Hodgson Pete: Electricity Industry Bill — First Reading 
Hodgson Pete: Electricity Industry Bill — First Reading 
[Volume:659;Page:8579] 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 Almost inevitably we have had yet another round of debate on electricity prices and under whose watch prices went up and by how much. We have had figures thrown all over the place by the Maori Party by the ACT Party and I am sure earlier in the debate by National. Well here is something to think about. In the middle of the last decade the Maui gasfield ran out and the price of gas just slightly more than doubled and gas— 
Aaron Gilmore 
: It didn’t run out the contract price. It didn’t run out. It’s pumping today. 
Hon PETE HODGSON 
: Oh so we have a brilliant operator who has told us that the Maui gasfield has not run out. Well actually he is correct. But what was a stream is now a trickle and we cannot run a decent electricity system on a trickle of gas. The Maui gasfield has run out to all intents and purposes. As part of that the price of gas just over doubled. Most of the time—not all of the time but most of the time—the marginal price of electricity in this country is set by the domestic gas price. That is what sets it not oil as Pita Sharples said and coal sometimes does and occasionally in January it is actually set by the hydro price. But it is nearly always set by the gas price. 
The price of gas just slightly more than doubled. What is National’s excuse? National has not seen any increase in the gas price in the last 13 months. But we have seen an increase in electricity prices. What was the excuse that Max Bradford used when he said in April 1999: “We will see prices decrease.”? In April 1999 they went up in one city by 13 percent in another city by 14 percent and in one other city by 18 percent. I rather suspect all of those increases were rolled into the ones that were levelled against the previous Government by speakers on the other side of the House. 
But enough on prices; we have a reasonable reason. The underlying reasonable reason is that when the Maui Gas contract was originally signed way back in the 1970s probably from memory it has—[ 
Interruption 
] It might have been a Labour Government I do not know. It must be the second-longest contract in the New Zealand economy. I do not think it is as long as our blood bank contract with Commonwealth Serum Laboratories in Australia. I think that contract is about 50 years old. But this contract has to be the second longest. How do I know? Because I spent about 50 hours renegotiating it on the 19th floor of Bowen House with a whole lot of people who were pretty keen to take each other to court and we got there. 
But in the course of those negotiations we rediscovered something that needs repeating. When the original Maui Gas contract was signed the inflator was made by law to be half the rate of inflation. So right through those decades including the high inflation years of the 1970s and 1980s when the inflation rate was 10 percent the Maui Gas price went up by 5 percent and so on year after year. If members want to know why the price of Maui Gas doubled there it is in a nutshell. If members want to know what the large driver on electricity prices was in the time of the Labour Government there it is in a nutshell. Owe it to history. Own up tell the truth—that is what happened. 
Hon Gerry Brownlee 
: And who negotiated the contract first up? A Labour Government— 
Hon PETE HODGSON 
: Gerry Brownlee is now accusing the 1972-75 Labour Government of being the problem in the first place because that Government negotiated the contract. He is right; he is right. So what do we do about that? Do we say that the negotiations that occurred nearly 40 years ago should be visited on this Opposition? Or should we simply reflect on the fact that the history came home to roost in the course of the middle of the last decade— 
Hon Christopher Finlayson 
: I believe in guilt. 
Hon PETE HODGSON 
: Guilt—[ 
Interruption 
] Yes—ha ha! Back then everyone thought they were doing the right thing for everyone else. Back then we did not know that subsidising fossil fuels was a bad idea because back then climate change was not exactly at the forefront of everyone’s mind. 
Hon Darren Hughes 
: Except Aaron Gilmore’s. 
Hon PETE HODGSON 
: Except Aaron Gilmore— 
Aaron Gilmore 
: I wasn’t even born then mate! 
Hon PETE HODGSON 
: —who of course was pre-natally aware. As he attended his pre-natal calculus classes he learnt not only that climate change was happening but how to differentiate and integrate the various equations that were leading to the ultimate outcome that we hope to see from Copenhagen in a week. This guy is amazing! His pre-natal awareness of these matters leaves me gobsmacked. Let us now turn to the bill and leave Aaron Gilmore where I think he should be left. 
Aaron Gilmore 
: I love your work; love your work. 
Hon PETE HODGSON 
: The member loves my work. I want to know from Gerry Brownlee where the vision is because I do not think that shutting down the Electricity Commission and replacing it with the Electricity Authority and the Security and Reliability Council is visionary at all. What is more I have noticed that Gerry Brownlee has said that the Electricity Commission may not play in the area that is known as energy efficiency. Well I think that is a mistake. 
Every time there is an extra marginal need for some amount of electricity one gets it by new generation by getting rid of a constriction somewhere in the transmission system or by improving the demand side. Those are the options. We do not import or export the stuff; we are too far away from anyone else. So those are our three options and Gerry Brownlee has taken option No. 3 away from the Electricity Commission even though it might be that on some future price curve—in fact almost certainly on a present price curve—energy efficiency would be the most economically efficient thing to do. But Gerry Brownlee has said no he cannot do it. It has to be done by the Energy Efficiency and Conservation Authority according to a budget set by Parliament and not done in any way that resembles integrated resource management—that does not in any way resemble integrated resource management. I think that is a mistake I tell Mr Brownlee; I really do. I really think that he could have got that wrong. 
I do understand that Mr Brownlee feels the architecture was a bit messy; I must say that I felt the same. I felt the same with the Electricity Commission the Commerce Commission the Energy Efficiency and Conservation Authority and on it goes. I understand the problem but I am not sure that he has exacted a very fine solution. In fact I think he will come to regret it. That is my view—that is my view. 
Hon Gerry Brownlee 
: Oh we’ve got a wee way to go. That’s why we have a select committee. 
Hon PETE HODGSON 
: OK so it is going to go to a select committee; therefore it might be given a bit of a chance. I do acknowledge that the Government has retained a market. The market was introduced by Max Bradford; we paid a terrible price for that market. We paid a terrible price for that market yet the moment one seeks to reverse the changes of Max Bradford one rolls up against two things. Either one nationalises Contact Energy and TrustPower or one accepts that that part is irreversible. And if it is irreversible then a market is necessary so making the market work as well as possible is a good idea. 
One thing that I find curious about this legislation—and I rather suspect that my colleague the Hon Lianne Dalziel also finds it rather curious—is that we have new law that says that Transpower is the system operator. Heaven forbid! Who did that? Was it done by the Ministry of Economic Development by the Electricity Commission or by the good Minister himself or was it done by the invisible hand of the market? No it was done by TransPower. TransPower is the system operator it has always been the system operator and for as long as it has been the system operator people whose eyes are swirly say that that should be put out to competition. And people whose eyes are straight say to not be stupid. 
I wonder what is so wrong with Gerry Brownlee that he thinks he has to exclude the possibility of the system operator ever being put out to competition by making it illegal in law. Is it that he does not trust his own ideology or the ideology of the fellows over there on the ACT benches? Is that what is happening? Is he getting so much pressure that he is saying “I’m going to get rid of this. I’m going to put it into law.”? Or we can reverse the argument as I am sure my colleague the Hon Lianne Dalziel might. What is it about National that it is agin competition? Why does it not like competition any more? What was wrong with the system operator coming out of maybe the stock market? Why could not it become the system operator? 
Hon Gerry Brownlee 
: They could. 
Hon PETE HODGSON 
: Oh it could. But not any more. It cannot because Gerry Brownlee has said “No no. We’re going to pass a law against it.”—a law against the competitive possibility. Those are very interesting National tactics—the sort of thing that would have been expected from Labour long ago. But no the National Government has done it with no explanation from the Minister on that; I think he owes us one.