Duynhoven Harry: Electricity and Gas Industries Bill — In Committee 
Duynhoven Harry: Electricity and Gas Industries Bill — In Committee 
[Volume:620;Page:15706] 
Hon HARRY DUYNHOVEN (Associate Minister of Energy) 
: 
 It is a pleasure to stand on behalf of the Minister of Energy the Hon Pete Hodgson and reply to one or two of the issues that have been raised. Ms Wong talked about the Minister’s effort to encourage the generation industry to take a responsible long-term approach to generation for the good of the country. Well encouragement is a very useful thing but it has proven to be not quite as easy to encourage the industry. That is the reason for now taking a stronger approach. The Minister signalled right at the beginning of the process that he would take that approach if the industry failed to respond in the way that he wanted. 
What we have now is a situation where basically it is very difficult to unscramble a scrambled egg. I say to Mr Prebble who conveniently forgot the basic rules of the market this is about market failure. The reason that we do not have scads of unused generating capacity is very simple. It is that the maximum productivity from the investment in generating capacity is at 99 percent and close to 99.99 percent of full load as we can get for as much of the time as possible and that is where the maximum profits are to be made. Therefore no generator will be voluntarily building unused capacity and it is as simple as that. 
Opposition Member 
: That’s nonsense. 
Hon HARRY DUYNHOVEN 
: It is not nonsense; it is a basic rule of economics. If we go over to Victoria University Economics 101 will tell us that. 
Another reason which Mr Prebble conveniently forgets is that we have a large number of thermal stations in New Zealand and very simply thermal stations cannot be very quickly turned on and off. I have one in my electorate which I am very familiar with. It is an older station and takes some time to bring it up to load. Therefore having reserve capacity able to be switched in relatively quickly is a very good solution in the interim. Mr Heatley talked about the absurdity of doing that. Well I do not think it is absurd and I do not think the people of New Zealand do either—particularly if it is a choice between having some higher-priced unused capacity available for peak times or having various areas of the country with the power out because that is the choice. 
Phil Heatley 
: How much of that did you use in the last little while? 
Hon HARRY DUYNHOVEN 
: As I explained to the member that in turn is to avoid having to turn thermal stations on and off at a time when we want to be using as much of our water—and we have an excess of water at the moment—as possible. Our big problem has been with the storms we have had. The high voltage direct current link across from the South Island to the North Island has had a lot of salt contamination and it cannot run at very high load factors when the dielectric is reduced by the fact that salt is on the insulators. That is a fundamental physics issue. 
With regard to the private generators which Mr Heatley said were numerous there are actually four main generators in New Zealand and three of those are State-owned. As I said they are in a competitive environment which was set up by Mr Bradford. The member could dial back through the  
Hansard 
 record if he wishes and look at my speeches as associate energy spokesman at the time and he will see that not only I but even very dedicated and active members of the National Party opposed that move. If he looks at my speeches in  
Hansard 
 I have quoted from one of those members who was very well respected in the electricity industry. He said that what was being done then would be a disaster for New Zealand. He has been proven right and that is the reason this bill is required now. 
I think it is probably true to say that once we have scrambled an egg it is very difficult to unscramble it. This bill is an attempt to make the market work in a way that provides that even though some of the main generators are State-owned those generators will operate in a competitive market. That is what the power pricing model is and we should not ignore economic reality. Perhaps the National Party is suggesting that we should somehow nationalise Contact Energy; I do not think those members would want to suggest that for a moment. So this bill is a means of getting a positive result out of what was a pretty resounding mess that was left and over the last 4 years the Minister has tried very hard to make the electricity industry act responsibly in the interests of the country. I believe that through this mechanism we will get to see it.