Fitzsimons Jeanette: Electricity and Gas Industries Bill — Second Reading 
Fitzsimons Jeanette: Electricity and Gas Industries Bill — Second Reading 
[Volume:619;Page:14735] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I acknowledge the touching faith of my colleague Peter Brown in the Australian research into carbon sequestration. He hopes it will work. I guess we all hope it will work otherwise we are going to be living on an uninhabitable planet. But some of us believe it would be prudent to do more than just hope. Some of us believe it would be prudent to have an alternative strategy so that we move towards renewables if in fact coal sequestration does not work. 
We already have 50 years of experience of the nuclear industry saying: “We haven’t solved the waste disposal problem yet but let’s just go ahead and build the stations and then sometime in the future we will solve the waste disposal problem and we’ll just store it until we do.” Well they are still storing it and they are no closer to solving the waste disposal problem than they were 50 years ago when they started building nukes. Let us not do that with carbon dioxide.  
However I move on to the subject of this bill. The Greens welcome a regulator for the electricity industry. We predicted in 2000 when the self-regulating industry governing board was set up that it was unlikely to work but agreed to give it the benefit of the doubt for a while provided there were backstop provisions in the Act. An interesting analysis was published in the Christchurch  
Press 
 recently by a couple of academics from that city pointing out that it is obvious under economic theory that in an industry such as electricity competition is going to have to compete on price and that competition will prevent investing in security of supply because that raises costs. Nobody will do that and stay in the market and therefore eventual shortages are inevitable. This is what has happened in the electricity market.  
It is also noteworthy that over recent years we have moved away from competition to the establishment of virtual regional monopolies in the electricity industry as companies have retrenched to the areas where they can make the most profits and moved out of others. So we really do not have a competitive industry any longer. We also have experience of various ways in which the market can be gamed and there has been no regulator to take care of that.  
We have a very good Government policy statement in terms of what is wanted from the electricity industry but absolutely no indication that the industry unregulated can deliver those outcomes. The Government policy statement asks for energy efficiency it asks for minimizing greenhouse gases it asks for safeguarding security of supply it asks for moving towards renewables and distributed generation and to demand-side participation in the market. None of those things happened at all while the industry was in charge of itself and in the end even the industry could not agree on what the rules should be. So now we have a regulator and I am glad that we do. Of course the jury is still out on whether the commission itself will be able to deliver on those outcomes but I have a lot more confidence that it will than I did when we were looking at self-regulation.  
Let us look first at the question of security of supply which is one of the biggies. Under the bill the commission may contract for reserve generation to ensure that the lights do not go out in a dry winter and that is a very good thing. In the meantime the Government has taken some steps it tells us to secure supply by building a 155 megawatt power station at Whirinaki which is ironically replacing a very similar power station that was there until very recently. It was sold off by Contact Energy as surplus to requirements when the National Government sold Contact Energy and it was thinking only of the short term and not of long-term security of supply. However the Whirinaki station has been re-established and we are told that is for security in dry years. In fact Mr Hodgson tells us it is designed not to be used yet in this very wet year when the hydro lakes are way above their normal capacity it has already been run 12 times we learnt from the  
Dominion Post 
 recently.  
So clearly security of supply is not triggering the Whirinaki power station but price is and I have to say this is not now reserve generation that is there for use in a dry winter. It has become part of a normal operating scheduling of stations when the price looks like going up a little bit. That gives me real concern about what will happen next year if it is in fact dry. However in the absence of this legislation the commission has not had the power to set criteria for the running of Whirinaki. With this legislation in place maybe it will do so and maybe it will return to being what it was designed to be and that is a station for security of supply rather than just for keeping prices down.  
I note that the commission under this bill is empowered to levy for providing greater energy efficiency and that it has the power to put some of that money itself directly into encouraging energy efficiency on customers’ premises. We have therefore a very confused situation under law. We have a small Crown entity set up in the year 2000 under its own Act—which I must say I introduced to Parliament—which required it to develop a national energy efficiency and conservation strategy which it has done with only $12 million a year in funding and a great deal to do. Now we have a large and better funded organisation with a mandate for energy efficiency but with no guidelines at all as to how it carries that out. We assume that it will be subject to the National Energy Efficiency and Conservation Strategy but we do not know—there is no guidance at all in the legislation—and they are reduced to developing their own memorandum of understanding with the Energy Efficiency and Conservation Authority as to who is to do what in this new environment. I think that leads to a lot of operational uncertainty and I think the Government needs to tell the commission what its role is meant to be in energy efficiency rather than leaving a turf war perhaps to eventuate between its two Crown entities.  
On the question of transmission Transpower is under the amendments to this bill able to contract for distributed generation and this is exactly the sort of cost-benefit analysis and trade-off that we desperately need to have happen. Many speeches are made in this House and elsewhere about how we need to expand transmission lines because we have transmission constraints. Well in some areas we do but in other areas there is a very much cheaper and more reliable way of overcoming those constraints and that is by building small-scale capacity close to where the end-users are. There needs to be a proper analysis of each proposal to expand the lines to see which is the best way to overcome that particular constraint and I hope that will be done under this legislation.  
Finally I have to say that I do not understand why the select committee finds it necessary to allow lines companies to build generation of any kind up to 50 megawatts. We already provided in the 2000 legislation for them to have unlimited scope to build new renewable generation because that is something the Government wants to promote. The non-renewable—in other words diesel sets—were constrained to 10 megawatts or 10 percent of their load. Now all of a sudden they are to be allowed to build quite sizable fossil fuel – fired plants and given that they are capital rich and have a wish to expand I really wonder whether this will take us further from our sustainability objective and from our greenhouse gas agreements.