Prebble Richard: Electricity and Gas Industries Bill — In Committee 
Prebble Richard: Electricity and Gas Industries Bill — In Committee 
[Volume:620;Page:15715] 
Hon RICHARD PREBBLE (ACT) 
: 
 Let me turn first to the amendment moved by Mr Sowry and the response from the Minister in the chair Harry Duynhoven. I say to the Minister that in the way I am following it I am not sure he is correct. The clause that requires consultation—and there is such a clause—states: “The Commission must before submitting a request to the Minister seeking an appropriation of public money for the following year or any change in the appropriation in the current year consult with those industry participants who are liable to pay a levy …”. So that provision certainly is there. But when we look at the levy is there a requirement to consult? No there is not. It appears to me that Mr Sowry’s amendment may be needed. I am reluctantly willing to support Mr Sowry’s amendment because I would not want anyone to think that the ACT party thinks that once consultation has occurred this levy is a good thing. No it is not. Also to say it is only a few cents on the power bill is to avoid the reality of what this levy is for. 
One reason the levy is there is for “endeavouring to ensure the security of supply”. That could be a bill of hundreds of millions of dollars. Indeed I think the levy will go up and up because this bill makes it very difficult for private sector generators to enter the market. It makes it less likely that they will do so. It will mean that the commission will have to build more and more of our generation. How do we know that? Genesis has already said that it will not build without a Government guarantee. If a State-owned enterprise backed by the deep pockets of Treasury is not prepared to build generation then why on earth would a private sector investor? I believe we will see the Government finding more and more requests to build new generation coming either from its own State-owned enterprises meeting by a guarantee or from the commission. 
The Minister has not responded to the points made by Mr Franks. I need to make this point to him: the market failure he is referring to and that has occurred in electricity is the result not of failures of the market but of failures of regulation. One of them is quite simple. We all know that if a large amount of electricity in New Zealand is consumed by households and if they are all exempt every time we have a power shortage and it all falls on the private sector then we do not have a market. If it were possible for consumers to participate in the market—and we participate by deciding to switch off and have cold showers for a while—and benefit financially from that or if those who wish to spend and have electricity at a time of shortage pay more then we have a true market. Would that work? Of course it would work. 
The reason we have not had it is that successive Governments in New Zealand have not been prepared to allow consumers and electricity suppliers to enter into agreements like that. If we want to have an agreement with our electricity supplier that guarantees one’s electricity supply even in times of shortage then we ought to pay more for it—of course we should. That requires some sort of reserve being put aside. But if people are prepared to go through an electricity shortage with less electricity—and I believe there are large numbers of New Zealanders who would—then they ought to be able to opt for a contract that allows that. In New Zealand only the commercial sector has been allowed to have those sorts of markets. The market failure the Minister refers to is a failure by the Government to believe in the market. 
I draw to the attention of the Committee to those members who may not have read this the number of regulations the Government is proposing here. I think we are unfair to describe this as “Muldoonist”. I cannot recall a bill that had these sorts of regulations. As far as I can see the Minister will be able to regulate virtually anything. This is Stalinist. I draw the Minister’s attention to clause 9 which contains the provisions relating to regulations. In the wholesale market we are able to have electricity including pricing—I guess Muldoon went in for pricing—clearing settling and reconciling market transactions; scheduling and dispatching electricity; disclosure of market information; disclosure of information on hedge and contract volumes and prices; the promotion of hedge including futures markets; minimum prudential standards for market participation; and minimum standards of market conduct. That is just for wholesaling. 
In generating there will be electricity generators to hold and provide for reserve fuels including water—we are going to regulate that; electricity generators to offer by tender a minimum volume of contracts; electricity generators to post buy and sell prices for hedge. We are to have disclosure of information on hydro lake levels and inflows thermal fuel stockpiles supply contracts for thermal fuels capacity to generate disclosure of offers into the spot market and disclosure of information on spill. Then on transmission there will be quality and security standards for transmission systems and reasonable terms and conditions on which Transpower must enable distribution lines. It goes on to expansions replacements or upgrades and so on for pages and pages. 
This industry has not been nationalised; it has been regulated. It will be totally regulated. Will new participants want to enter into this industry? I say to the Minister that the market risk of entering into generation now will be enormous. That is why the question of the levy is important. In effect we are nationalising the building of new generation. That will be produced by levies. I realise there is consultation in some areas but I do not think it covers the levy. If we do not accept Mr Sowry’s amendment we will have a situation whereby a substantial amount of tax in New Zealand will come through our power bills. It may be the result of a commission that goes power mad and decides to start building more generation than we need. Of course that was the situation in the 1950s 1960s and 1970s in New Zealand and I think it could well occur again. We could end up with a gold-plated electricity system where there is no proper debate or discussion as to whether the reserve generation is needed. 
A consultation clause of course is no substitute for the disciplines of a market but if we are not going to have a market then we should at least enable consultation. There ought to be consultation by those who will be affected which will be the lines companies. I am not sure whether Grey Power could make a great contribution to this matter but I most certainly believe we ought to ensure that a consultation clause is included. For that reason even though I do not want to have this interpreted as the ACT party supporting a levy I recommend that we vote for it. I ask the Minister to consult his officials. It does appear to me that consultation is only about a request for public money. Is he saying when we look at the definitions that a levy meets that? In looking at the definitions clauses of the bill I cannot see that. It may be that he can direct me to some other clause but I think that his officials are being disingenuous when they say that yes there is some consultation. Yes there is but is the consultation over the levy each year; if so where is it? I cannot see it in the bill. If I cannot see it then I bet members that when this bill has gone through the commission will not be able to see it either. 
The commission will not want to consult over the levy. As the bill states the commission can think up any figure it likes which could be hundreds of millions of dollars. Personally I think that is a tax one that if it went through this House we would debate. We would call for consultation and we would have a great deal of discussion on the matter. We are taking a power of taxation and giving it to this quango and then the quango I believe when it comes to the levy itself will not have to consult.