Fitzsimons Jeanette: Electricity (Disconnection and Low Fixed Charges) Amendment Bill — First Reading 
Fitzsimons Jeanette: Electricity (Disconnection and Low Fixed Charges) Amendment Bill — First Reading 
[Volume:640;Page:10809] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 The Greens will not be opposing this bill because we see it as essentially harmless. I have to say though that we cannot muster a huge amount of enthusiasm for it either. 
Everyone of course was shocked at what happened to the Muliaga family and wants to make absolutely sure that a disconnection can never again cause the degree of distress experienced by that family. The matter is being dealt with largely through the guidelines of the Electricity Commission which the companies are signing up to and of course we support a back-up power to regulate if the companies ignore those guidelines. But I think the retailers have pretty much learnt their lesson by now from the huge public outcry at what happened. I cannot imagine that that incident is going to be repeated. Nevertheless we do support a power to regulate just in case. 
Clause 4 however is a very minor tweaking of a largely ineffective existing law. I think we ought to be bolder and start asking why just one industry out of the very many that have high fixed costs is able to charge fixed prices before it charges for use. If I drive on to a petrol station forecourt I do not have to go through a barrier and put in $20 before I get to the pump and buy my petrol at 50c a litre. A petrol station has very high fixed costs including storage of fuel the checkout counter the building and the bowsers and it would be in serious trouble if everybody who came in bought only 50c worth of petrol and went out again. But petrol stations do not have the right to charge a fixed entry cost. A supermarket has very high fixed costs too but when we get to the checkout it does not say: “OK that’s $20 for coming in the supermarket door and now you get a discount off all your groceries.” So why is the electricity industry any different? 
In the electricity industry we pay a substantial part of our power bill just to be connected to the lines. A lot of people mistakenly call it a line charge. They think it is the lines companies that charge the fixed bit of the tariff and the retail companies that charge the variable bit. But that is not true. The lines companies charge quite a lot of their return on a variable basis and the retail companies charge a fixed charge for metering and billing. When did we ever have to pay a fixed cost for having our meters read before we bought any electricity? 
 The Green Party has always had a policy that there should be no fixed charges and that fixed costs for companies should be recovered out of the unit charges. That would mean that unit charges would be higher and the price of electricity at the margin would higher but it would mean that using less would become cheaper. For example it would mean that the return people got on insulating their houses or on installing a solar water heater or by just turning off dripping taps would be very much higher than it is now. Most people who save half of their electricity use save only about one-quarter of their bill and that is not a very good incentive. Getting rid of fixed charges used to be Labour’s policy as well but that somehow went by the board. 
In 2001 I spent a lot of time discussing with the then Minister of Energy the Hon Pete Hodgson the 2001 electricity legislation where Labour sought our support. I argued very hard for zero fixed charges. The best the Minister would offer as a compromise was the low fixed charge for those consumers who used less than half the average amount of electricity because their bills would then go down without the bills of higher consumers going up. That compromise has not been particularly effective. Power companies have all kinds of ways of disguising the fact that optional low fixed-charge tariffs exist and because it applies only to some consumers the benefits of it are actually pretty small for most people. 
This bill tweaks this situation a little bit further and it is the only legislative outcome of the 2006 Ministry of Economic Development study called  
Pricing in the New Zealand Electricity Market and its Economic Impact 
. That study found that electricity needed to be priced at marginal cost to prevent shortages and subsidies and to encourage efficiency but if all electricity was priced at this level—as it is now—it would be unaffordable for some and it would make huge windfall profits for generators which it currently does. 
The report concluded that there were three ways of addressing this problem but it recommended against all of them. The most sensible way to address the problem is through progressive pricing where all households have a basic block of power at a low price per unit and the price per unit rises with each block of power used above that. The power company receives the same total revenue but basic needs are affordable. People do not get into the situation in which the Muliaga family found itself in respect to their power bill but everybody has an incentive to conserve because the last unit that people are using always costs more than the average that they are paying. However this report advised against that because it was not consistent with the ideology of competitive market arrangements. 
Instead the Minister proposed to Cabinet that it tweak the optional low fixed charge in the South Island to recognise that the average use in the South Island is higher. That is not a bad thing to do; it will do no harm and it might do a tiny amount of good but it is actually hardly worth the legislative time that it is taking. It is a huge missed opportunity to price electricity in a way that would ensure that everyone could afford to meet his or her basic needs but would face a higher cost at the margin and have an incentive to use electricity wisely.