Electricity (Disconnection and Low Fixed Charges) Amendment Bill — Second Reading 
Electricity (Disconnection and Low Fixed Charges) Amendment Bill — Second Reading 
[Volume:646;Page:15113] 
Electricity (Disconnection and Low Fixed Charges) Amendment Bill 
Second Reading 
Hon DARREN HUGHES (Deputy Leader of the House) 
 on behalf of the  
Minister of Energy 
: I move  
That the Electricity (Disconnection and Low Fixed Charges) Amendment Bill be now read a second time 
. This bill has two small parts. The first part amends the definition of a “low-use consumer” in the Electricity Act 1992 so that regulations can be made that will enable a greater number of low-use lower South Island customers to benefit from a low fixed-charge tariff option. 
The low fixed-charge regulations were introduced in 2004 to provide low-use consumers with a tariff option that is more equitable for low energy usage and compatible with the Government’s energy-efficiency objectives. At present these regulations require networks and retailers to make available a low fixed-charge tariff option to all domestic consumers whom they service and who have consumption at their primary dwelling of less than 8000 kilowatts per annum. However the 8000 kilowatts threshold has resulted in far fewer consumers in the lower South Island being on the low fixed-charge tariff than in other regions due to the fact that power tends to be used for heating in colder regions. 
This bill alters the definition of a “low fixed charge consumer” from a fixed threshold of 8000 kilowatts as currently defined in the Act to a definition to be provided in the regulations so that different regional locations and averages can be used. The Labour-led Government believes that this will be more equitable. 
The bill will also extend the Minister’s powers to grant exemptions from the application of the regulations to electricity distributors or retailers. This change is directed at small isolated networks that are not connected to the national grid where the cost of servicing consumers can be far higher than is normal for grid-connected networks. 
The second part of the bill responds to the recent concerns about the disconnection practices of electricity retailers particularly with regard to vulnerable consumers. It amends the Electricity Act so that regulations can be made if electricity companies do not follow the disconnection guidelines developed by the Electricity Commission. The Act does not currently contain sufficient powers to regulate disconnection processes or to regulate the full content of these guidelines. The bill consists of regulation-making powers. It does not alter any of the existing processes or requirements in the Act relating to the making of regulations. 
I would like to thank the Commerce Committee—on this occasion all the members of the Commerce Committee for their consideration of the bill—as well as persons who made submissions to that committee. The committee received and considered 11 written submissions and heard four oral submissions. The Commerce Committee was unanimous in its report back and the only amendment to the bill was a drafting change that was recommended by officials in order to simplify the bill. Apart from this amendment the bill will proceed in the same form as was initially introduced by my colleague the Hon David Parker. The fact that it is proceeding largely unchanged and received very few submissions shows that the bill has widespread support. 
Chris Auchinvole 
: Oh! 
Hon DARREN HUGHES 
: Well the member’s party is supporting it so I will give the member the charity of my silence. 
Once the bill is passed the Minister will finalise new regulations that will enable a greater number of lower South Island consumers to benefit from a low-fixed charge tariff option. The regulations will set the threshold for the lower South Island initially at 9000 kilowatts which is the average domestic consumption level for this region. 
Regarding disconnections this bill will enable regulations to be made that will protect vulnerable consumers for example by regulating arrangements regarding the process for disconnections following non-payment of accounts reconnection billing information and processes alternative payment options such as smooth payments redirection of income and debt recovery and also the process for identifying consumers who would be at risk if their electricity was disconnected. 
I hope that the disconnection-related powers conferred by this bill will never need to be used. I am confident that electricity retailers will continue to work positively as they have with the Electricity Commission to ensure that the disconnection guidelines are adhered to. However the regulation powers in the bill will act as an important backstop if the voluntary process that is available at the moment proves to be ineffective. On behalf of the Minister of Energy the Hon David Parker I commend this bill to the House for its second reading. 
GERRY BROWNLEE (National—Ilam) 
: 
 The National Party is supporting the Electricity (Disconnection and Low Fixed Charges) Amendment Bill through its second reading because who could argue against the idea that vulnerable New Zealanders should be protected from the ravages and difficult times associated with having their electricity cut off? It should be very clear that the disconnection requirements or the enabling aspects of this bill are not necessarily new for any of the energy companies. 
What a lot of New Zealanders do not realise is that the Government still owns about 85 percent of the electricity industry in New Zealand—85 percent of the generating capacity of the retailing capacity and of course of the national grid or the distribution sector. The Government is a massive player here. It is worth noting that it was a Government-owned organisation that got itself in the pickle over the disconnection of the Muliaga family in Auckland midway through last year. 
No one could be more sympathetic to the situation that that family found themselves in than the people of New Zealand as a whole. But we need to be very clear that that was an event that should not have happened because the protocols for Mercury Energy the Government-owned organisation that was supplying the Muliaga family with its electricity meant that that situation should never have arisen. What has certainly happened inside the industry since that time with the considerable publicity that surrounded that event is that all the players—the contractors who are involved in the distribution industry or part of the electricity industry—are much more aware of the protocols that the companies have in place. 
I think it is very interesting to note that we are giving speeches that can last up to 10 minutes tonight. I hope not to take as much of the House’s time as that because one can actually read this bill three or four times in 10 minutes. There is just nothing in it; it is an exceptionally light little bill. It does though create some interesting opportunities for the Government to regulate the threshold at which the low fixed charge should cut in. The Government has very generously decided that although the 8000 kilowatt hours will remain in place for the vast majority of New Zealanders in the deep south where it is colder than it is elsewhere that threshold level will be raised by just 1000 kilowatt hours. That is actually not a lot when one starts to think about it. In that part of the country it is cold. It is much much colder in Southland than it is in Auckland during the deep part of the winter—there are beautiful days of course; people have sunny days there unlike the rain that falls in Auckland often during the winter. I do not wish to say anything adverse about living in Southland but there is a reality about the situations that people find themselves in with regard to electricity usage in a particular geographic location. 
There is an element in this bill of lip-service being paid—a suggestion that somehow because this bill passes there will be no unfortunate disconnections like the disconnection that happened to the Muliaga family. That risk can never be mitigated by any Act by any law or by any decree from a Government. It is to be hoped that the lessons that were learnt around that time are well understood by all the energy companies. 
I want to go back to my first assertion here this evening: that the Government remains a major player in the electricity industry. The Government is the dominant owner of generating assets in this country. So that raises the question of why electricity prices are so high. This Labour Government holds itself up all the time as the friend of the family the friend of the worker the friend of the oppressed the friend of the low-wage earner and all that sort of thing so why is it presiding over a regime that will see electricity prices rise continually for the foreseeable future? The Government has no idea of how it might increase the availability of electrical energy which in turn would lower the price. It has no idea of how to do that at all. 
I ask subsequent Government speakers to explain to the House why electricity is so expensive for domestic consumers in this country. Why after 9 years of a Labour Government has there been very little change in the industry? There has been only the addition of a massive bureaucracy called the Electricity Commission which all consumers pay for with a little extra on their electricity bill month after month. What has ever been achieved by that? I think it would be a good idea if subsequent Government speakers told us how the Government intends to lower the price of electricity for New Zealanders. 
I have to say that the Government’s record is to increase prices across the board. We need only to look across the energy sector at the moment to see that gas prices are going up. The Government says that is not caused by it but is because of international prices. But the Government has done very little about telling New Zealanders that in the coming year this country will be a very large exporter of hydrocarbon product. This year a lot of the oil that comes out of the ground will be exported. That is of no benefit to domestic consumers but of course it does make Michael Cullen’s accounts look a heck of a lot better. A Government member should also address the question of the rise in the general costs that people have to pay. It would be interesting to see whether Mr Swain is able to explain how people are so much better off under a Labour Government than they were previously when all they see is their cost of living rising day after day. 
This bill is very short but if there were a scarcity of a product then the relativity of a low price is dependent on whatever the high price is. We are on a track that has seen electricity prices rise continually over the last 9 years. The Government has come out now with a project to have New Zealand 90 percent dependent on sustainable energy by 2025. We think that is a good idea but there has not been one single initiative from the Government since it announced that project to try to facilitate the rapid development of more renewable energy in this country—not one. It is laudable that the Government is trying to put in place some encouragement for New Zealanders to look at alternative sources of energy for home hot-water heating. That is a good idea. It is marvellous that there is encouragement for people in some parts of the country to insulate their houses better but that initiative is very small and concentrated on just a few people: by and large just a few who can afford it. 
One of the ironies is that a family of four or five kids and their mum and dad low earners could escape the low fixed charge simply because they use the electricity that would obviously be used by such a large number of people in a household. They would get no relief whatsoever. This bill is more about public relations than anything else. We believe that the regulation-making capacity in the bill is useful. We look forward to having that at our disposal in Government. We do not intend to go about telling New Zealanders that we are doing a marvellous job in energy when they see their electricity prices go up day after day. 
Hon Clayton Cosgrove 
: You could never pull that message off. 
GERRY BROWNLEE 
: The Minister for Small Business sits over there. I had to ask my colleagues before what he was Minister of. Someone told me he had been the Minister for Building and Construction and all that sort of thing. I cannot believe that. I cannot believe that he would make such a sanctimonious speech as he did earlier this evening knowing that he is the man who presided over the misery that so many New Zealanders have while sitting in their damp homes this evening knowing that the only help they will get from the Government will come after they have spent $150000 of their own money on getting to some sort of resolution position. 
National will be supporting this bill—not necessarily because it is good legislation but simply because it has some interesting regulatory capacity to it and because the sentiment that those New Zealanders who are the most hard up should get a bit of a break is not unreasonable. 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 I hung off every word there and I was waiting waiting waiting to hear a policy. I was waiting to hear what the National Party would do if it was ever in Government—not in my lifetime but if it was ever in Government—about electricity prices. That is what I was waiting for. The member Gerry Brownlee led us on a bit of a merry dance down the path. He talked about the issues and the problems—he slowly took off each veil and suddenly we had the expectation that the naked policy would be there standing in front of us. But unfortunately we got nothing. I will come back and ask some questions around that in a minute because he did ask us to address some questions. 
Of course the member is right. He chaired the Commerce Committee—and did not do a bad job of it I have to say—and this bill is about two basic issues: the low fixed-charge tariff which the member mentioned and the big problem of the fact that it is now for a standard 8000 kilowatt hours across the country. Of course as the member pointed out in the colder parts of the country that amount gets used up pretty quickly so the ability to have some flexibility across the country is obviously a good idea. The second issue the bill deals with is the problem of disconnection and to some extent the tragedy that occurred in Auckland. I will come back to those points in just a minute but I will now take up some of the points that the member raised about electricity issues. 
Mr Brownlee asked why it is that electricity prices keep going up. Well that is a good question which maybe we should go back and ask Max Bradford. I actually recall Max Bradford saying in this House that as a result of the electricity reforms that the former National Government introduced in the late 1990s—1998 as I recall it—electricity prices would go down. 
Hon Ruth Dyson 
: Did they? 
Hon PAUL SWAIN 
: Well of course they went up. For the National Party that may not be much of a difference—up and down down and up—but it is actually quite a big thing when it comes to consumers. When consumers heard National say that if we went through all of that electricity reform their power prices would go down and then they went up consumers would have wondered what had happened. We heard National say that prices would go down but then they went up. Then we heard the National member criticise the fact that electricity prices are going up. 
What I really wanted to hear from Mr Brownlee was what National would do about it. For example would National introduce price control? 
Hon Clayton Cosgrove 
: Would it? 
Hon PAUL SWAIN 
: I do not know. Let us ask the National members. I ask the National members whether they would introduce price control on electricity to stop prices going up. I do not hear any response from anybody on the National side. What happens during a dry winter when people use more power and it costs more money to generate it? Is National saying that that should not be reflected in the price of electricity? Or is it saying that the Government should regulate the cost of power? If the Government does that what message does that send to the generators? There is some market economics which apply to electricity in here. I would expect National to come forward with some ideas. I presume it is not advocating regulation. 
Chris Auchinvole 
: I presume that you’re short of ideas because this is all you have done for the last 8 years. 
Hon PAUL SWAIN 
: We have heaps of ideas and I am going to come to them in just a minute. 
Chris Auchinvole 
: It is under your watch that the prices are going up. 
Hon PAUL SWAIN 
: Well OK. Mr Brownlee tells us it is an outrage that the power price is going up but I want to hear the National Party’s ideas on how to address that because we have done a number of things. Of course the other thing is that he says the Government is heavily involved in the electricity sector and he is absolutely right about that. In fact we were 100 percent involved in the electricity sector until the National Government sold off Contact Energy in the late 1990s as well. 
I asked the National Party members over there whether one of its solutions to doing something about the power price was to privatise more generators. You see this is the problem. We know that the National Party wants to say yes they should be privatised because deep down fundamentally it believes in the privatisation of electricity generators. But the National members cannot bring themselves to say that because they know it is unpopular and they will not get elected. I think that the big problem is that the public would ultimately support them more or at least consider their policy more if they were prepared to be frank and say “Look we the National Party believe in the privatisation of State assets. In fact we think that a couple of those generators should be sold.” At least their policy would be clear. The problem which everybody now knows is that the National members think they can slip and slide on this kind of policy right up to the election. And if the National Party were ever elected to Government as I say—with no disrespect to Mr Deputy Speaker and not in my lifetime—everyone knows that it would sell the generators off. So people are asking why National does not come forward and tell them that now. They wonder why it does not come forward and tell them that now not at 5 past 12 on the election-day Saturday. People want to hear that and for them to be told that at 5 to 12 would be probably a little more helpful to them than to be told later even though the polls would still have closed. 
So the issue is really that the problem of electricity is a difficult one. But the Government has implemented a number of initiatives—for example initiatives to address hot-water heating and through local authorities insulation. Many of those kinds of initiatives have been taken to address some of the fundamental problems but in the end the issue is that electricity is a market and of course the tension always is—when a party is in Government and actually has to say what it thinks—between on the one hand people having to pay for power and on the other hand the importance of a correct signal being given so that generators can go out and generate new electricity. The demand for electricity is rising and no one will thank a Government if the lights go out. So that is the real tension. In the end some people get caught in the middle between price rises to fund new generation on the one hand and consumers not being able to afford the prices on the other. 
That is why this good Government has introduced this legislation to try to address that issue. It recognises that although electricity is a market—and the Government does not want to regulate prices across the board—some people will struggle to pay the bill. There are low fixed charges already in regulation but having been introduced this good listening Government—which goes around the country listening to people hearing good ideas and taking them back discussing them thoroughly at caucus and coming forward with positive legislation—has recognised that perhaps a standard rate across the country and across all temperatures is not a very good idea. Such a rate applies equally in sunny Hawke’s Bay where Chris Tremain is from and in the deep south where it is colder. So the Government says that perhaps we should introduce some flexibility so that people can adjust the kilowatt hours. That is a good idea and because this is a good Labour Government that listens to people it is prepared to take that option. 
Then of course if people are not prepared for the cost of electricity and get themselves into trouble there should be rules around disconnections. Rather than people just willy-nilly cutting off the power there should be some rules to be followed for disconnections particularly if people are attached to machines that require electricity—which was the issue faced in Auckland. So we are saying there needs to be some ability to address those issues and that is what this bill also does. 
Debate interrupted.