
: That member’s tradesmen have actually been doing very well over the last few years during the building boom. The ability of people to pay their bills has been enhanced under this Government. 
Clause 5 which is in debate at the moment does not say anything about giving people 6 months to pay their electricity bill. It is a response to the tragic circumstances last year when a lady’s electricity was cut off despite the fact that she needed it for running the electrical equipment that her life depended upon. It was cut off by the electricity company’s contractor. I am sure the company deeply regrets that action but the mistake happened and it had tragic consequences. 
When the Government looked at what its response was—because Governments have a responsibility to pass regulations to protect the public when that is appropriate; National members might scoff at all regulation but some regulation is necessary—it found that the Electricity Act was deficient and that notwithstanding that it was a terrible thing that should never have happened we did not have the right to stop it happening again. In the meantime we have developed voluntary guidelines and it looks like those voluntary guidelines are being adhered to by the electricity companies. But if that were not the case then it is proper that the Government should have the means to protect consumers from this sort of thing happening again. 
This bill creates a regulation-making power. It does not create regulations; it creates a regulation-making power. In the event of something like this happening again the Government in its role of protecting people from adverse consequences has the ability to regulate and to make sure that electricity companies have to do by law what they should really be doing anyway. 
DAVE HEREORA (Labour) 
: 
 I stand in support of the bill and thank the Minister for that clarification because as we heard from the Opposition speaker previously I did think that National was losing the plot on the intention of this bill. But clause 5 “Electricity governance regulations” inserts section 172D(1)(22A) which states: “providing for the terms and conditions on which electricity retailers must provide domestic consumers with billing and payment options …”. Now I think that drives at the very heart—the very essence—of the intention of this bill. Because we have heard of what obviously very tragically happened with the Muliaga family but I recently fielded a call from a constituent a solo mother with three children at 5 o’clock in the evening who had her power cut off. Obviously during that time of the day when one has children one has to cook and the children have to be cleaned. There was no way she had the opportunity to continue with those services because her power was cut off. What does one do? At the end of the day one can imagine how that solo mother felt. She was literally left in the dark. That can be isolating. 
The question I pose to the Opposition is who has that social responsibility to ensure that people are looked after. I believe that clause 5 represents the very essence of this bill. It also acknowledges the moral issues surrounding the reason why we are regulating in this case. I thought I would contribute that and I thank the Minister for his clarification. 
Clause 5 agreed to. 
Bill to be reported without amendment presently.