Parker David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeParker David: Questions for Oral Answer — Questions to Ministers[Sitting date: 12 March 2014. Volume:697;Page:16558. Text is incorporated into the Bound Volume.]8.Hon DAVID PARKER (Deputy Leader—Labour)to the Minister of Finance: What is the total amount of dividends that the Government has taken out of Transpower since 2011 and what is the current debt gearing ratio of Transpower?Hon BILL ENGLISH (Minister of Finance):Dividends paid since 2011 total $610 million. The debt gearing ratio is 70 percent.Hon David Parker: Did he write to the chair of Transpower in 2008 and 2009 demanding that the company increase its debt so as to pay out larger dividends?Hon BILL ENGLISH: I would have to go back and check the records but it is likely that that is the case.Jami-Lee Ross: How much has Transpower invested in the national grid since 2008 and why has it made this investment?Hon Trevor Mallard: Because the Labour Government told it to.Hon BILL ENGLISH: Actually I agree with the interjection. Under a programme initiated by the previous Labour Government and its last competent Minister Trevor Mallard Transpower invested over 10 years from 2008 to 2018. Its investment will total $5 billion. This represented at the start of the programme and does still now a much-needed and overdue investment in transmission assets. It has increased reliability particularly in the upper North Island and enabled growing demand in Auckland to be met from mainly renewable generation south of Auckland. These investments are being made under the independent oversight of the Commerce Commission which requires investments to be made only in the long-term interests of consumers. Although the costs of this investment pass to consumers so do the benefits in terms of an improved network fewer blackouts greater competition between generators and more use of renewable energy.Hon David Parker: Did he receive a letter from the chair of Transpower dated 19 February 2010 that stated: “A target gearing ratio of 40 to 60 percent was appropriate for a business of our type and consistent with our peer group.” and “To go above this range would be imprudent.”?Hon BILL ENGLISH: I do not recall the letter but I think the member can be assured that the Government would have taken the best commercial advice available in setting the levels of debt applicable to Transpower.Hon David Parker: I seek leave to table the letter of 19 February 2010 from Transpower to the Hon Bill English which says—Mr SPEAKER: Order! It has been described well enough. Leave is sought to table that particular letter dated 19 February 2010. Is there any objection? There is none. It can be tabled.Document by leave laid on the Table of the House.Jami-Lee Ross: What is the process for setting Transpower prices?Hon BILL ENGLISH: Transpower is now independently regulated by the Commerce Commission which sets the prices Transpower can charge. It does so under the Commerce Act. The Commerce Commission’s price-setting process does not refer to Transpower’s dividends or debt—that is it does not matter what Transpower’s level of dividends or debt is the Commerce Commission applies its own criteria regardless. So the dividends paid by Transpower do not change the prices charged by Transpower. The Commerce Commission also determines whether investments over $50 million are in the long-term interests of consumers. Overall consumers are facing increases of an average of 2.6 percent in their electricity bills to pay for Transpower and lines company investment to improve the network.Hon David Parker: Is he aware that after the Government forced Transpower to borrow more money to pay higher dividends taking it over the debt gearing ratio that the chair had warned was imprudent Moody’s downgraded Transpower’s credit rating saying that it was because of “the company’s willingness to weaken credit metrics in favour of shareholder distributions”?Hon BILL ENGLISH: I am aware that that occurred. Shareholders have the rights of owners. The point I would have thought of the Government owning Transpower is that it can set those policies. We do not rely entirely on what the chairman or the rating agency thinks. Of course that is taken into account along with other advice and also the needs of the shareholder.Hon David Parker: Has the effect of increased indebtedness and interest bills been to increase Transpower’s costs?Hon BILL ENGLISH: That is arguable. The fact—Iain Lees-Galloway: That would be a yes.Hon BILL ENGLISH: It can be argued because if it had less debt it would pay fewer dividends and higher interest—exactly a point that Opposition parties have made when arguing against the sale of the other electricity generators. It is not obvious exactly what impact it would have. What the member needs to be clear about is that the Commerce Commission does not take account of those issues or Transpower costs in determining prices. The prices are set independently by the Commerce Commission.