Electricity and Gas Industries Bill — In Committee 
Electricity and Gas Industries Bill — In Committee 
[Volume:620;Page:15703] 
Electricity and Gas Industries Bill 
In Committee 
Debate resumed from 9 September. 
Part 1 Amendments to Electricity Act 1992 ( 
continued 
)  
Hon ROGER SOWRY (National) 
: 
 I raise a point of order Mr Chairperson. Usually it is appropriate at this time that you announce who had the call when the bill was last being debated and how much time that member has. This debate does go back a couple of weeks—the Government’s programme is a bit shambolic—and I myself am struggling to remember but I understand that I was on my feet and I want to know exactly how much time I have left. 
The CHAIRPERSON (H V Ross Robertson) 
: The member is quite correct. He has 30 seconds remaining. 
Hon ROGER SOWRY 
: It will be 30 seconds that the Committee will not want to miss. I start by reminding members that this is a bill that National is totally opposing. It is a bill that every single electricity company—be it a lines companies or a generator be it Government owned or private sector—opposes. It is a bill that some of the brightest New Zealanders who have been involved in the structure of Government issues around State sector issues oppose. It is a bill that only Labour members seem to favour. It is a bill that sets up a structure that the Government has ignored. 
PHIL HEATLEY (National—Whangarei) 
: 
 Only the Labour Party supports this bill. It wants to see the Electricity Commission instated because it sees the commission’s prime role as being a taxation agent. The most important job of the Electricity Commission which is given rise to in this bill is to raise levies. 
Interestingly enough it does have a series of other roles and I would like to go through them because there are no fewer than 10—but its primary role is to impose levies. First of all it is to be a policy adviser. It is then to be a proposer of regulations and rules—so it will follow its own advice. It is to be a purchaser or provider of market operations. It is to be a purchaser of reserve power. It is already involved in the Whirinaki scheme. That generator is supposed to sit there and not be used. The levy payer somehow has to fund that particular generator to sit there and do nothing for month upon month and year upon year so that in a dry year when there is a shortage of electricity we can call upon it. Interestingly enough it has been wound up a number of times already. I have heard that it has been wound up almost fortnightly. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
PHIL HEATLEY 
: I thank the member for Banks Peninsula for returning to the Chamber in all her enthusiasm to hear the completion of my speech. I was talking about the roles of the Electricity Commission which seem not only numerous but in conflict with one another. I mentioned that the commission would be a policy adviser as well as a proposer of regulations and rules. Therefore following its own policy it will set regulations and rules. I do not know where the checks are there. It will be a purchaser or provider of market operations and a purchaser of reserve power. 
I was dwelling on the fact that the Minister of Energy and the future Electricity Commission seem quite delighted at the idea of money being spent on the Whirinaki station which is supposed to sit there in the dry years and not be used. In other words the taxpayer or levy payer funds that beast—that white elephant—which does nothing because its generation is excess in case there is a dry year. I wonder at the absurdity of that. To prove the point we find that that particular power source has been generating regularly over the course of the winter which is quite amazing given that it is supposed to be there to provide reserve power in times of particular shortage. 
The Electricity Commission has a fifth role as a seller of electricity in dry years—clearly from that reserve power—a sixth as an adjudicator of fines and penalties and a seventh as an industry facilitator. 
John Key 
: What does that mean? 
PHIL HEATLEY 
: That means it sits in the middle loving all sides not making the hard decisions engaging in a bit of hand-wringing and being indecisive—sending recommendations up the chain but not taking any responsibility. It has an eighth role as a promoter of energy conservation and a ninth as a decision maker over the investment services and prices of State-owned enterprises. Certainly in the electricity industry there are plenty of State-owned enterprises. In fact I do not think the New Zealand public knows that this Government is up to its eyeballs in electricity generation. There is a belief out there that electricity generation is in the hands of private enterprise yet we know that by far the largest generators—both in size and number—are Government owned and are filling Dr Cullen’s pockets. The tenth role under the Commerce Act is as a regulator of the prices and services of distribution. 
Hon RICHARD PREBBLE (ACT) 
: 
 The ACT party if anything is even more strongly against this proposal. 
Phil Heatley 
: That’s impossible. 
Hon RICHARD PREBBLE 
: Well we are very strongly opposed. The Committee should know that the submissions received were also hostile. There was a very good submission from Mr Scott who used to be the Secretary to the Treasury pointing out the inconsistencies in the bill and pointing out that the ways in which it will work will not actually achieve the purpose. I think that the Minister when he is looking at these particular clauses should think about the fact that they will meet the worst type of lawmaking: “there ought to be a law”. That comes from a drought from a possibility of electricity shortage and from great public pressure for something to be done. The Government has reacted to the notion that for every problem there ought to be a law. So here we have a law saying that there ought to be electricity. When we look at it we see that that is what it really is. The commissioners are really being told that somehow or other they have to create electricity. 
What the Government has not looked at are the underlying reasons that there is a shortage of generation. The Government knows the reasons—the Minister does. He can take a call because he knows. The Resource Management Act makes it virtually impossible to build generation as does the ideology of this Government—the fact that it has signed up to the Kyoto agreement. Interestingly enough if Government members read the latest issue of  
The Economist  
magazine they will see that it is predicting that within a decade there will be the ability to build coal-fired stations that do not emit. But this bill is set up because the Government has a shortage of gas. 
The impossibility of building a decently sized hydro scheme and the Government’s ideological opposition to coal mean that we are now being told we have to have this stand-by station. But does anyone actually think that that is a good use of taxpayers’ money? Even the Minister does not. Of course Government members then try to pretend that it is not taxpayers’ money—because it is a levy. Well does anyone think the generators will pay that? Of course not! The public of New Zealand will pay that. 
This is a bill to put up electricity prices. Here we are a country on the edge of the world looking for every competitive advantage we can get and one competitive advantage this country has had all through our lifetimes has been low electricity prices. But this Government is actually legislating against low electricity prices. I tell the Minister that that is what these clauses really mean and he is bright enough to know that what I am saying is completely correct. This Government does not believe in this bill. We can tell that because no one has taken a call to support it. If they had and if they believed that this bill would do some good there would be Government members going for the call. But they have not because they know that the bill seemed like a good idea a year ago when they had a blaze of headlines when people were worried about electricity shortages and when they felt there ought to be a law. Here is the “ought to be a law”—namely an Electricity Commission. I ask the Minister how on earth that will help. Does anyone seriously believe that it will? 
When we actually look at the projected energy needs in this country we see that this reserve station even after it is built will not in any way be able to compensate for the sort of weather cycles we will get. We know that we will have occasions—and that is absolutely predictable—when there will be a shortage of rain. When we have a shortage of rain we then have a shortage of water in those dams and that situation will come. It might be next winter it might be in five winters’ time but it will come. Will this legislation cover that situation? No it will not. What the Government should be doing is looking at the electricity market. It should have some faith in the market to enable the market to work. For a proper price the private sector is most willing to invest in electricity generation. We have only to look at the share price of the registered electricity generators to know that electricity generation is something that entrepreneurs are prepared to invest in. But they cannot get around the real problems that exist or around the Resource Management Act. 
PANSY WONG (National) 
: 
 It is interesting to look at Part 1 of the Electricity and Gas Industries Bill because that part states the purpose of the bill. The purpose firstly under clause 4(a) is: “to improve security of supply of electricity:”. I think the minority Labour Government is living absolutely in a fantasy world if it thinks that by forcing through legislation it can command the security of supply of electricity. 
The Minister of Energy came into this Government 5 years ago and had spent about 10 years in Opposition as spokesperson on energy. One would have thought that he came to his position with a vision and a blueprint for the energy portfolio but the first thing he did was set up an energy governance board. It would get the whole industry together with consumers and it was supposed to work out a solution but what it meant was the Minister never really had any solution or vision for the energy future of New Zealand. The Hon David Caygill was the chairman of that particular phase. Well millions of dollars later the energy governance board disbanded and then the Minister once again displayed to the public that he actually had no solution or vision for the future of the electricity sector of New Zealand. 
So as I pointed out yesterday during the Committee stage of the Maori Fisheries Bill whenever the minority Labour Government does not have a solution the answer is quite simple. It sets up either a committee or a commission. Now without really specifying the parameters or giving good guidance and directions it has kicked this difficult issue to a commission to resolve and to establish means and methods to secure the supply of electricity. 
When we look through Part 1 we see pages and pages of details reporting mechanisms disclosure requirements and dispute resolutions—exactly what the Hon Richard Prebble said—without examining the underlying problem of the shortage of generation or the unnecessary restrictions on the usage of various means to generate electricity. The Government resorts to disclosure requirements bureaucracy and appointing the commission to perform a task that the Minister has no solution for. So I think the Minister in the chair the Hon Harry Duynhoven should take a call to explain to the New Zealand public how Part 1 of the Electricity and Gas Industries Bill by setting up those disclosure requirements and the pages of code of conduct would secure the supply of electricity to the public. 
This bill is one of many that we have witnessed in 5 years under this Minister of Energy but we are yet to really know or appreciate what the vision or the way forward is for securing electricity supply for New Zealand. Today the Government announced some tinkering to the Resource Management Act and that will not be helpful either. 
Hon HARRY DUYNHOVEN (Associate Minister of Energy) 
: 
 It is a pleasure to stand on behalf of the Minister of Energy the Hon Pete Hodgson and reply to one or two of the issues that have been raised. Ms Wong talked about the Minister’s effort to encourage the generation industry to take a responsible long-term approach to generation for the good of the country. Well encouragement is a very useful thing but it has proven to be not quite as easy to encourage the industry. That is the reason for now taking a stronger approach. The Minister signalled right at the beginning of the process that he would take that approach if the industry failed to respond in the way that he wanted. 
What we have now is a situation where basically it is very difficult to unscramble a scrambled egg. I say to Mr Prebble who conveniently forgot the basic rules of the market this is about market failure. The reason that we do not have scads of unused generating capacity is very simple. It is that the maximum productivity from the investment in generating capacity is at 99 percent and close to 99.99 percent of full load as we can get for as much of the time as possible and that is where the maximum profits are to be made. Therefore no generator will be voluntarily building unused capacity and it is as simple as that. 
Opposition Member 
: That’s nonsense. 
Hon HARRY DUYNHOVEN 
: It is not nonsense; it is a basic rule of economics. If we go over to Victoria University Economics 101 will tell us that. 
Another reason which Mr Prebble conveniently forgets is that we have a large number of thermal stations in New Zealand and very simply thermal stations cannot be very quickly turned on and off. I have one in my electorate which I am very familiar with. It is an older station and takes some time to bring it up to load. Therefore having reserve capacity able to be switched in relatively quickly is a very good solution in the interim. Mr Heatley talked about the absurdity of doing that. Well I do not think it is absurd and I do not think the people of New Zealand do either—particularly if it is a choice between having some higher-priced unused capacity available for peak times or having various areas of the country with the power out because that is the choice. 
Phil Heatley 
: How much of that did you use in the last little while? 
Hon HARRY DUYNHOVEN 
: As I explained to the member that in turn is to avoid having to turn thermal stations on and off at a time when we want to be using as much of our water—and we have an excess of water at the moment—as possible. Our big problem has been with the storms we have had. The high voltage direct current link across from the South Island to the North Island has had a lot of salt contamination and it cannot run at very high load factors when the dielectric is reduced by the fact that salt is on the insulators. That is a fundamental physics issue. 
With regard to the private generators which Mr Heatley said were numerous there are actually four main generators in New Zealand and three of those are State-owned. As I said they are in a competitive environment which was set up by Mr Bradford. The member could dial back through the  
Hansard 
 record if he wishes and look at my speeches as associate energy spokesman at the time and he will see that not only I but even very dedicated and active members of the National Party opposed that move. If he looks at my speeches in  
Hansard 
 I have quoted from one of those members who was very well respected in the electricity industry. He said that what was being done then would be a disaster for New Zealand. He has been proven right and that is the reason this bill is required now. 
I think it is probably true to say that once we have scrambled an egg it is very difficult to unscramble it. This bill is an attempt to make the market work in a way that provides that even though some of the main generators are State-owned those generators will operate in a competitive market. That is what the power pricing model is and we should not ignore economic reality. Perhaps the National Party is suggesting that we should somehow nationalise Contact Energy; I do not think those members would want to suggest that for a moment. So this bill is a means of getting a positive result out of what was a pretty resounding mess that was left and over the last 4 years the Minister has tried very hard to make the electricity industry act responsibly in the interests of the country. I believe that through this mechanism we will get to see it. 
GERRY BROWNLEE (Deputy Leader—National) 
: 
 That was a speech from a Minister who does not have a clue what he is doing. That was a speech on behalf of a Minister who does not have a clue what he is doing either. Apparently we cannot unscramble an egg. Well that might be true but let us be very clear that in the 4 years the current arrangements have been in place Labour has been in Government. Right through the whole change process Labour has been there. Right now whether or not those members want to admit it more of the electricity industry is in direct Government control than was ever the case throughout the years of the 1990s. 
Government Member 
: Not true. 
GERRY BROWNLEE 
: That is absolutely the truth because what has happened is the big generators have become the big retailers. The Government has stood by and let them swallow up all the small organisations around the country that were there to represent the best interests of their consumers and to participate very directly in the market. We have to ask ourselves—I would have asked myself this if I were the Minister—how we can have competition when generation capacity is balanced with retail demand. How can we get competition in that sort of environment? 
There is no incentive for any of the State generators to provide low-cost electricity because they have captive consumers. They just quietly sit there and jack up the price as much as they possibly can and the Minister says that he cannot do much about it. He will form a committee and call it a commission and he will see what happens. I tell the Minister that nothing will happen as a result of this bill passing. The situation with regard to the security of supply of electricity in New Zealand will continue to worsen as long as the Labour Government chooses to put its head in the sand. 
This country has not had the investment in electricity infrastructure that it should have had during these years of a growing economy. The reason is simple: nobody will stick up his or her hand on a very big project worth hundreds of millions of dollars while the Resource Management Act is acting as a block to that happening. We know that right now if one of the Ministers was prepared to do what is sensible and give the go-ahead for the Dobson project security of supply in the top half of the North Island could be assured. No the Government has no interest in that. So now we have the situation whereby South Island residents have been told by Transpower that it can no longer guarantee security of supply even if enough electricity is being generated because there is too much demand for the end product. 
This Electricity Commission will comprise a group of interested people who will sit around writing reports and making recommendations to the Government. It cannot possibly do anything to hasten the development of greater electricity infrastructure in this country. All the talk about the work it might do to try to reduce demand simply ignores the fact that this country wants to live well wants a growing economy and wants people to have the benefit of living in supposedly the First World. I cannot see how we will achieve any of that if a group of Ministers are simply going to abdicate their responsibility to some bureaucracy. 
The Minister is sitting there shaking his head and saying that they will not do that. I ask the Minister why we are passing the bill. Why are we setting up this thing? Worse how much will it cost consumers? The purpose apparently is to improve the security of supply of electricity. The only thing this Government has done is to preside over racing electricity prices and that will continue. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 Firstly I want to acknowledge that the Minister made some very good points in his contribution as did Gerry Brownlee. When it comes to electricity this country is in an absolute mess. National knew that just before the 1999 election. I received panicked phone calls from Max Bradford. When he put through the 1998 reforms he did not listen to the advice of New Zealand First about putting through the appropriate amount of regulation. He did not regulate the lines for a start but he wanted to do so in 1999. New Zealand First though could not reach an agreement with National just before that election to tidy up the electricity industry. 
When Labour came to power it made an attempt to rectify the situation with the 2000 bill or whatever it was but I say with due respect to the Minister that it put the focus on making the market work as against getting the right outcomes. Right now electricity as it relates to the general public is in a mess. Prices are escalating weekly. 
Stephen Franks 
: You voted for it. 
PETER BROWN 
: We have not voted for this bill nor did we vote for the bill before it. 
Stephen Franks 
: You voted for the bill before. 
PETER BROWN 
: I tell Mr Franks that we did not vote for the bill before. He should check  
Hansard 
. We voted for this bill to go to the select— 
Stephen Franks 
: In 1998. 
PETER BROWN 
: In 1998 we did. 
Hon Richard Prebble 
: That’s when the egg was broken. 
PETER BROWN 
: Can I take questions from these guys? 
Hon Ruth Dyson 
: Why did you vote for Max Bradford’s bill? 
PETER BROWN 
: There was a clause in Max Bradford’s bill that allowed for regulation but when it came to it he did not implement that. There was quite a discussion behind the scenes about why he did not. But in 1999 he wanted to do exactly that; that is the fact of the matter. 
From the public’s point of view electricity prices are escalating weekly if not daily. The supply is threatened—or appears to be threatened; is perceived to be threatened. Cheap gas is running low and that will affect the price even more. 
New Zealand First members asked themselves three very simple questions: firstly will this bill help to guarantee security of supply? It goes a little way to doing that by giving the regulators some power and some teeth. 
Gerry Brownlee 
: How does it do that? 
PETER BROWN 
: It gives the Electricity Commission enough power to monitor the whole thing with a degree of independence. We have to be fair—the commission has an independent look about it. The bill goes some way to giving that independence. The second question we asked ourselves was whether the bill would provide fair and reasonable prices. It goes a teeny-weeny little way towards doing that because it brings in the 30c per day maximum lines rate. That is a reasonable little thing for low consumers of electricity. I say to Mr Brownlee that maybe he should read the bill—he will see that in it. 
But does the bill encourage investment into the industry— 
Gerry Brownlee 
: You don’t need a bill to do that. They could do that tomorrow if they wanted. 
PETER BROWN 
: I am not denying that to the member but that provision is in the bill and it does assist. The third question— 
Hon Ruth Dyson 
: Could you repeat that? I didn’t hear because he was talking. 
PETER BROWN 
: I said that the bill does provide for the 30c per day maximum lines rate for low users of electricity. That goes some way to reducing prices and New Zealand First is quite encouraged by that. 
The third question we asked ourselves was whether this bill would encourage investment into the industry to ensure ever-increasing capacity. I do not know how it will do that because I do not think it does. It makes a token gesture by allowing lines companies to increase generation capacity from 25 megawatts to 50 megawatts and makes a good argument for opening the door again so that lines companies can come in and become generators. I know the National Party wants to allow that. New Zealand First is not necessarily convinced that that is the way to go but we believe the token provided for in this bill is not good enough. 
In New Zealand we provide electricity to the amount on average of around 8000 megawatts per year and we use every megawatt. We use everything. In 1998 we had a surplus that we could sell. If we can produce something and sell it all effectively we have a very limited market—if a market at all. 
Gerry Brownlee 
: You can’t store the stuff. 
PETER BROWN 
: We cannot store it no. We sell it all. If anybody who produces electricity sells it all there is no market to put pressure on prices. 
STEPHEN FRANKS (ACT) 
: 
 I can see the enthusiasm among Government members for my speech. It is very interesting to go to a bill and see what is basically a 1950s sort of Stalinist regulatory prescription. This is the Minister who is going to make electricity by making rules. This Minister says that reserve energy is created by specifying the conditions of securing and using that energy and by specifying the circumstances and terms including volume and price by which that energy must or may be offered on the wholesale market. 
I ask the Minister why the Government lost its nerve to use the sort of mechanism that would have rewarded every consumer. Why does nothing in the bill enable householders who can save when we are short to get the benefit of their saving? If they will not save why does the bill not ensure that the price will give them a signal that power is suddenly more valuable when the rain is short the wind has stopped blowing and we cannot use coal because the Government has signed up to the Kyoto Protocol so that all the coal will be burned in China and India instead? 
 What is it about the market that has failed? We heard the words “market failure” tossed around but what we have is the absolutely predictable outcome of a Government looking as if it is about to panic. 
What investor is going to build any new capacity when the Government is holding a big stick out and saying: “If we don’t like the price you charge and it’s awkward and politically embarrassing we will regulate.”? Why would new capacity go in in those circumstances? 
So what we had last year was a bluff being called. When the market said: “We won’t build new capacity in these circumstances.” the Minister could then turn round and say that he had to go ahead and pay someone to build it. Of course the market is not going to agree when it has a Government that came in in 1999 saying: “We believe in looking active.”—“We as politicians will go out there and earn votes by looking as if we will thump people around who have lots of money.”; “We will thump them first with an increased tax rate and then we will thump them with regulations that tell them what price they can buy at what price they sell at how much and who they supply to.”—together with all the conditions that are now set out in clause 10 and the pages and pages of rules that the Minister can now make. Because it is patently obvious to anyone who reads those rules that it will be politically imperative to respond the next time there is any kind of crisis. 
The Minister will not be able to resist when the major electricity users group the telecommunications users association equivalent comes and says: “We don’t want to pay the real cost of reserve generation for our industries. We would much rather that you took that from the taxpayer or disguised it in a levy or seized it from consumers because you’ve got the power to do it. So please do it Minister.” How will the Minister withstand that kind of pressure? Putting that kind of regime into legislation is an absolute recipe for being able to say—for the next 25 years—that the market does not work because there will not be volunteers in a market whose building is unconstrained and when it is quite plain the Minister can stipulate its rate of return at will. 
This is that self-fulfilling prophecy: the Minister will get up and say: “I fear market failure so I’ll give myself powers to deal with market failure.” and of course there will be market failure. But it is not failure; it is simple market prudence. It is exactly what any investor would do. It is exactly what the Electricity Commissioner said when the Government came in and guaranteed the Meridian investment. The commissioner asked why people would go ahead without the benefit of a guarantee. Who will want to compete when the Government can be panicked into stepping in every time there is a complaint? 
In Part 1 we now have pages and pages of powers—or what look like powers—given to a Minister that in fact will end up as fetters. They will end up as irresistible demands on the Minister because the Minister will not be able to stand there in front of us on the  
Holmes 
 show saying: “Yes I did have the power. No I chose not to use it because I thought that using it would frighten people from investing in generation.” No this Minister will not say that. The Minister will instead pull the levers and try to look as if he is generating electricity by his rules and what we will have instead is a return to the New Zealand of the Muldoon days—the New Zealand where Mr Muldoon managed to fend it off for quite a long while. 
Hon ROGER SOWRY (National) 
: 
 This is a major part of the bill and one we are very very opposed to. I start by saying to the Minister in the chair the Hon Harry Duynhoven that his help on Part 1 in the Commerce Committee does need to be acknowledged and I thank him for that help. If I can give a bit of history it was during the latter stage of the bill—in fact after all the submissions had been heard—that Transpower toddled around the back of the bike shed and went to see the Minister Pete Hodgson. Transpower said that it must be excluded from any legal action being able to be taken by a lines company or a generator that thought Transpower was at fault—if there had been a breakdown in supply or something like that and someone wanted to take legal action Transpower wanted immunity from legal action. That was not in the bill so I thank the Hon Harry Duynhoven for agreeing with me that interested parties should at least be consulted on this. And they were. A number of parties came to the select committee and they were outraged by this. Meridian Energy as a generator and Orion as a lines company are two that stick out in my mind. They were just outraged that they would have no legal remedy against Transpower if there was a fault that was due to Transpower’s negligence. 
There are very few times that I am disappointed in the advice from officials but this was one of them. The officials sat in front of the select committee and to paraphrase it basically said that this is what is done around the rest of the world there are precedents for this; so be it. When we looked at those precedents we saw that it was not done. In fact other State-owned transmission companies do have the right to be sued—albeit it in a narrow range. We now have those clauses back in the bill with a much narrower range around them. 
So I start this speech by being positive and saying to Harry Duynhoven: “Thanks for your help in getting that part of the bill right.” because I think we have got those clauses right in this part. What worries me about this part though is the levy on industry participants. I say to the Minister that we are tabling an amendment to this and I am looking forward to other parties’ support on the amendment. We are not being radical. United Future members do not need to die in a ditch just worrying about whether they will or will not support the Government—again. All we are saying is that before the levy is set we believe that the Electricity Commission should have to consult all affected parties. That is fair enough. 
At the moment if one goes to the Electricity Commission’s website right now—and Mr Copeland can shake his hand; he does not think it is fair—one will see the levy that it is putting on lines companies. There are now lines companies planning legal action against the commission. They were not consulted. No one asked them. They were levied. “Bang. This is what you pay. That’s it. End of story. There’s your cost. Pay up.” That is a cost that goes straight through to consumers. I was with my lines company Electra this morning and they are furious about this. They are involved in legal action using consumers’ money to fight this proposal. It will be interesting to see how the Labour members vote; whether they think that the lines companies should be consulted. That is all! We are not asking that they have to agree because I do not think I could get people to agree to that. So it is a soft amendment saying that at least the commission should have to consult. 
I hope that the Committee will see fit to put this amendment into the bill so we do not end up with the commission having the power to tax with no accountability at all. The Minister in the chair the Hon Harry Duynhoven is checking to see whether the amendment is soft and I am pleased he is. I hope he takes a call. In fact I hope the Government supports the amendment because I do not think it is onerous on a Government at all to ask for consultation. For members who are following the debate it is an amendment to add new paragraph (d) to subsection (1A) of section 172ZC inserted by clause 16 which talks about the way the levy is prescribed. I am saying that we should add that any levy must be determined by the commission after full consultation with all the relevant industry groups including consumers. 
The reason I put in “including consumers” and I do not expect them to go out there and consult every household is that I have had Grey Power members in my office. They are very worried about the cost of the commission being levied on the lines companies and the lines companies saying: “Oh well that’s a tax.” and then whacking it straight through to elderly consumers. They are saying there is no consultation in the bill. All I am saying by adding new subclause (d) is that any levy must be determined by the commission after full consultation with all the relevant industry groups including consumers. 
 I have to say that I do not think we could get a softer amendment than that. It has no financial implications. I do not think the Government can go out there and veto it because it is only consultation. Once it has consulted it can still see it but at least it can give people a chance to have a say. The Minister must acknowledge this. Consumers are really wound up. They do not get a chance to have a say any more. They get a letter from Contact Energy from their lines company saying: “Your prices are going up.” Contact blames the lines companies. They end up having to go to the Commerce Commission to get it sorted out and they find out it was actually Contact that put the prices up all along. Genesis Energy whacked its prices up the other day. 
Consumers just get this continual barrage of price increases. We can blame all sorts of previous structures but we have a structure that the Minister is trying to make better. I do not think this bill does it but I think that by putting in this amendment at least we are giving people a say. We will be moving some further amendments as Grey Power in particular is concerned to have a say on some of the industry committees and I think one appointment does not actually matter a big deal. I think that is a good point to have. We will be looking to do that. We will be looking to increase the lines companies’ ability to generate. 
But I particularly want to make this point to Harry Duynhoven given that he helped the committee dig the Government out of a hole on the issue of Transpower not being able to be sued when the fault was there. Given that he was reasonable about that when the Minister clearly was captured by Transpower officials—the Minister did not even bother to come to the committee to explain it to us but Mr Duynhoven was very generous in his willingness to work with the committee to get some better clauses in this part of the bill—my appeal to Mr Duynhoven is to support the addition of new paragraph (d) to subsection (1A) of section 172ZC inserted by clause 16. This is a small change to enable us to go back to our lines companies and say that before the levy is placed on them they will at least be consulted so that they do not find out about it as lines companies did on this one by logging on to the web and finding out that this is what their levy will be so pass it on. We are not talking about a small amount of money. It is millions of dollars is it not Minister? 
Hon Harry Duynhoven 
: Yes it is. 
Hon ROGER SOWRY 
: It is and he nods; generously so. It is. It is millions of dollars. So I think that amendment will go a long way and I hope the Minister can see fit to support this. I hope that others in the Committee will support it too. I know the Greens will because they are always worried about low-income earners and Grey Power. I do not think they will want to say to Grey Power: “Actually we just did not favour any consultation.” 
I think this is a small move. It will not solve the Act. It does not alter my view of the bill at all in terms of supporting it but it is a small move that says to the Government that if it is going to ram this through as it is at least put a bit of consultation in there for people who are most at risk. And those who are most at risk in electricity terms are consumers who end up bearing all of the cost. Lines companies do not bear any of this as none of the fees and none of the levies stay with them. They do not take it off their bottom line; it all gets passed through. 
That is why Electra and two other lines companies are looking at legal action. What a waste of money! What a waste of the money that those lines companies will spend. Judy Keall who was a member of this House is on the Electra trust board and she is looking at legal action to fight her Government because of the levy and the way it has been put on. What sort of nonsense is that? So when the Labour members who have gone on to the trust board are fighting their own Government that tells us that all is not right in the state of Rome or the state of Levin or wherever one happens to be at the present time. 
So I am saying to the Minister that I hope he can say a few words on this and explain to the Committee that he is happy to support it because that will go a long way to facilitating this debate. 
Hon HARRY DUYNHOVEN (Associate Minister of Energy) 
: 
 I accept the member’s point that there should be some consultation involved in this. Although he says it is millions of dollars he should remember that that is a small fraction of a percent on power bills and it is to provide the reserve capacity needed that is not provided because of the way the market works. I say to the member that his amendment would be a good one if it were not already covered. If he checks section 172ZCA in clause 16A he will find that the budget set-up includes consultation with the parties involved. 
I will make a quick comment in relation to Mr Brownlee’s earlier comments about the Dobson project. The Dobson project just happens to be in the South Island. Mr Brownlee said that it could cure the supply problem in the northern part of the North Island. 
Gerry Brownlee 
: I raise a point of order Madam Chairperson. I appreciate the Minister’s response but so that we be clear I said it was about security of supply in the northern part of the South Island. 
Hon HARRY DUYNHOVEN 
: I thank Mr Brownlee. I misheard him and I apologise for that. Mr Brownlee also said there was a responsibility on the part of the Labour Government for generators gobbling up retailers. In fact all purchases of retail businesses by generators and that includes the State-owned enterprises took place in 1998 and 1999. All of them were completed by 1 April 1999 except in one instance. That was On energy in 2001 which was taken over by Genesis and Meridian because On energy had failed to take out hedge contracts before the 2001 winter. One of the reasons that this legislation is being put in place now is of course as a result of the shortages that occurred at that time and the way in which the market did not cope and did not provide for security of supply. The electricity market is a technical complex and dynamic being to the extent that we could never include in primary legislation everything needed to ensure that it operates in response to every situation and when we get into regulation and rules Ministers have to be involved. This cannot be totally delegated independently. 
I thought Mr Franks’ simple and dogmatic arguments that the Government was in panic and we should have a hands-off approach were interesting. That failed us years ago. Intervention is necessary at times and that is what this is about. It is to ensure that where necessary the right amount of signal is given. The Electricity Commission has a large number of features. It does not simply regulate. It does not simply make decisions. It is not only about recommendations but also about regulations and rules and three or four recommendations regulations and rules have already been promoted. It is about initiatives. It is about new legal initiatives that might be required. It gives effect to the Government’s policies on electricity. It is a much broader mandate than a simple regulatory body as has been portrayed. It makes contracts for reserve energy to ensure security of supply. It will regulate and coordinate to ensure security of supply to ensure not only that we have the capability in the system but also that fuel stocks are available that we have coal stockpiles where needed etc. It is very simple to write it off and say that it is a panic reaction. By the way it is very hard to argue that this is a panic reaction on the one hand then say on the other hand that for 5 years the Government sat on its hands. Clearly that is not the case. 
Hon Roger Sowry 
: Are you coming back to the amendment? 
Hon HARRY DUYNHOVEN 
: Mr Roger Sowry says that the amendment does not cover consumer groups. 
Hon Roger Sowry 
: No it doesn’t cover consumer groups. 
Hon HARRY DUYNHOVEN 
: I am not sure that the member is correct in that because the advice I have had from the officials is that in the setting of budgets groups have to be consulted. The suppliers and participants—and presumably therefore their voice from the consumer groups—have to be consulted. After all as the member has just pointed out many of them have trusts that are involved. Surely they represent the consumers in the area. I know that in my area they certainly do until events that are happening right now that are quite separate from this bill. 
Hon Roger Sowry 
: So will Grey Power be consulted? 
Hon HARRY DUYNHOVEN 
: I am not sure of the answer to that but I imagine that it will have very strong representation particularly in Electra. As the member said I am sure that with Judy Keall there Grey Power will have very strong representation. But one of the features of the system we have now— 
Darren Hughes 
: She’s a former member who got elected to that trust. There’s a former member from our area who will never get elected to it. 
Hon HARRY DUYNHOVEN 
: Can I say in response to the interjection that Judy Keall was a very good and assiduous member of Parliament and I am sure that the views of Grey Power will be strongly represented in that particular electricity trust. 
Hon RICHARD PREBBLE (ACT) 
: 
 Let me turn first to the amendment moved by Mr Sowry and the response from the Minister in the chair Harry Duynhoven. I say to the Minister that in the way I am following it I am not sure he is correct. The clause that requires consultation—and there is such a clause—states: “The Commission must before submitting a request to the Minister seeking an appropriation of public money for the following year or any change in the appropriation in the current year consult with those industry participants who are liable to pay a levy …”. So that provision certainly is there. But when we look at the levy is there a requirement to consult? No there is not. It appears to me that Mr Sowry’s amendment may be needed. I am reluctantly willing to support Mr Sowry’s amendment because I would not want anyone to think that the ACT party thinks that once consultation has occurred this levy is a good thing. No it is not. Also to say it is only a few cents on the power bill is to avoid the reality of what this levy is for. 
One reason the levy is there is for “endeavouring to ensure the security of supply”. That could be a bill of hundreds of millions of dollars. Indeed I think the levy will go up and up because this bill makes it very difficult for private sector generators to enter the market. It makes it less likely that they will do so. It will mean that the commission will have to build more and more of our generation. How do we know that? Genesis has already said that it will not build without a Government guarantee. If a State-owned enterprise backed by the deep pockets of Treasury is not prepared to build generation then why on earth would a private sector investor? I believe we will see the Government finding more and more requests to build new generation coming either from its own State-owned enterprises meeting by a guarantee or from the commission. 
The Minister has not responded to the points made by Mr Franks. I need to make this point to him: the market failure he is referring to and that has occurred in electricity is the result not of failures of the market but of failures of regulation. One of them is quite simple. We all know that if a large amount of electricity in New Zealand is consumed by households and if they are all exempt every time we have a power shortage and it all falls on the private sector then we do not have a market. If it were possible for consumers to participate in the market—and we participate by deciding to switch off and have cold showers for a while—and benefit financially from that or if those who wish to spend and have electricity at a time of shortage pay more then we have a true market. Would that work? Of course it would work. 
The reason we have not had it is that successive Governments in New Zealand have not been prepared to allow consumers and electricity suppliers to enter into agreements like that. If we want to have an agreement with our electricity supplier that guarantees one’s electricity supply even in times of shortage then we ought to pay more for it—of course we should. That requires some sort of reserve being put aside. But if people are prepared to go through an electricity shortage with less electricity—and I believe there are large numbers of New Zealanders who would—then they ought to be able to opt for a contract that allows that. In New Zealand only the commercial sector has been allowed to have those sorts of markets. The market failure the Minister refers to is a failure by the Government to believe in the market. 
I draw to the attention of the Committee to those members who may not have read this the number of regulations the Government is proposing here. I think we are unfair to describe this as “Muldoonist”. I cannot recall a bill that had these sorts of regulations. As far as I can see the Minister will be able to regulate virtually anything. This is Stalinist. I draw the Minister’s attention to clause 9 which contains the provisions relating to regulations. In the wholesale market we are able to have electricity including pricing—I guess Muldoon went in for pricing—clearing settling and reconciling market transactions; scheduling and dispatching electricity; disclosure of market information; disclosure of information on hedge and contract volumes and prices; the promotion of hedge including futures markets; minimum prudential standards for market participation; and minimum standards of market conduct. That is just for wholesaling. 
In generating there will be electricity generators to hold and provide for reserve fuels including water—we are going to regulate that; electricity generators to offer by tender a minimum volume of contracts; electricity generators to post buy and sell prices for hedge. We are to have disclosure of information on hydro lake levels and inflows thermal fuel stockpiles supply contracts for thermal fuels capacity to generate disclosure of offers into the spot market and disclosure of information on spill. Then on transmission there will be quality and security standards for transmission systems and reasonable terms and conditions on which Transpower must enable distribution lines. It goes on to expansions replacements or upgrades and so on for pages and pages. 
This industry has not been nationalised; it has been regulated. It will be totally regulated. Will new participants want to enter into this industry? I say to the Minister that the market risk of entering into generation now will be enormous. That is why the question of the levy is important. In effect we are nationalising the building of new generation. That will be produced by levies. I realise there is consultation in some areas but I do not think it covers the levy. If we do not accept Mr Sowry’s amendment we will have a situation whereby a substantial amount of tax in New Zealand will come through our power bills. It may be the result of a commission that goes power mad and decides to start building more generation than we need. Of course that was the situation in the 1950s 1960s and 1970s in New Zealand and I think it could well occur again. We could end up with a gold-plated electricity system where there is no proper debate or discussion as to whether the reserve generation is needed. 
A consultation clause of course is no substitute for the disciplines of a market but if we are not going to have a market then we should at least enable consultation. There ought to be consultation by those who will be affected which will be the lines companies. I am not sure whether Grey Power could make a great contribution to this matter but I most certainly believe we ought to ensure that a consultation clause is included. For that reason even though I do not want to have this interpreted as the ACT party supporting a levy I recommend that we vote for it. I ask the Minister to consult his officials. It does appear to me that consultation is only about a request for public money. Is he saying when we look at the definitions that a levy meets that? In looking at the definitions clauses of the bill I cannot see that. It may be that he can direct me to some other clause but I think that his officials are being disingenuous when they say that yes there is some consultation. Yes there is but is the consultation over the levy each year; if so where is it? I cannot see it in the bill. If I cannot see it then I bet members that when this bill has gone through the commission will not be able to see it either. 
The commission will not want to consult over the levy. As the bill states the commission can think up any figure it likes which could be hundreds of millions of dollars. Personally I think that is a tax one that if it went through this House we would debate. We would call for consultation and we would have a great deal of discussion on the matter. We are taking a power of taxation and giving it to this quango and then the quango I believe when it comes to the levy itself will not have to consult. 
DAVE HEREORA (Labour) 
: 
 I move  
That the question be now put 
. 
PHIL HEATLEY (National—Whangarei) 
: 
 I would like to continue this debate particularly along the lines on the issue of consultation. Members may be interested to know that although we have been debating one particular levy this Electricity Commission being set up under this bill has the potential to put in place seven different levies that will ultimately hit consumers and whether those consumers are the levy payers or the taxpayers the reality is that they are the mums dads and businesses in this country. 
The Electricity Commission can have a systems operation levy a market operation levy a supply security levy if it wishes—and I am sure it will—an electricity efficiency levy and if that is not enough it can have a consumer protection levy. One has to ask how a levy protects the consumer. I would have thought it should have a levy protection levy with all those coming down. The sixth type of levy is an electricity transmission levy. There are six different levies that this Electricity Commission can put in place in order to tax consumers because ultimately they will pay. But last of all the commission can levy what is known as “other activities” and that can be as broad as the imagination will allow. 
I have an amendment put forward by Roger Sowry in relation to the Whirinaki issue which I would like to raise with members. The amendment adds to clause 19 new subclause (5) which states: “The Minister must consult with all other generators before determining the terms of the Whirinaki contract.” Here we have the absurdity. Clause 19 informs us that the Minister may direct the commission to enter a contract relating to the Whirinaki power station. Here is a power station—a diesel generator by the way—in the Hawke’s Bay commissioned last year operating on diesel and not as a State-owned enterprise but in all senses basically subject to the Electricity Commission which is supposed to provide security of supply. 
What is happening is that the Electricity Commission is purchasing reserve power. Whirinaki will be sitting there on a retainer which will cost the consumer and it will kick in when there is a high electricity demand where supply does not meet demand. The Minister is prepared to legislate a reserve generator to meet the demand when supply is low yet he is not prepared to legislate for or on any policy platform support for those in the private sector or even for State-owned enterprises to go into the construction of generation plants themselves. 
The Minister will not promote in any way coal generators because he is against coal. He will not promote in any way geothermal generators. We saw this in recent times when the extension of the geothermal generation at Ngawha in the far north was literally put on the back-burner by this Government. The Minister will not promote in any way other generators around the country. In fact as the Hon Richard Prebble mentioned the E3P project in Huntly was not going to get off the ground at all unless it was underwritten because that generator had no confidence whatsoever that it would be a runner with current Government policy and legislation. 
GEORGINA BEYER (Labour—Wairarapa) 
: 
 I move  
That the question be now put 
. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 I welcome the opportunity to comment on Roger Sowry’s two amendments. I think he has put his finger right on the button. I am surprised—actually I am a bit embarrassed—that we did not pick these things up at the select committee. They are very obvious things and I compliment the member on bringing them up. 
With due respect to the Minister the clause that he referred to does not cover the issue and these two amendments should be given serious consideration by the Government. They are fairly innocuous really and simply state that there is an obligation to consult and we will support them wholeheartedly. The Hon Richard Prebble either wittingly or unwittingly illustrated quite clearly how badly the market is failing in this country in terms of electricity. I say to members of the Committee that it is not acceptable to the average New Zealander living in the 21st century to have to pay extra to have access to their power all the time. 
Hon Richard Prebble 
: They do it elsewhere. 
PETER BROWN 
: They might do it elsewhere but that is moving back to the 19th century. That member should get into the 21st century. We want power at the flick of a switch at reasonable prices and that is the problem that MPs must face up to. The question that New Zealand First has asked is whether this bill does that. The answer unfortunately is no it will not do it. 
Hon Richard Prebble 
: Well you’re right about that. 
PETER BROWN 
: I am right about that and I am right about the other one. That member should ask any members of the public whether they want electricity any time of day at a reasonable price. 
Hon Richard Prebble 
: Win Lotto! 
PETER BROWN 
: He is comparing wanting electricity with winning Lotto. I would suggest to Mr Prebble that average New Zealanders see the winning of Lotto as something that is extraordinary but when they go home at night on a cold day they want to be able to put the fire on and the lights on. I know that the average New Zealander is accommodating and would say: “Well I don’t want all the lights on. I’ll turn them off in this room if I’m only using that room.” People do not want all their lights all at the same time but they do want access to electricity 24 hours a day 7 days a week 365 days a year. 
I believe that people want that electricity delivered at reasonable prices and that is the challenge that we in Parliament must face up to. That is the issue that the public wants us to address. Will this bill do it? New Zealand First says that it will not. Will a competitive market deliver reasonable prices to the average consumer to the business consumer and to all consumers? The answer is that if there is a working market then it will but we do not have a market that is working to the fullest extent. Can we get there? This bill will not help us get there. In the view of New Zealand First it will not encourage investment in sufficient quantity to develop capacity supply and generation. 
We need to face up to the fact that we have billions of tons of coal in this country and use it at a reasonable price to generate electricity. The amount of carbon dioxide that would go into the air or wherever is negligible on a worldwide scale. We sell it to India and to China. They burn it with impunity and we restrict it here. I say to the Minister in the chair Mr Duynhoven that he should think again about the use of coal. Wind will go so far—we can get so much wind power relatively cheaply—but to get the full amount of electricity we need will be very very costly. Cheap gas is running out. We know we have to find an alternative and it is sitting there. We have enough coal to supply electricity to this country for hundreds of years but we prohibit its use for ideological reasons. I say that is daft. New Zealand is a relatively small country with a very small population on a world scale. We should be using coal to generate electricity at reasonable prices. 
Hon Richard Prebble 
: The member is right again. 
PETER BROWN 
: I am right on about five things. 
Gordon Copeland 
: I think so too. 
PETER BROWN 
: United Future agrees. I think I might have a re-think now! I say seriously to the Minister that this is not a joke. We are using electricity on an ever-increasing basis. 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be put. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Motion agreed to. 
The question was put that the following amendment in the name of the Hon Roger Sowry be agreed to: 
to amend section 172ZC(1A) of the principal Act by adding the following new paragraph: 
(d)any levy must only be determined by the Commission after full consultation with all the relevant industry groups including consumers. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Noes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon Roger Sowry to clause 19 be agreed to: 
to amend clause 19 by adding the following new subclause: 
(5)The Minister must consult with all other generators before determining the terms of the Whirinaki contract. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Noes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 243 in the name of the Hon Pete Hodgson be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Amendments agreed to. 
The question was put that Part 1 as amended be agreed to. 
A party vote was called for on the question  
That Part 1 as amended be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Part 1 as amended agreed to. 
Part 2 Amendments to Electricity Industry Reform Act 1998 
Hon ROGER SOWRY (National) 
: 
 We are now into Part 2 of the bill and I guess the pattern of the debate has been set where we will see the Greens voting with the Government on this bill which will put up the price of electricity substantially. They are doing it I guess for conservation reasons. They think that if people have to pay more they are more likely to conserve. We see United Future voting with the Government to put the price of electricity up. I am not quite sure what their reasons are. United Future seems to take an increasing approach of voting against the business sector and the business community and this is probably part of that approach. It is also their little game that goes on with the Greens as to who will be in bed with the Labour Party on any particular day. 
That aside we are now into Part 2. In this part we have an amendment to delete paragraph (a) of clause 22. Part 2 is a very important part because the constraint in the electricity industry at the moment is one of availability of power. We do not have the fuel or the generation that we need in this country. We have five major generators of which three are State-owned and two are privately owned. It is a pretty cosy little club to be honest. 
A whole lot of other potential generators are lines companies. They are sitting out there with an enormous amount of capital ready to invest back into the industry. This bill increases the amount those companies can generate up to a maximum of 50 megawatts or 20 percent of the total demand for their lines. We say that is just not enough. 
The two major lines companies in New Zealand are Vector which is Auckland-based and supplies Auckland and Wellington and Powerco which is headquartered in New Plymouth and supplies the New Plymouth and Tauranga regions right through down to Wairarapa—as the Minister indicated. They are the two largest lines companies in the country. They came to the Commerce Committee and said: “We want to get into generation. We want to build some generation facility but we won’t do it if you put these artificial limits on.” 
That is what New Zealand First members were talking about when they said that we needed some more generation. We might differ with them on how much generation is needed but National’s view is that given that the Commerce Commission now controls the pricing of the lines business through its consumer price index minus X formula lines companies are highly regulated and given that they cannot cross-subsidise—which is the purpose of the Commerce Commission regulations—then why would one restrict them? 
The Government has fallen between a couple of stools. Pete Hodgson says: “Well I don’t want them to generate but I’ll let them do so much. They can do a little bit of generation so that ideologically I’m not being totally opposed to them generating.” Then the Greens toddled into Mr Hodgson’s office and said: “We think that the lines companies should be able to generate as much as they like from renewables.” and the Minister said that was OK. 
So a lines company can put up as many windmills as it likes but it cannot put up a coal-fired unit. The Greens nod and say that that is fine except if one is cold and the lights go out. I predict that the Greens will feel the political blast of that in the near future. 
So there is no principle in this at all. I know that New Zealand First can see there is no principle in it because its member said so in the House before. He might not go as far as us but at least he understands the issue. What I would really be interested to see is where United Future members go on this. In effect they have said that the deal has been done behind closed doors and they will not listen. But I ask whether they will be prepared at least to look at the fundamental principle. 
A lines company is either generating or it is not. What we have now is lines companies with abundant amounts of money and not knowing what to do with it. Powerco is off to Australia with its money. Because we deny the company here it will invest in Australia. That is smart; really clever. Vector is likely to do the same. That does not seem very smart politics to us. 
However what is even more worrying to me is the small lines companies out there doing all sorts of potty things with their money because they cannot buy or invest in a local generation scheme. For example Electra owns a finance company. Well that is really useful for power consumers. Electra owns Oxford Finance in Levin. I am sure that every power consumer wants to own one of those. Electra also owns an electrician’s business. I suppose one could say that owning an electrician’s business is OK. 
The other day Electra’s chairman said to me that it was looking at investing in a winery. I said: “What?”. But there is more. It has just put up its prices. The Government has Electra on a consumer price index minus X formula which allows it to put up its prices this year so it has put them up to meet the formula. So consumers are paying more money and the lines companies want to invest the money in generation but they are not allowed to except if it is wind. Well it does not blow very much on the Kapiti coast. Electra’s chairman said: “What the hell we’ll buy a winery.” I hope that he was pulling my leg but I do not think he was. So that is the worry with the nonsense of this. It is just ludicrous; absolutely ridiculous. 
I say to the Minister—and this is genuine—that he has gone out there and staked his reputation on getting new explorers into the country and good on him. We have two rigs out there at the moment which is the most we have had for a zillion years and all of that. God help us if they find anything! If they find something and want to bring it on shore in Canterbury the major investor to help them would be the lines company and it will not be allowed to. I bet that if they find something we will be back in this House changing the rules because that is what we will have to do. 
Hon Harry Duynhoven 
: It’s a good thing they’re drilling in the Wairarapa. 
Hon ROGER SOWRY 
: I do not know why and I am not sure how that helps because Powerco still will not be able to invest in it. 
We are locking out major chunks of potential capital for no good reason. Why would the Government vote to say that the power companies cannot build a combined-cycle gas turbine plant but can build a windmill? Why would it say that? Who built the last combined-cycle gas power plants? A lines company did. 
Hon Member 
: Genesis. 
Hon ROGER SOWRY 
: No Genesis Power did not build them and the Minister knows that. Genesis is about to build one a little jet engine thing. The one the Minister knows I am talking about which is the Taranaki one—the one he is proud of and beats his chest about and for good reason—is a good plant and he knows that it is. He has been there. He told me that when I was there. It was built by the lines company. Why would we lock them out? Why would we allow windmills to be built but not small coal-fired power stations or combined-cycle turbines? It just does not make sense. So we have an amendment to take out clause 22(a). Let us tell the lines companies to make their business decisions go out there and if it stacks up build it. If it stacks up and they can get resource consents they should build it. 
If the Greens think that the answer is in wind I ask them what happened tonight at 6 o’clock. The Genesis wind farm failed to get consent because it offended Maori values. That is a Resource Management Act issue and I suspect that members will probably come to that in the House tomorrow. It is an issue in itself. The wind farm met all the other criteria but offended Maori values. The proposal was turned down by the Environment Court today. 
So wind power is not that easy to get. It is easier for a lines company to buy a finance company a winery or God knows what next—a Chinese restaurant or something—than to invest in the infrastructure that we really really need in this country. 
GORDON COPELAND (United Future) 
: 
 I shall take a call on Part 2 and speak to exactly the same clause that Roger Sowry has just spoken to—namely clause 22. In some ways I agree with a lot of what he said. However I also thought that at times he wandered off into a mist of hypothetical unreal situations. So let us get down to a little bit of reality about the clause. Firstly when the bill went through its first reading and then to the Commerce Committee the limitations on lines companies for investing in non-renewable generation were amounts of no greater than 25 megawatts or 10 percent of the maximum demand of the lines owned or operated by the person. The bill of course has now been amended to provide for a limitation of the greater of 50 megawatts or 20 percent of the maximum demand of the lines owned or operated by the person—namely a doubling of the situation which every party in the House should be very happy about. Why has that happened? It happened in a rather unusual way. When Meridian Energy decided to pull the plug on Project Aqua we had an urgent debate in the House about that matter. In the course of the speech that I gave on that occasion I asked the Minister the Hon Pete Hodgson why on earth we had those restrictions on lines companies of 25 megawatts or 10 percent. In response he was good enough to say that I had a good point and that he would go to 50 and 20 percent. So on the spot he basically doubled the amount. That was obviously a very very worthwhile move. 
Therefore the question now arises—and this is Roger Sowry’s point—of why we have any restrictions at all. I must say that I have some sympathy with that point of view. I think though that he completely overstated the case in a couple of areas. 
Firstly there is nothing to stop a lines company from building a small coal-fired plant or a small gas-fired plant because those companies can go up to 50 megawatts. Roger Sowry’s was a completely erroneous statement. The second and more important point is as he has just said that the situation is very very simple if a lines company at any point in time does discover gas—and let us hope that they do; I certainly hope that they do because we desperately need more fuel—or indeed if it wants to build a large new coal-fired station which United Future would support 100 percent. Like Peter Brown we believe also that coal is a resource that we should exploit in this country. Recently I gave my support to Mighty River Power’s proposal for example to try to convert the Marsden B power station to coal and I hope that it is successful in its resource consent for that. However the reality right now is that we do not need lines companies to buy up existing plants. There is no point in our just simply reshuffling the pack and swapping the ownership of existing non-renewable generating companies from the present generators to lines companies. 
The urgent need this nation has right now is for brand new generation. We need to have brand new generation and we need it quickly. We need it to utilise any fuel that is available frankly. If the day comes when a lines company does want to build above the 50 megawatts or 20 percent level in coal or in gas then I have the assurance of the Hon Pete Hodgson who has given me his word which I am recording in  
Hansard 
 tonight that in those circumstances the company simply has to come to him and we will very quickly whip a bill through the House to permit that to happen. Obviously if we do that we will have the support of every party here so it should not be a problem. I point out to Roger Sowry that the gap between discovering some new gas off the Canterbury Bight for example and actually processing it to generate electricity would in any event be several years long and we would have ample time to whip some legislation through the House to permit that to happen. 
A straw man is being set up here tonight. The goal is to get new generation going and to encourage that. The other example that I gave to Pete Hodgson was that I know Solid Energy will probably go out to tender at some time for a 100 to 150 megawatt coal-fired plant near Westport. 
Hon RICHARD PREBBLE (ACT) 
: 
 I deliberately waited until after the United Future party had spoken to this part because I was interested to learn how a party that claims it is centre-right could support such legislation. Let me say to that party that this is one of the most socialist bills I have seen—and I have been in this House for 26 years. I saw Sir Robert Muldoon’s legislation and I know this is Stalinist centralised command-and-control legislation. Then we found that the United Future party boasted that it had a role in the bill. Yes it has managed to persuade the Government to lift the generation limitation for lines companies from 25 megawatts of power to 50 or from 10 percent of their load to 20 percent. Somehow that is a justification for United Future to vote for the bill. Then the member gave us another extraordinary justification: he said that if somebody does find some gas we will whip a new bill through Parliament. 
Gordon Copeland 
: Why not? 
Hon RICHARD PREBBLE 
: The member asks why not. I ask the member given that that party says it is principled where the principle is behind voting for this legislation and where the principle is—whether economic religious or from any ideology of any nature—that states it is evil for a lines company to generate 51 megawatts of electricity and it is evil for it to generate more than 21 percent of its load. 
I could understand a split between lines companies and generation if the limitation was set at zero. Or if we are to say that lines companies should get into generation why can it not be set at 100 percent? I say to the United Future party that I realise it likes to suck up to the Government and its members like to be able to get up in the Chamber and say that they made a tiddly little change so they are good boys. 
Gordon Copeland 
: More than you can say isn’t it? 
Hon RICHARD PREBBLE 
: The member says it is more than I can say. I say to Mr Copeland that at least one knows the ACT party has a rational point of view. We have a rational point of view and we are asking why if lines companies are to be allowed to get into generation the limitation is set at 50 megawatts? Is there a law that states that generators that generate less than 50 megawatts are efficient? If one listens to Mr Copeland’s own words—which is more than he does—one can hear that he is arguing for a 150-megawatt station to be built by Solid Energy but not by a lines company. Now I ask Mr Copeland what is wrong with that? He cannot give us an answer to that because the United Future party is on the far far left of New Zealand politics. It does believe that the Government and the Minister ought to interfere with the industry in that way. United Future does believe in command and regulation. It is on the left in terms of its views and it ought to be upfront and admit that. United Future ought to be upfront and say that the Government would not be able to introduce this socialist legislation without the support of the United Future party. 
It is no good for the United Future members to come along to the Chamber and say that they made a minor variation to the bill and therefore this socialism is OK. Either one is in favour of the free market and believes in free enterprise—in which case one would vote against the bill—or one does not and is a socialist. I say to Mr Copeland that he is a socialist. He is on that side of the paddock and he ought to be proud of it. He should go out there and tell small-business people that he does not vote in favour of deregulation but that he gets up in Parliament and supports a Stalinist bill. Yes the United Future party does belong with the Labour Party. Mr Dunne has not changed his stripes; he is a socialist. He does believe he knows better than other people and that he can tell investors what they should do. That party believes it knows better than other people and it is telling the lines companies that it is evil for a lines company to generate more than 20 percent of the generation in its area. I do not know what that evil is because Mr Copeland has not got around to telling us what it is. Apparently it is terribly inefficient to generate 51 megawatts but we are told that if gas is found then all Mr Copeland’s principles will go out the window and he will come down to the Chamber and rush new legislation through. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 I want to follow on from where Richard Prebble left off although not perhaps in such a fierce mood. I say to Mr Copeland that he has let New Zealand down by taking pride in doubling the megawatts from 25 to 50 that lines companies are allowed to get involved in generating. He has let New Zealanders down. I wish New Zealand First had known that before today. We did not really know where that figure came from; nobody on the Commerce Committee could tell us that. Now we know there was some sort of little backroom— 
Gordon Copeland 
: I wrote to the select committee and told it about that. 
PETER BROWN 
: I say to him that if he had done nothing but put a representative on the select committee—and I cannot recall a United Future member turning up to the select committee at all if I am correct— 
Gordon Copeland 
: I raise a point of order Mr Chairperson. I think that is a breach of Standing Orders. The United Future party does not have representation on that committee and for the member to announce to the people of the New Zealand that we are not on that committee is against the Standing Orders. That is not fair to— 
The CHAIRPERSON (Hon Clem Simich) 
: That is not a point of order. 
PETER BROWN 
: I have to go on along those lines because I say to Mr Copeland that frankly if United Future had even had someone sitting in the audience to listen to the submitters and especially to the lines companies he might have thought then as we thought that 50 megawatts was not enough. 
The debate tonight has certainly convinced me in my mind that there is a stronger case for National’s proposal to totally uncap the limitation on lines companies. The honourable member shakes his head but I can remember that separating lines businesses from generation was a result of the Bradford reforms. The argument was pretty sound. I thought Labour opposed it at the time; as I recall the situation it opposed it pretty strongly. But the point now which Roger Sowry made exceedingly well is that we now have lines companies investing in generation in Australia. I hope they are not investing in wine companies but they have to do something with their money. There is a strong case for considering allowing lines companies to get back into investing in generation in this country. 
New Zealand First debated that matter at length in our caucus. We were concerned that if we removed the cap totally one of them—or maybe two—would go out and buy Contact Energy and we would have not a kilowatt more of generation. But there would be some advantages in that because Contact Energy would be a totally New Zealand - owned company. We decided that the whole matter should really be subjected to a comprehensive review by professionals by people who know the industry inside out with a view to determining the best outcome for New Zealanders in terms of security of supply a reasonable price and the availability of electricity at the flick of a switch. 
But after hearing the debate tonight and after listening intently to Roger Sowry and then to Gordon Copeland New Zealand First has decided it will support the National Party’s amendment. We think there is a lot of merit in deleting clause 22(a) and allowing lines companies back into the scene so to speak. We know that they are now subjected to regulation that they are controlled by the consumer price index minus x formula and that they cannot cross-subsidise. Why we did not do that in 1998 I am at a loss to know. It seems to me that the National – New Zealand First coalition Government at that time made a mistake because it did not think through that change thoroughly enough in my view. I know that the Minister the Hon Pete Hodgson made very strong representations at the select committee—he was on that committee at the time—along the lines that we should not just split it all off totally. 
So New Zealand First is of the view that there could be some significant benefits to New Zealanders and to this country as a whole if we get new generation. It seems we can get that more readily by allowing the lines companies in and it seems that if we allow them in and allow them to build coal-powered generators with some degree of liberalisation for want of a better term we will all be better off. 
GORDON COPELAND (United Future) 
: 
 I raise a point of order Mr Chairperson. I would like to direct your attention to Speaker’s ruling 24/1 which states: “(1) The convention of not referring to the absence of a member is equally valid when applied to the presence or absence of a member from a select committee hearing.” I could not bring the reference to mind when I raised my point of order but I think that that Speaker’s ruling makes it very clear that members should not refer to the absence of a particular member from a select committee. I would like you to take that into account. 
Hon RICHARD PREBBLE (ACT) 
: 
 Mr Copeland should have read out the whole of that Speaker’s ruling because it goes on to state: “(2) there is no breach of the convention in referring to the fact that a member was not a member of the committee and so did not attend committee hearings when evidence was being heard.”As I understand it Mr Copeland’s main argument is that he was not a member of the committee which is exactly what Mr Brown was pointing out to the Committee. Of course Mr Brown was perfectly entitled to say that United Future members could have gone to the Business Committee and could have made themselves members of the Commerce Committee but they did not. 
The CHAIRPERSON (Hon Clem Simich) 
: I thank both Mr Prebble and Mr Copeland. I tell Mr Copeland that he has no basis to his argument; Mr Prebble is quite right. 
GORDON COPELAND (United Future) 
: 
 I raise a point of order Mr Chairperson. I agree entirely with the second part of the Speaker’s ruling which is why I said that we were not there. But if we go back and check  
Hansard 
 we will see that Mr Peter Brown said that no member of United Future decided to go to the select committee. Therefore the second part of that ruling is not applicable—the part that gives him permission to refer to the fact that we were not there if in fact we could not have attended because we were not members. He simply said that we did not bother to turn up and I think that that is a breach of the first part of Speaker’s ruling 24/1. 
Hon RICHARD PREBBLE (ACT) 
: 
 Well I was trying to give Mr Copeland the benefit of the doubt because in fact he interrupted Mr Brown’s speech when Mr Brown had actually made the points he was referring to. I presumed that Mr Copeland would not be relitigating a point of order he had already made and that he was raising a new matter. Mr Brown after that point of order corrected himself and then went on to point out that United Future did not have a member on the committee. In fact Mr Copeland’s point of order is completely out of order because it should have been raised at the time and not afterwards. 
The CHAIRPERSON (Hon Clem Simich) 
: I thank members for that. The ruling is that Mr Copeland was out of order and he should not interrupt a member’s speech when he does not have a proper point of order. That is the way it is. Mr Brown was not referring to any absence from the committee in a way that is covered by Standing Orders or Speakers’ rulings. 
PHIL HEATLEY (National—Whangarei) 
: 
 I would like to bring the Minister of Energy the Hon Pete Hodgson up to speed on what we have heard in the Committee this evening regarding the deal he made we understand with Gordon Copeland of United Future. United Future has apparently made a deal with the Labour Party in relation to lines companies having the ability to go into generation over and above the 50 megawatts as proposed in clause 22. 
We would like the Minister to comment and confirm that Gordon Copeland had assurances from him that if there were some discovery in terms of gas or some huge need or opportunity for lines companies to go into significant generation—by definition I suppose that means above 50 megawatts—the Minister together with United Future would put a bill through the House— 
Hon Richard Prebble 
: Rush it! 
PHIL HEATLEY 
: —and rush it through the House we presume under urgency to allow lines companies to go into generation well over and above the 50 megawatts as proposed in the bill which is the current restriction they have. So we would like to hear from the Minister whether that is in fact the case. Will lines companies sometime in the future be able to generate well over and above 50 megawatts? We would like to ask the Minister whether he gave assurances to United Future that legislation would be passed. Did he do that verbally or in writing and does he stand by it? I invite the Minister to take a call on that matter. 
In doing that I also invite the Minister to tell us why he thinks that in the future—whether in the near term medium term or distant future—there might be a sudden need for generation that is over and above the need that exists today. We already know that the No. 1 constraint in the electricity industry today is the availability of power. There is constraint through the lack of generation and through the fact that the Government in no way encourages generation in this country at this time and certainly has not for the past 5 years. The Government does not encourage coal generation with the Kyoto Protocol and through the Resource Management Act. It is starting to dismiss wind generation and we saw that by the cancellation this evening of a proposal for wind generation because of constraints under the Resource Management Act. We know that the Minister does not support geothermal generation because the constraints on that for sustainability go way past 100 years—which is unachievable. So why would this Minister suddenly decide that at the moment with the lack of generation in this country and with poor growth seen into the future there may be some need down the track? Can the Minister please take a call on that and tell us whether he has given some assurance that he will whip legislation through the House to allow lines companies to go into significant generation. 
We also ask the Minister: what is magical about 50 megawatts? Why has he chosen in clause 22(a) that lines companies are allowed to generate 50 megawatts of energy? We know that 25 megawatts was the magical answer before that and that is in the bill and before this legislation came to the House 5 megawatts was the magical number that lines companies were allowed to go into generation with. So why was it once 5 megawatts—why was that the magical figure? Why did it become 25 megawatts? How come through this legislation today lines companies are suddenly limited to a figure of 50 megawatts? In percentage terms it has gone from 5 percent to 10 percent and then to 20 percent. 
Hon PETE HODGSON (Minister of Energy) 
: 
 The preceding speaker has asked a number of questions which basically boil down to: why did we choose 50 megawatts? I will tell him the history. There was earlier in this Parliament a member by the name of Max Bradford and he came to the view—supported by all the National Party members—that the way we should run our electricity system in the future was as follows. If someone owned a line that person could not simultaneously own an electron. That was the view of the National Government at the time. 
Hon Roger Sowry 
: We’ve changed our mind. 
Hon PETE HODGSON 
: Roger Sowry has just chipped in saying: “We’ve changed our mind.” That is good is it not because that is proof that the National Party now realises that that was a most extraordinary error. The disruption around the country was amazing. It was astonishing; so much so that by the time we came to the winter 2001 event— 
Phil Heatley 
: Why 50 megawatts? 
Hon PETE HODGSON 
: I have 5 minutes and I will get to that question. I did not chip away at the member who has just resumed his seat during the course of his speech which went on and on and I expect him to stand by and get an answer to the question that he has put to me. If he does not want an answer he can continue to chip and I will resume my seat. 
What happened then was we went to winter 2001 and we found some reserve generation on the waterfront of Wellington but the person who owned the generator also owned the line and we could not turn it on. That is why we needed to get the electricity amendment legislation of 2001 through the House in a hurry. That is how silly it was. At that stage we said: “Let’s start moving in such a way that lines companies can generate a certain amount.” At that stage the threshold was set at 5 megawatts. 
Then we came to this legislation 3 years later. In the interim something else had happened. Lines companies were placed under Commerce Commission regulatory review. They are under watch. They may be subject to a Commerce Commission inquiry or they may be subject to the CPI-x regime and on it goes. So now for the first time we have decent disclosure as to how lines companies run; whether they are making excess profits; and whether they are doing what they were doing in Britain which was creaming it and behaving monopsonistically and the answer is generally speaking they are not although there are some exceptions to that. Those exceptions are detailed by the Commerce Commission and as the years have gone by we have a much much better handle on whether there has been monopoly rent taken by lines companies and an ability to reduce that rent if it is taken. 
So I put to the House legislation that said: “Let’s raise the threshold. Five is too low so let’s go to 25. Let’s just quintuple it.” That legislation then went to a select committee. In the course of the select committee hearings a number of people came along and said: “That’s still too low.” and the select committee came to the view that it should be raised to 50 megawatts. Then in the House—in front of the member who has asked a question about a so-called secret deal—Gordon Copeland got up during a question and asked: “What does the Minister think about going to 50 megawatts?”. I said: “Well if the select committee decides that is the right thing to do it is fine by me.” And that is the end of the story. 
Hon RICHARD PREBBLE (ACT) 
: 
 I hope Mr Copeland was listening to the Minister because the Minister basically told us that Mr Copeland’s belief that he is responsible for the 50 megawatts is as far as the Minister is concerned nonsense—and Mr Copeland is telling members what a great influence United Future has had. Mind you the Minister could not actually tell us: “If it’s 50 then why not 100?”. But let us turn our minds to the ridiculous amendment from the Greens. 
The Greens have said that line companies can generate any amount they like providing it is from a new renewable energy source. I looked at the principal Act to see whether “new renewable energy source” is defined. The Greens might be interested to know that it is not. I know the Greens do not know anything about physics but that means that they are in favour of a line company—and there might be one mad enough to do it—generating by nuclear fission because nuclear fission results in plutonium. The Greens might be interested to know that it is definitely within the definition of a “new renewable energy source”. So the Green Party is saying it is in favour of nuclear power in New Zealand and I never thought I would see that day. 
Peter Brown 
: Maybe he’s had a few smokes! 
Hon RICHARD PREBBLE 
: Maybe he had a few. Well he thinks it is funny but that is exactly what this clause does. Let me tell him something else. I am a lawyer and I would be quite willing to go along and argue—as I am sure a line company lawyer will—that a new renewable energy source does not cover just wind and water but also covers things like coal. Coal is generated over millions of years and there must be new coal being generated as we speak. It will be being formed and new gas will be being formed. There is nothing in this bill to say how rapidly the renewal of the energy source has to be just that it is happening. Well as a matter of scientific fact it is happening so the Green Party is introducing a measure that actually says that line companies can generate any amount of energy provided that they get a lawyer like me—and I will soon be available—who is quite happy to argue that this clause covers any energy and it certainly covers nuclear fusion. There is no doubt about it. 
Sue Kedgley 
: Is that renewable? 
Hon RICHARD PREBBLE 
: It is renewable—of course it is. Nuclear fusion results in plutonium. It is one of those interesting processes where one ends up with more energy at the end. In fact the Greens ought to love nuclear fusion. Perhaps they do—perhaps I have misinterpreted the Greens. Perhaps the Green Party is really right into nuclear power. I always thought that they were against it but I see this clause being put in and I say that this is the sort of clause—like the 50 megawatt clause; if we accept Mr Copeland’s argument—that gives MMP a bad name. Here we have small little parties trying to prove to their membership that they have some influence so they put forward this sort of amendment. Even though the clause is nonsense—and both clauses are nonsense; the whole bill is nonsense—in order for the minority Labour Government to have a majority to put through this Stalinist legislation we have clauses of this sort. It is sheer madness. 
The Government ought to realise that the reason it is in this position is not just MMP and its loony flaky coalition partners like United Future and the Green Party but that what it is trying to do does not make any sense. There is a Resource Management Act and it is for that Act which talks about sustainable New Zealand to decide those sorts of questions. It is bad lawmaking—and the Minister knows this—to put in a clause that uses the term “new renewable energy source”—a term that has not been defined by the Greens. The Greens do not know what that means. Nor do the line companies. There will be litigation about this matter. I say to the Green members that the result might be the exact opposite of what they think. We have line companies that are crazy enough to invest in wineries and finance companies so they are certainly nutty enough to invest in nuclear power now that they have been told by the Green Party that it is the only form of energy they are allowed to invest in. Why should this Parliament be attempting to make those sorts of guides and rules for the energy companies? It is complete utter nonsense. 
DIANNE YATES (Labour—Hamilton East) 
: 
 I move  
That the question be now put 
. 
Hon ROGER SOWRY (National) 
: 
 I want to take Minister Pete Hodgson’s attention for a while because he was not in the Chamber for the debate. I say to him firstly that the Commerce Committee did not decide to do this in the way he portrays it. In fact when we in the select committee asked about going to an unlimited amount of generation—and the Labour members were there when we asked the officials—the officials told us it was a policy decision. The Labour members of the committee voted for the Labour policy. One presumes that that was something the Minister decided. We were told earlier by Gordon Copeland that both he and the Minister decided on that new artificial limit. The debate really is about why we should have the limit. 
I accept the arguments the Minister made about what National did in the 1990s. As I said we changed our mind; it is not our policy now. 
The Minister has here a “get out of jail free” card. We can have unlimited generation by lines companies and because of the “CPI minus X” regulations and the regulatory environment the Minister has put around lines companies we can feel confident that the cross-subsidisation the Minister and his predecessors worried about will not occur—or if it does occur will be adequately picked up and monitored. We are confident with that. 
I think the Minister is confident with that as well in his heart of hearts. Otherwise why would he allow lines companies to have an unlimited number of windmills but not to have anything to do with gas? Before the Minister came to the Chamber tonight I put to members a situation. I was criticised because it was hypothetical but let us say it is not. We have two gas rigs currently drilling at sea. The Government should rightfully accept credit for having a couple of rigs out there after a long period without rigs. Some of that credit is to do with the Government and some is to do with the price of Maui Gas being right but those rigs are drilling now. I have heard the Minister say that he has been worried about finding gas and that that has been his biggest concern—rightly so. If a company finds gas for example in Canterbury and wants to bring it on and do a deal with a lines company to build a combined cycle plant—the last major one built in this country in New Plymouth was built by a lines company—it will not be able to do it. This bill will prevent it from doing that. 
Gordon Copeland who supports the bill said in the Chamber that that was OK and that he had talked to the Minister who said that amending legislation would be brought in to fix that should gas be found. I do not know whether Mr Copeland is right or wrong—I have no reason to disbelieve a God-fearing man—but I say to the Minister that that is a bit of a silly way of doing it so National will vote to remove the restriction. We will help the Minister so that he does not have to be a hostage to the Greens. I suspect that if the Minister were to put his hand up to vote for that even United Future would vote for it. I think United Future is kind of clinging to the fact that it has a small gain and it thinks that that is about where the politics are on this issue. 
The politics are in letting a lines company unleash some of its capital. The Minister will know as I know that lines companies are talking about investing in Australia. That is nutty when we need the investment here. It is crazy! If we can guarantee that those companies will not cross-subsidise the investment why not let them make it? As the Minister well knows lines companies are also looking at other investments that are way off beam from electricity. I gave the example before of ElectraLines which owns a finance company. 
Hon Pete Hodgson 
: Who’s that? 
Hon ROGER SOWRY 
: ElectraLines. It owns the Oxford Finance Corporation in Levin and I do not think the Minister believes that that is a good use of money for a lines company. That is not what it should be doing. It should be investing in some generation if it wants to invest or just giving a rebate to consumers—I do not care what. I know the politics of the industry; I know what has gone on before; I am not trying to walk away—[ 
Interruption 
] The member can go on about that but I am not trying to walk away from any of it. 
National disagrees with the bill. In fact it might be made more difficult for us if there were no limit in the bill on lines companies. But I say to the Minister that we should remove that limit and let the lines companies live with “CPI minus X”. Let us have faith in the Commerce Commission: I am glad that that is where the Minister has left the regulatory regime and we will come to that in the next part. Let us do all that. Let us remove this silly clause that allows a lines company to put up as many windmills as it wants but does not allow it to put a small coal-fired unit or something else in place. 
Hon PETE HODGSON (Minister of Energy) 
: 
 I think the member raised some good points but I think he has also told an incomplete story and I would like to finish the other half if I may. The issue of whether we should allow generation capacity of above 50 megawatts is of course something that people have talked about. It is a matter of fact that with new renewables there is no limit—there has not been one for 3 years. It is a matter of fact that new renewables are defined in the 2001 legislation and that in that legislation reserve generation can be built without limit. 
Notwithstanding those changes and notwithstanding the fact that the without limit provision for new renewables has been in place for nearly 3 years there has not been a lot built. That raises the question of why. Because that answer is not yet known to me in the past few weeks I have asked the Ministry of Economic Development to go and find out. In fact after discussions with Gordon Copeland and other members—and with myself one might say—I have asked the ministry to go away and consider whether we should remove that threshold altogether. That work is now under way. 
If we were to remove the threshold we would of course allow all retailers to buy lines companies. That means we would have the prospect of some sort of regional concentration. There might be one Auckland power company or one Wellington power company that would have part of its obligations regulated etc.—OK? So we will take a look at that and see whether it is the right thing to do. 
In the course of the Commerce Committee hearings one lines company decided that it wanted that to happen now without the public policy analysis—if we did not mind. Well we do. That company did not want to build new generation; it wanted to buy other people’s. If only its trustees—or the National Party members amongst them—could stop taking one another to court then maybe we would see that particular lines company get into the gas business. It did not want to build new generation; it wanted to buy existing assets—and that is a very interesting distinction. 
The member asked why we did not release capital for new generation. The answer is that we just did somewhat—not that much has been built. If we removed the threshold entirely the capital may not go to new generation for indeed the largest lines company in the land has decided that it wants to buy other people’s assets. 
GERRY BROWNLEE (Deputy Leader—National) 
: 
 That may seem like a very reasonable contribution from the Minister. People listening to the radio or sitting in their offices around Parliament would have thought that was a nice peaceful little explanation from the Minister and I suppose it gives us an indication of a Government that is thinking about these things. But the reason there has been no substantial investment in renewables for generation in the last 3 years is that it is so hard and what is left to people is so unreliable. The Minister would have to concede that if one wanted to do a hydro project in this country—and hydro power is a renewable form of energy—it is almost impossible. He would also have to concede that if one wanted to build a wind project in this country the economics make it almost impossible. Big companies like the State-owned generators can carry out the nice little exercise of building wind farms everywhere but everyone knows that on the best of performances they will be barely 40 percent efficient. So why would a lines company want to risk its consumers’ or its owners’ capital on such a dodgy venture? When it comes to biomass energy or something else—when it comes to any form of emission—we know immediately that the Resource Management Act will stand squarely in the way. 
The fact that nothing has happened in the last 3 years since the Minister allowed lines companies to look at unlimited amounts of generation from renewables is that all the other conditions that have to be in place are not in place. It does not matter how many times the Electricity Commission meets sits and makes decisions until those other factors are taken care of it is most unlikely that we will see any sort of substantial investment from those companies in new generation capacity. 
 The Minister said it is interesting that one of the country’s biggest line companies wants to buy only generating assets that exist. Well it wants to do that because it knows how hard it is to get new generation established. We have seen in the last 12 months the falling over of the very large project on the Waitaki River and although one or two new wind farms have opened up they are just nice little green adjuncts to the generating capacity of the big companies. 
I ask the Minister whether he might comment on corporate separation. What exactly is the purpose of having a statement about corporate separation in this bill and for that matter the arm’s-length rules that relate to the preparation of the contracting of and the purchasing of reserve generation? We need to understand that this Government is proposing to smooth out any possibility of interruption to electricity supply by creating reserve capacity. Well how do we create reserve capacity when already there is more demand than capacity to deliver? 
Hon David Cunliffe 
: Read the State-Owned Enterprises Act. 
GERRY BROWNLEE 
: What we will see over a period of time is the Government encouraging State generators—and there is good evidence of it happening now—to create that reserve capacity effectively by rationing through price. It is the consumer who will pay for that. I heard a member on the other side of the Chamber interject: “Read the State-Owned Enterprises Act.” I ask his Minister to explain how one’s reading the Act is relevant or helpful in understanding how this committee of well-meaning people is going to work to get reserve capacity in this country. 
Hon David Cunliffe 
: Would the member like me to take a call? 
GERRY BROWNLEE 
: I would very much like the member to take a call. 
JILL PETTIS (Labour—Whanganui) 
: 
 I move  
That the question be now put 
. 
The CHAIRPERSON (Hon Clem Simich) 
: We have had over an hour on this part but I think the Committee would like to hear some more good sense. 
Hon RICHARD PREBBLE (ACT) 
: 
 I think that the Greens despite suggesting they would not would actually be very interested in what I have to say. I am obliged to the Minister for taking a call—it was very parliamentary of him—and pointing out to me that there has been an amendment in a subsequent Act. Following the 1999 Act in 2001 “new renewable energy source” is defined. I am obliged to the Minister and I have now read it. It certainly does not rule out nuclear energy and it states that a new renewable energy source means an energy source that occurs naturally the use of which will not permanently deplete New Zealand’s energy sources of that kind. What that means is that an imported coal-fired station would meet this definition. Why that is important for those of us who know about energy is that in fact the cheapest way to produce energy in New Zealand is to set up a large coal-fired station and import the coal from Queensland. Indeed that is exactly what one of the State-owned enterprises did. When there was a coal shortage it was importing coal from Australia. 
I find it simply amazing that the Green Party is saying and this bill is saying that a line company—and who would want to do this; well it would be the Auckland line company—can build the 150 megawatt station providing the coal that it burns does not deplete New Zealand’s coal. So here we have the Green Party saying: “We are in favour of coal–fired stations provided it is not New Zealand coal.” That is what it says I will read it out. It means an energy source that occurs naturally the use of which will not permanently deplete New Zealand’s energy sources of that kind. It goes on to say that it has to be replenished if it is in New Zealand. I might point out that this definition clearly allows wood-fired stations because wood would renew within 50 years. So the Greens are in favour of a wood-fired station which I assure members has all the attributes of a coal-fired station. 
Here we have the Green Party saying—actually it is more than saying. I think this bill is almost a direction. It is going to become an absolute certainty that the line companies want to get into generation. We know that because they came along to the Commerce Committee and said they wanted to build a station bigger than 50 megawatts. We even had the United Future party telling us that Solid Energy wants to build a 150 megawatt coal-fired power station. Well if it buys a line company it will be able to do it because then it will come under the exemption and then it will be allowed to build as big a power station as it likes provided it does not use New Zealand coal. That is all the renewable energy sources provision does. It says that we cannot burn New Zealand gas but we can import it from Indonesia and there are people who have said: “Let us bring in liquid gas and have a gas-fired station from liquefied petroleum gas.” That is perfectly OK by the Greens because no doubt they read this clause. 
I have to say to the Committee that I had not appreciated until the Minister drew it to my attention that in 2001 and no doubt it was he who did this he managed to—I will not say con the Greens—persuade the Greens that somehow we are helping the whole planet if we burn Australian coal and not New Zealand coal. 
 The odd thing is of course that New Zealand coal is dug up and sent to Indonesia and the Indonesians send their coal here and that is OK! That is all right; it helps the planet! [ 
Interruption 
] The Green member Sue Kedgley is interjecting from her seat. I ask her to explain to us whether that is what she meant. Is that Green Party policy? Could we have the Green physics that will let us know that somehow or other we help the planet if the Indonesians burn our coal and we burn their coal. 
Hon Maurice Williamson 
: What if they sent ours back? 
Hon RICHARD PREBBLE 
: That is a point but no I do not think that would be allowed. I think we would have to test the Indonesian coal to make sure it is not our coal that has been sent there and brought back again because I think that would be naughty. Under this provision that is what “renewable energy” means. Interestingly what it does not mean is “hydro” and “geothermal” and Lord knows why that is. 
Hon DAVID BENSON-POPE (Minister of Fisheries) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Motion agreed to. 
The question was put that the following amendment in the name of the Hon Roger Sowry to clause 22 be agreed to: 
to omit paragraph (a). 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Noes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Awatere Huata 1. 
Amendment not agreed to. 
A party vote was called for on the question  
That Part 2 be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 47 
New Zealand National 27; New Zealand First 12; ACT New Zealand 8. 
Part 2 agreed to. 
Part 3 Amendments to Commerce Act 1986 
Hon ROGER SOWRY (National) 
: 
 Part 3 is a relatively narrow part which amends the Commerce Act. I want to bring attention to what I think is a very serious issue. I will do it quickly now; I know that we will have to deal with this part again when the Committee resumes sometime next sitting day. 
Subsection (3) of new section 57CA inserted by clause 30B refers to the Commerce Commission and states: “The Commerce Commission must if asked by the Energy Commission to do so reconsider an existing authorisation or undertaking and to the extent that the Commission considers it necessary or desirable to do so”. What we have is the Commerce Commission having to dance to the Energy Commission’s tune. 
If we look at an earlier part of the bill we see that that commission is able to be directed by the Minister. So let us go through the food chain. The Minister can direct the commission about something to do with lines company charging or the regulatory environment or the environment those companies function under. The commission then toddles off to the Commerce Commission and the Commerce Commission is required to have a look at it. We have in this country an independent Commerce Commission—or we have had until this bill is passed. Now we are to have a Commerce Commission that is being brought into political question by its dancing to somebody else’s tune. 
Not only that but the Minister is further muddying the waters by proposing to have some commissioners who are joint commerce commissioners and energy commissioners. So they will be answering to the Minister one moment then sitting on a case supposedly independently the next. Imagine if in the Air New Zealand - Qantas debacle that went through the Commerce Commission the Minister could have gone to the transport authority and said he wanted it to do A B and C and to make sure the Commerce Commission looked at A B and C and the transport authority could then have toddled off to the Commerce Commission and said it wanted it to have a look at this and this and the Commerce Commission was obliged to look at this and this because the Minister had directed it to do so and there was cross-accreditation of commissioners. 
Progress reported.