Brownlee Gerry: Electricity Industry Bill — In Committee 
Brownlee Gerry: Electricity Industry Bill — In Committee 
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Hon GERRY BROWNLEE (Minister of Energy and Resources) 
: 
 I want to address a couple of things that came up in the previous discussion on clause 3 and are being repeated in debate on this part of the Electricity Industry Bill. Firstly the Labour Opposition says it has concerns around security of supply prices and sustainability. In looking at those three things I say that this review of how electricity is governed and the regulations around the production and sale of electricity comes on the back of a period under the previous Government where we had several electricity crises— 
Chris Hipkins 
: It didn’t rain. 
Hon GERRY BROWNLEE 
: —during so-called dry years. The one thing that is really interesting to me is that we never ran out of electricity during that time. That raises the issue as to whether the way in which the governance of the sector and the views on the worth of the water and of storage were being properly considered. That is why the Government has looked at asset swaps to get a different view. That is why we have looked at virtual swaps of large tranches of electricity and that is why we are looking at having a more liquid hedge market. 
On the issue of price I make it very clear that I have never at any point said—and no one will find a quote from me saying—that we will bring electricity prices down. I have repeatedly said that we will get a more stable price path for electricity. One thing I point out is that in the May 2009 to May 2010 year the average electricity price rise was 2.9 percent. That compares to over 8 percent for each of the previous 8 years under the previous Government. I think there is a very good trend there. 
With regards to the situation in Dunedin I simply say to Dunedin residents that if one company is jacking up its prices through the roof they should look around and see who is not. There has never been more choice for people in that city than there is at the moment. That choice is driven directly out of the ability of Genesis Energy to ensure its own supply into that market. 
On the issue of sustainability I say that we were recently able to report once again that New Zealand is enjoying the benefits of very high levels of sustainably produced electricity—73 percent in the latest  
Energy Quarterly 
. I concede that part of that is because of the commitment to thermal generation— 
Hon David Parker 
: Geothermal. 
Hon GERRY BROWNLEE 
: —geothermal generation made by the previous Government; the former Minister of Energy is right to correct that. But it is also worth pointing out that at Huntly at the moment coal is being replaced as a fuel with gas which is having a very positive effect on reducing emissions from that important piece of kit in the New Zealand electricity system. 
The question was raised about this bill not dealing with prices. Well the members who raise that question totally failed for a very long period of time to deal with outrageous prices. This bill at least creates an environment where there is pressure on retail sales where there is the ability for others to enter a market and where there is capacity for companies to secure a supply that means they can meet their consumers’ demands. 
The Electricity Commission was set up by the previous Government and was required to do a broad range of things. The Electricity Authority set up by this bill has a much smaller range of things to do and I think that is appropriate. One of the most important things it will do is make rules. One of the failures I saw in the system was that Ministers were required to sign off on rules. Quite frankly few Ministers have the time to read those rules let alone understand what they are about. I think having an authority that has a better focus on that will see us with a better surer and more secure arrangement. 
I might also say that the issues raised about energy efficiency are important. I can say two things there. Firstly the current Government has funded the Energy Spot on national television. It runs many times during the week and gives people practical tips about how they might reduce their energy bills. Further we have committed a large tranche of funding to the home insulation programme and the Clean Heat programme which are seeing literally tens of thousands of New Zealanders in warmer drier homes where energy efficiency will be much improved. 
I also say that the funding flow is now to the Energy Efficiency and Conservation Authority. The authority will be required to engage in a broader programme for getting a better approach to energy efficiency. One of the things I hope it will pick up very quickly—it is a little outside the purpose of this bill—is the issue of industrial use of electricity business use of electricity and commercial use of electricity where a possibility exists I am told for very very substantial savings in the amount of energy this country uses. I do not discount the idea of a notional power station that indicates to people on a year-by-year basis how much efficiency we have managed to get across the country. I think it is extremely important and taking that role away from the Electricity Authority formerly the Electricity Commission and putting it with the Energy Efficiency and Conservation Authority will give the public a great deal more confidence about the information that will be provided to them. 
I raise the issue of the emissions trading scheme. Although some power companies may have suggested that the emissions trading scheme is the reason for their price hikes I have repeatedly said that I think that is unreasonable. The fact is that 73 percent of electricity sold in this country in the last quarter was generated from renewable sources and around 25 percent of that was from thermal. That indicates that there is a much lesser draw on the requirement. The Government has capped the price of carbon dioxide emissions at $25 a tonne effectively meaning that industry pays half of the cost which is $12.50. The average price appears to have been something between $18 and $18.50 recently which puts it back to $9. I think the costs that some companies are applying are excessive and we have said that we will want to have a good look at that as we go forward. 
I note that we would have a long way to go to use up on electricity charges the $100 a week extra that superannuitants are now getting since this Government was elected than was the case under the previous Government. Although Ms Curran might be concerned about one company jacking up its prices by 9 percent in one part of the country 9 percent was the average price increase for 8 years. Not only was the price going through the roof but also we had so-called electricity shortages. Although I admit that some of that shortage was due to the hydrology it was not at the frequency that we saw over those years. That is why we are looking at the issue of asset swaps and that is why we have looked at virtual swaps among those companies so there are balanced obligations. It finally means that what should have been in place for years between the very large hydro generator in the South Island and the very large thermal generator in the North Island is being put in place. There is plenty of evidence that those swaps will create a more secure environment. 
I think it is unreasonable to suggest that the Crown may not be capable of being bound by this bill when clearly the previous Government had absolutely no evidence to suggest that it was bound by previous Acts. None of the predictions that were made by previous Ministers came to pass. I can at least say that since we started down this process things have greatly improved for consumers. That is a completely unarguable position. I look forward to reasonable discussions about the way in which aspects of this bill might be applied but I think in a general sense suggesting that everything was better the way it was before is a completely wrong position. If the Labour Party wants to argue that we should have done nothing and just carried on the way things were then it is saying that New Zealanders were condemned to 9 percent and 10 percent price rises per annum for their electricity. We have rejected doing that and have had a bit of a go at seeing whether we can straighten things out and get a better and more reasonable arrangement for the way that electricity is marketed and sold. 
There is no backing off the idea that the best form of investment should be chosen every time. At the moment we are seeing that the best form of investment appears to be in geothermal energy; we certainly encourage that. But I would not in any way want to take away the opportunity for electricity companies to look at gas where it is needed. A number of projects are on the books. I hope that they are developed because gas has a much lesser carbon profile than coal and it provides very fast instant back-up to the system particularly where we have wind energy which may drop off very very quickly. Having an over-reliance on that particular fuel source would be a disaster for New Zealand consumers. It has its place.