Clendon David: Electricity Industry Bill — First Reading 
Clendon David: Electricity Industry Bill — First Reading 
[Volume:659;Page:8573] 
DAVID CLENDON (Green) 
: 
 The one proposition that the Greens can agree with in the Electricity Industry Bill is that there is certainly work to be done and considerable scope for improvement in the interests of assuring a reliable and affordable supply of electricity to New Zealand homes and businesses. The reforms dating back to 1998 which is over 10 years ago have clearly fallen well short of delivering on the outcomes that were promised at that time. The intention of this bill appears to be at least to remedy some of the issues around security and pricing and that intention can only be applauded. However the Greens will not be supporting this bill given that it would be relying far too heavily on one key assumption and one mechanism. That singular focus represents a missed opportunity—indeed a number of missed opportunities—to make more meaningful and positive changes in the sector. 
The bill seeks to promote increased competition within the sector and relies on that competition to effect efficiencies that will flow on if not to give price reductions to consumers then at least to slow or stabilise the inexorable rises in electricity prices that we have seen since the last major round of reform a decade or more ago. We could support moves to make the electricity retail market more competitive and more efficient if we thought it likely that the reforms would deliver economic and environmental benefits. But there is a distinct lack of evidence that in a market of the size and nature of New Zealand’s this proposed model would achieve those goals. 
One of the many options missing from this bill is any reference to the real solution or set of solutions that must address issues of demand and conservation of energy rather than be so tightly focused on managing and manipulating the price of supply. We can remake and remodel the electricity retail sector but that will do little to affect the fundamentals of supply and demand. We will look in vain for long-term sustainable savings for households or businesses until such time as we invest in energy conservation measures and provide incentives for a distributed supply network based on renewables. This proposal to effectively reshuffle the deck in regard to ownership of the key assets of the three State-owned enterprises may serve to avoid the so-called regionalisation of competition but along with the so-called virtual asset swaps the obligation to enter into long-term hedging contracts would seem to add up to very complex mechanisms inevitably with a very high level of transaction cost. The previous speaker David Parker noted the attempt to impose an economic solution in a context where ecologically and physically it makes no sense. 
The proposal to disestablish the Electricity Commission in favour of a much more narrowly focused electricity authority is also of concern. The commission has had some success. It has built up a level of expertise and skills that are likely to be lost to the sector and the reduced ambit of the new authority reflects an unfounded confidence in market solutions. It puts responsibility for key outcomes in places where there is little or no likelihood of them being adequately managed. We are far from persuaded that the proposed reallocation of other functions of the commission would in fact be picked up in any satisfactory way. The expectation that the Minister should be responsible for making regulations to ensure fairness in dealings between retailers and distributors and their consumers represents a triumph of hope over experience given that conflicting political and economical demands and expectations are sure to land on that Minister. 
The bill proposes that the promotion of energy efficiency should be consolidated in the Energy Efficiency and Conservation Authority but nowhere does it reflect on any increase in the Budget or other resources available to that agency to advance that work. We would argue that in any case every agency involved in the electricity supply chain should be actively engaged in the promotion of energy efficiency and demand reduction. 
The proposal that generic environmental policy and law notably the Resource Management Act should be relied upon to ensure the environmental sustainability of the sector is a remarkably disingenuous approach which denies the value of a national strategy for a sustainable supply that could help to future-proof the industry and protect its consumers. The generic approach ignores the reality that Resource Management Act provisions have often been inadequate to prevent the consenting of some projects like the wholly unsustainable Rodney Power Station proposed by Genesis. The residents and other objectors very early in that process recognised there could be no certainty of gas supply to fuel it and even less certainty that the gas might be available at a price that would make the project viable although the applicant has only much more recently arrived at that same conclusion. 
We note that there is no place reserved on the new governing authority for consumers or a consumer advocate despite the fact that they are paying nearly half of the electricity industry revenues. This seems to continue a trend of diminishing opportunities for public participation which was much in evidence in the Auckland governance legislation debated earlier this evening and in the reforms of the Resource Management Act pushed through Parliament earlier this year. 
There is some very poorly targeted spending proposed in the bill including the expenditure of some $15 million over 3 years to promote customers switching between retailers. One would have thought that if the provisions of the bill could achieve a more competitive market as its proponents would suggest then consumers would be astute enough to manage their own switching as indeed they do in the telecommunications market with no substantial contribution of funds from the Government. That proposal would almost certainly be a gift primarily to the advertising industry which would be employed by the power companies to sell the real or imaginary benefits of dealing with one or another of the companies. The added cost of that would just as surely land on consumers in the long-term as we saw in the tertiary education sector when it was encouraged to adopt a competitive approach to the provision of education. Rather than spending $15 million on that rather peculiar market intervention it seems much more sensible to fund for example another green solar water heating programme which could add a further 15000 solar water heaters to homes thus saving householders significant amounts on their bills and reducing the pressure for increased supply. 
Another way to much better spend $15 million would be to invest in the roll-out of smart meters in people’s homes. One of the specific recommendations of the ministerial review that did not get picked up in the legislation was the development of smart meters. The nearest the bill comes to incorporating this recommendation is in clause 120 where there is a brief reference to the creation of flexible tariff options for the consumer and smart meters are certainly a tool that can facilitate that. The Parliamentary Commissioner for the Environment has made a powerful plea for smart meters and in particular a smart meter protocol ideal for New Zealand’s needs the so-called ZigBee protocol which has had widespread use in North America and which has been mandated in the Australian State of Victoria. A rapid adoption of the commissioner’s recommendation would be an enormously valuable addition to this bill. Smart meters and the in-house display units that can sit alongside them have been shown to reduce power bills by some 5 to 15 percent purely through increasing householder awareness of their power usage. Smart timers and plugs are readily available and could save householders money and reduce demand immediately and we could expect to see smart appliances on the market very quickly once meters were installed to exploit their benefits. The Greens entirely support the parliamentary commissioner’s recommendation in respect of meters and to that end Jeanette Fitzsimons has drafted a member’s bill. 
In announcing the review the Minister of Energy and Resources Gerry Brownlee indicated his attraction to the idea that consumers could be compensated in the event of there being conservation campaigns particularly in dry years. I return to my earlier point that far from discouraging energy conservation we should always and everywhere be encouraging it in residences and businesses and in good and bad years. The analysis that was done by Professor Wolak indicates considerable questions about whether the proposed penalties on suppliers would in fact be a particularly effective tool given the history of the large profits made in the sector that will be scarcely dented by the proposed penalties even in dry years. 
Climate change and the end of cheap oil will have massive implications for the price and security of energy given that we are at the end of a very long supply chain. This bill fails to even recognise those threats. It fails to incentivise solutions based on the investment and development of green technology and on renewable distributed generation so it will not be supported by the Greens. Thank you.