Parker David: Electricity Industry Bill — In Committee 
Parker David: Electricity Industry Bill — In Committee 
[Volume:667;Page:14150] 
Hon DAVID PARKER (Labour) 
: 
 In Part 2 we have clause 9 which states that we will have statements of Government policy that the authority must have regard to. What statements of Government policy have we had since the election? We had one arm of the Government apparatus—I forget whether it was Mr Whitehead at Treasury or Dr Bollard at the Reserve Bank—say that on the basis of the recession there was a need to have decreased profit expectations on the part of the big power companies. There were to be decreased profit expectations on the part of the major infrastructure companies including—and I think they were named—the power companies. Of course the Government owns the power companies because they are State-owned enterprises. If the Government had wanted to achieve less pressure on power prices it could have explicitly said to those State-owned enterprises that it wanted lower dividends; that it did not want them to pay as much money into the Government coffers. Did it? No it did not and that shows how hollow its rhetoric is about its desire to control power prices because that is all it needed to do. It could have said to Genesis or Meridian or Mighty River Power or all of them exactly what the Labour Government had already said to Transpower which was that it did not want as much dividend. The Labour Government did do that in respect of Transpower and the National Government could do that in respect of the major generators if it wants to take pressure off power prices. So all this talk about having a statement of Government policy that the authority must have regard to when undertaking its functions is not worth a tin of fish. We know that the Government had the lever. We know that the advisers to the Government at the highest level—and from memory I am pretty sure it was Dr Bollard at the Reserve Bank—said that the Government needed to take pressure off consumers by not ramping up prices profits and dividend flows to the Government. 
The Government has control of two-thirds to three-quarters of the electricity market. The Government-owned State-owned enterprises—Genesis Meridian and Mighty River Power—produce two-thirds to three-quarters depending on the year of New Zealand’s electricity. They are dominant. If the Government had just given them the direction that it did not want as big a dividend then electricity prices would not have gone up as much. I still call on the Minister in the chair the Hon Phil Heatley to take a call and explain how it is that this authority will control prices in a way that the existing commission does not because that is what Gerry Brownlee says is its purpose. He says that the authority will be more effective at controlling price. Well how? It is not apparent from the legislation. We know that the Government has ignored this opportunity to say that it does not want more dividends. In fact it has said the opposite. The Minister for State Owned Enterprises Simon Power has said to these companies that the Government wants greater efficiency and higher dividends. In reality the only way we can get significantly higher dividends from the electricity State-owned enterprises is through price increases. They do not have very high variable costs in terms of their labour inputs so a change to their salaries policy does not make much of a difference to their profitability. The only way they can increase their profitability and dividends is by increasing prices. 
So I ask the Minister to explain how this new authority is going to have a different outcome in respect of market competition from what the Electricity Commission has had. If it is not going to have any difference I cannot see how the Government can rely upon it to control prices any more than the existing commission can and the Minister is already on record over many years as saying that the existing arrangements were not sufficiently controlling price increases. So if there was not sufficient price control through the market mechanisms that were operationalised under the Electricity Commission and if we are moving to a new authority what is it that is different that changes that status quo? The answer—because we will not hear a call from the Minister on this because there is no answer—is that there is no change to the powers of the authority compared with those of the commission in terms of market outcomes. 
I ask the Minister in the chair to stand on his feet and explain how it is that different rules pertain to the authority and give them more powers than the Electricity Commission had to constrain prices. The answer of course is that there are no extra powers. The answer is that this legislation will not properly constrain price increases.