7. Question No. 7—Energy and ResourcesJONATHAN YOUNG (National—New Plymouth) to the Minister of Energy and ResourcesQuestion No. 7—Energy and Resources7. JONATHAN YOUNG (National—New Plymouth) to the Minister of Energy and Resources: Does she expect recent high wholesale electricity prices to be reflected in household power bills; if so when?Hon ANDREW LITTLE (Minister of Justice) on behalf of the Minister of Energy and Resources: No. Short-term peaks in wholesale electricity prices are unlikely to be reflected in consumer prices. Household power prices are driven by a number of factors including line charges and customer service costs as well as power companies' projections of long-term future demand supply and the need for investment. Wholesale price volatility is not generally a significant driver of household power pricing.Jonathan Young: Considering that answer does the Minister consider that the long-term wholesale electricity prices which have increased by 30 percent over this last year will not be passed through to households at some point?Hon ANDREW LITTLE: On behalf of the Minister one can gauge what is happening simply on the facts of the matter and there has been some commentary in relation to some short-term outage of gas supply and the fact that the hydro lakes in the South Island are lower at this time of the year than they were previously—Hon Gerry Brownlee: No they're not.Hon ANDREW LITTLE: They're 12 percent lower than the long-term average of those lake levels. Those sorts of things often lead to commentary about pressure on both wholesale prices and household prices but there is no evidence that household prices are rising because of generation capacity.Jonathan Young: So is she saying that businesses whose base costs are rising won't pass that on to consumers?Hon ANDREW LITTLE: On behalf the Minister the original question related to wholesale prices. There are then additional costs such as line charges and customer service costs and I am aware that some of the power companies are reconsidering prices because of customer service charges and line charges that are beyond their control.Jonathan Young: Will she therefore guarantee that household electricity prices will increase at no more than the same rate as over the last 10 years?Hon ANDREW LITTLE: Again on behalf of the Minister I can't give any guarantees about what will happen in a market which is widely now accepted as somewhat flawed. That is why we are doing an electricity pricing review. That is yet to come up with a series of recommendations that will improve the market but measures such as this Government has taken like the winter energy payment are about alleviating the pressure on households.Jonathan Young: Well how can the Minister say that the wholesale prices won't be passed through to households but won't guarantee that prices will not increase higher than the last 10 years?Hon ANDREW LITTLE: On behalf the Minister the member seems to be confusing the different sources of price pressure on electricity. Wholesale power prices relate to generation capacity and the power companies have it in their hands to make their decisions on projections of long-term demand and supply and the investment decisions they make. We know now from recent commentary that investment in renewable sources of energy is cheaper than fossil - fuel based sources of energy and we expect power companies to be investing in that. That will in the long run bring prices down.Jonathan Young: So is the Minister saying that the long-term wholesale price out to 2022—that's currently at just under $92 a megawatt hour increased from $70 a megawatt hour a year ago—is not going to be passed on to consumers?Hon ANDREW LITTLE: On behalf the Minister what I am saying is speaking basic orthodox market principles and that is that those who are selling power to consumers when they set that price take into account a number of factors. The wholesale price is driven by generation capacity. That is affected by short-term measures such as lower than usual hydro lakes; such as both planned and unplanned outages of for example gas supply. That is affecting household prices at the moment but that is not expected to have a material impact on household prices in the long run.Jonathan Young: I think I need to ask that same question Mr Speaker because—SPEAKER: Well the member's allowed to ask it again.Jonathan Young: Thank you. So is the Minister saying that wholesale prices won't be passed through to households yet won't guarantee that prices will not increase any faster than they have in the last 10 years?Hon ANDREW LITTLE: On behalf the Minister there are a number of factors that contribute to the household price of electricity. The member's original question related to the wholesale price of electricity and there are a number of factors that go to make that up. What the consumer and the household pays for their price relates not only to household electricity prices but to line charges to customer service charges and to other things that the electricity retailers add on to their customers. The member is conflating different aspects of the market to all impinge on the household price and the member himself is confused about what it is that is relevant to household electricity pricing.Jonathan Young: So to make it clear is the Minister saying that any household increases in electricity prices will be exclusive of increases in the wholesale price?Hon ANDREW LITTLE: On behalf of the Minister the market in the way it operates at the moment—we know from the Electricity Commission's recent report—is flawed. That is why change is about to happen to it. We know that those selling electricity to households take into account a number of factors when they are setting that price. To the extent that that member is implying that volatility in wholesale electricity prices is a driver or the main or principal driver of household electricity prices he is wrong. There are a number of factors that go into it but the reality is that for the vast majority of households when they come to pay their power bill the price they pay is driven by a range of factors and is not directly impacted by wholesale power prices.Jonathan Young: So is the Minister to make it clear saying to this House that increases in the household price of electricity are completely exclusive to any increase in the wholesale price of electricity?Hon ANDREW LITTLE: On behalf of the Minister no that is not what I have said. In the many answers I seem to have given today I have said that volatility in wholesale electricity prices is not a driver of household electricity prices.