Parker David: Electricity Industry Bill — In Committee 
Parker David: Electricity Industry Bill — In Committee 
[Volume:667;Page:14136] 
Hon DAVID PARKER (Labour) 
: 
 I will first state my agreement with the Minister in the chair the Minister of Energy and Resources in respect of his comments about the effect of the emissions trading scheme on power prices. I agree with him that the emissions trading scheme has not been responsible for all of the power price increases that we have seen. We know that partly because at least in theory the electricity price is driven by the long-run marginal cost of new supply. The long-run cost of new supply in the electricity system has long foreseen the cost of carbon coming. Indeed when I was the Minister some years ago Contact Energy told me that it had already factored into its investment decisions—and indeed into its share price—the effect of the cost of carbon on electricity prices and investments. So again I agree with the Minister that although the increases of late that have been blamed on the emissions trading scheme are partly a consequence of that they are also partly not. 
Of course that begs the question that if it is not all related to the emissions trading scheme then what is it related to? The answer to that question is perhaps that there is insufficient competition. The purpose of this legislation is set out in clause 4 as: “The purpose of this Act is to provide a framework for the regulation of the electricity industry.” The reason that we need a framework for the regulation of the electricity industry compared with other goods and services that are supplied particularly when it comes to the way in which electricity is delivered is that the market has severe constraints and it is arguable that it is not competitive enough. That is why the Government intervenes and therefore regulates the market to try to enhance competition. 
The question we have to ask in New Zealand is whether after the years since we had the so-called market reforms that were pushed upon the country by Max Bradford originally there is sufficient competition to justify competition being the control on price. If there is insufficient competition to control price then we have to give up on having the competitive market as the appropriate way to control price because it is a fiction and what lies behind that fiction is excessive pricing. 
We have heard from Clare Curran about the example she gave in Dunedin. Before I move to that I say that one thing the Minister ignores in respect of the prior decade is that the major driver of the increase in electricity prices in New Zealand was the Maui gas running out. Maui gas was subject to a price control that went back to the Muldoon Government. As the gas ran out there was the need to remove the cap on the price of gas so as to encourage more exploration and that was actually the main driver of price in the early to mid-2000s. It does not explain increases in price since that date and real questions remain as to whether the market is sufficiently competitive. What is driving the Government’s behaviour now is that it has a desire for dividends from State-owned enterprises. 
The Government is not interested in real competition. It is not interested in real controls on an appropriate price for electricity. What the Government wants is dividends and capital distributions from the State-owned enterprises to the Government’s coffers. We know that because the Government has been open about it. The Government said that one of the things it wanted from the State-owned enterprises was improved financial performance. The only way we can get any significant change in the financial return from the major electricity State-owned enterprises is to put up the price. If the price is put up a higher profit is made and therefore a higher dividend can be paid to the Government. Please do not pretend that it is anything other than that. 
In respect of whether there is proper competition I am just about ready to conclude that there is not. No one can explain the enormous differential between industrial and residential tariffs in New Zealand. It is higher than anywhere else in the world that I know of; there is an enormous difference. I think that is very good evidence that there is not sufficient competition at wholesale and retail level in residential markets. 
I will give another example of where this is bad. Alexandra sits next to one of the biggest hydro facilities in New Zealand—the Contact Energy dam on the Clyde River. Alexandra pays one of the highest electricity costs— 
Jacqui Dean 
: It’s the Clutha River. 
Hon DAVID PARKER 
: What did I say? 
Jacqui Dean 
: The Clyde River. 
Hon DAVID PARKER 
: Sorry it is the Clutha River; the member is quite right. I meant the Clutha River. The Clyde Dam sits on the Clutha River. Despite that the people of Alexandra pay a far higher price for their energy than just about anywhere else in the country. I am not talking about line charges. I am talking about the energy charges. This dam is close to Alexandra and just down the road is the Roxburgh resource yet they pay a higher price for electricity. This legislation will not change that at all. 
The question was put that the amendment set out on Supplementary Order Paper 154 in the name of the Hon Gerry Brownlee to clause 5 be agreed to.