Parker David: Electricity Industry Bill — Second Reading 
Parker David: Electricity Industry Bill — Second Reading 
[Volume:665;Page:12493] 
Hon DAVID PARKER (Labour) 
: 
 In this debate much has been made of the fact that electricity prices increased by including inflation 72 percent over the past decade or so. The National Government has tried to make that out as being the fault of the previous Labour Government. 
David Bennett 
: Which it is. 
Hon DAVID PARKER 
: Who said that? Mr Bennett I think. Well if that was the case why has National not been able to reverse it? The reality is that we all know in this House that the main driver of the increase in electricity prices was that the Maui Gas fields ran out. 
David Bennett 
: Oh rubbish! 
Hon DAVID PARKER 
: I tell Mr Bennett that that is ill-informed. It is the reality. Maui Gas ran out and alternative sources to replace Maui Gas—either gas sources or renewables—were more expensive. Under the marginal cost competitive model that we have for electricity we see that that is the most significant cause of increase of the price of electricity in the last decade. I tell the member not to give me this rubbish that it was some sort of mistake by the Labour Government that led to that because that was the main cause. Were that not the case were there some other cause then the National Government would have put our electricity prices down. But it has not; it has left them where they are because it knows that that was unavoidable. 
This legislation in respect of the changing of the name of the Electricity Commission to the Electricity Authority does not change a lot. It makes a few changes; we can argue whether those changes are good or bad. But actually that was just Gerry Brownlee saying that he had to change something. So he did away with one regulator and he has created another. We heard from the prior speaker Chris Auchinvole that objectives have been slightly changed—but really they have not been changed a lot. 
That is not the most offensive part of this legislation except that it is a ruse. It will not change much in terms of competitive pressures in the electricity market; it is a ruse. To that extent it is offensive. But what is more offensive in this legislation is the asset swap that is being forced upon Meridian Energy. That is trying to pursue an improved market-competitive outcome at the expense of resource efficiency. If the market is so uncompetitive that we have to use the physical resource less efficiently in order to get a more efficient financial market outcome we have to say that the market model is fundamentally broken. If to obtain market-competitive price efficiency one has to use the underlying physical resource less efficiently then that is wrong. 
We heard the warnings from Treasury from the technical advisory group and from market analysts that we do not want to use the water in the Waitaki system anything less than as efficiently as we can use it. If we use it less efficiently—we spill more of it so that we do not use as much of it for electricity and it flows out to sea—what do we do when we would otherwise be using the water that would not have been spilled for electricity generation? The reality is that we need more electricity generation to replace the generation that would have come from the water that we have wasted. 
Pursuing a market-efficiency outcome through less efficient use of the water is nonsensical and that is the greatest flaw of this bill. It forces Tekapo to be sold to Genesis or given to Genesis in an asset swap. It means that that water does not flow through Tekapo the Pukaki the Ohau system Benmore Aviemore and the Waitaki system in the ownership of one controller which is the most efficient way to use that resource. That is just common sense. If we split that between different owners who have different imperatives we will end up with less resource efficiency. Not only that we will need different sets of engineers. We will have engineers down there from Genesis and from Meridian. How is it sensible to have two sets of people servicing those sets of dams on the Waitaki? It is nonsensical. The less efficient use of those resources can have only one consequence which is that we will need extra generating capacity to make up for it and that comes at a cost to the consumer. 
I will say two other things. One of them is a thank you to the Government. I agree with the move that is being made here in respect of requiring or allowing penalties to be put upon generators and retailers in the case where a conservation campaign is said to be needed among retail customers. I thank Gerry Brownlee for seeing that through. When I was Minister of Energy I thought that was something that needed to be done. Last time we had a water shortage it was all too easy for the generators to say that residential consumers could suck it and have a conservation campaign. Consumers were the ones who effectively suffered the cost of the generators not having enough generating capacity or not having stored water early enough in the season. It is appropriate that there be a financial penalty there for generators in those situations so as to discourage them from doing so and I congratulate the Government on doing that. 
But the big issue that remains in New Zealand is whether we have true competition in the electricity market. If we do not we have price gouging. In the absence of competition markets with monopoly characteristics act as monopolies are reputed to act: they extract monopoly rents at the expense of consumers. The issue that Brendon Burns raised is the issue that I was never convinced about as Minister of Energy. We have seen a 72 percent increase in retail tariffs during the period that the National members have quoted. During the same period industrial and commercial tariffs—especially industrial tariffs—have not moved nearly as much. We are now in the position in New Zealand where the gap between tariffs paid by industrial users and residential tariffs is higher than anywhere else in the world. 
There has never been an adequate explanation of why that is justified. I suggest to the House that it is because at the industrial level there is a bit of competitive pressure on those big power sellers but at the retail end of the market there is not adequate competition. That is why we have seen increases that are higher in respect of retail tariffs than industrial tariffs. The Government does nothing about that in this legislation—and why not? The answer is that it wants the dividends from the electricity State-owned enterprises. It suits the Government’s purpose for those profits to stay high so that the Government can gather the dividends. It has had tax cuts that increase the deficit of New Zealand and how will it fund those? In the future it will fund them in part by the dividends it wants from the major electricity State-owned enterprises and perhaps—we do not yet know the Government’s plans—through the sale of those electricity State-owned enterprises. 
Of course the Government knows that if the profits of the electricity State-owned enterprises are maximised in the meantime they will go for a higher price when the Government flogs them off. The Government has been very careful to say that it will not sell any State-owned enterprises during its first term of Government. That is its mantra. If the Government gets a second term it is not promising that it will not sell them. It has now backed away from under pressure and after all its flip-flops proposals to sell Kiwibank and New Zealand Post. Those assets are already owned by New Zealanders and ought not to be flogged off but the Government is keeping an eye on that option by maintaining profits higher than they should legitimately be because there really is not adequate competition at retail level. 
Rather than complaining to us about the electricity price increases I say to Mr Bennett that he should be asking himself why the Government has done nothing to reverse that and why the Government has done nothing to address the differential between retail and industrial tariffs and why in the name of a market efficiency the Government is using less efficiently the underlying resource that is used to generate electricity. In the end that can have only one consequence and that is a need for extra generation which has to be paid for by the consumers of electricity. Labour opposes this bill.