Parker David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Parker David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Volume:647;Page:15981] 
Hon DAVID PARKER (Minister of Energy) 
: 
 I am used to some level of ignorance on the part of the National Party spokesperson on energy Gerry Brownlee when it comes to the Electricity Commission and other matters of detail. But having pointed out those mistakes in a radio interview with Sean Plunket on Radio New Zealand National about a week ago I thought that by now the speech notes that Mr Auchinvole read from would have been corrected. 
Before I return to some of the misunderstandings that the National Party has in respect of the Electricity Commission I would like to correct the power crisis myth. One would think that the lights had gone out in New Zealand under the Labour Government. When was the last time New Zealand had lights going out because of a shortage of power? 
Sandra Goudie 
: Last year. 
Hon DAVID PARKER 
: No it was actually way before then. It was in 1974. New Zealand has not suffered blackouts since 1974. When was the last time street lights were dimmed—not residential lights but street lights? Street lights were last dimmed because of a shortage of electricity in 1992 under a National Government. I am not blaming that Government because in 1992 we had very very low inflows into the hydro system. It was not the National Party’s fault that the rain did not fall in 1992 but even in 1992 when we had the lowest rainfall pattern for about 60 years the lights did not go out but we did have to dim the street lights. That is the worst it has been since that time. We have not had a repeat of that since 1992. 
Chris Auchinvole 
: What about the CBD in Auckland? 
Hon DAVID PARKER 
: Under a National Government the lights went out in the CBD in Auckland. It was not because there was a shortage of generation but because the transmission assets failed under a National Government. I thank Mr Auchinvole. I understand that he is the deputy spokesperson on energy for the National Party and he does not know that basic fact. That is so typical of the member’s ignorance of these energy areas; it is second only to Mr Brownlee’s. 
We have heard this claim that the Electricity Commission does not do anything. Well of course the Electricity Commission was established in 2003 because the industry could not agree on what it needed to do to regulate itself. It was the failure of the self-regulatory model that led to the commission being set up. No progress had been made on transmission investment very limited evolution of the market arrangements had occurred anti-competitive practices were getting worse and there had been little development of the grid. There were stalemates on a number of issues. 
Chris Auchinvole 
: What’s changed? 
Hon DAVID PARKER 
: I will tell the member what has changed. Please listen because a lot has changed. The commission has focused on three areas. Firstly it is enabling transmission investments. The member says that nothing has happened. A total of $1.25 billion of grid investments was approved to March 2008—$1.25 billion. The rate of expenditure on the grid has gone up from $60 million per annum on average when that member’s party was last in power to over $300 million this year and it will rise to about $500 million next year. Grid investment has gone up hugely and the security of the New Zealand transmission grid is improving year by year as a consequence. 
Some of these reviews have saved New Zealanders hundreds of millions of dollars. The Electricity Commission has oversight of Transpower’s grid investments. It did that in respect of the Waikato upgrade and it actually knocked $150 million off the net present value—a cost that would otherwise have been paid by New Zealand consumers. There was a $150 million cost saving in respect of that one proposal alone yet Mr Auchinvole would demolish the commission; he would actually take us back to that failed system of the past. 
The commission has also completed grid reliability standards which New Zealand has never had before. We have transmission pricing methodology which is absolutely fundamental to determining who pays for what—[ 
Interruption 
] Sandra Goudie rolls her eyes makes a smart comment and says that it is unimportant. Well these are multibillion-dollar assets and who pays for them is important—critically important. This had been an unresolved issue for more than a decade under the prior unregulated mess left by the National Government and Max Bradford. The Electricity Commission has fixed it. It was a tortuously complex issue and it has fixed it. In addition to that it is investing in electricity efficiency and it is also overseeing different aspects of the system. 
The total amount that the Electricity Commission costs consumers is 1 percent of their bill not 10 percent of their bill. If we look at the bill that people pay every month we will see that it is less than 1 percent of the bill. No one would say we have hugely vigorous competition in the electricity sector as we have only five main players. In fact we really have only four big players and TrustPower which is much smaller. So we have limited competition at best. Removing the Electricity Commission would take out one of the oversights and of course that would have the effect of putting people’s prices up by more than the 1 percent that the Electricity Commission costs. 
Chris Auchinvole 
: So what do they do with it? What do they use the $230 million for? 
Hon DAVID PARKER 
: I answered that question on Radio New Zealand National the other day and I wish that National’s leading spokesperson on energy had pointed out what I had said because I pointed out the fundamental mistake in National’s logic. Most of the things that the Electricity Commission pays for have always happened will always be necessary and will always need to be paid for. Consumers pay for those things through the Electricity Commission. 
Sandra Goudie 
: What are they? 
Hon DAVID PARKER 
: Power is dispatched. Someone has to control which hydro station or other generator is turned on and off and which lines the power runs over. That is the system operator contract. That is how the whole system works. I am surprised Sandra Goudie and Chris Auchinvole do not know that. They asked me the question because they do not know the most basic things in respect of the electricity system. This is done through the Electricity Commission paying for these services which it contracts to the system operator. If we were to dump the Electricity Commission tomorrow those things would still need to be done otherwise our lights would go out. There would be no saving of costs. That costs $28 million per annum and it is 32 percent of the Electricity Commission’s reserve. It funds reserve energy—Whirinaki power station is funded by the commission. It costs $27 million per annum and is 28 percent of its cost. Again if we did not have the Electricity Commission we would still need that and it would still exist. If that were abolished as well then maybe the lights would go out under a National Government. 
The commission also funds electricity efficiency programmes. We all know that we need to spend more on efficiency in New Zealand. It actually saves us all money—it is cheaper to spend money on efficiency than it is to build more generating capacity. That costs the commission $18 million which is another 19 percent of its budget. That cost would not go away unless we stopped spending money on electricity efficiency in which case everyone’s bills would go up. The commission’s own operations cost $20 million which is one-fifth of its total budget. That one-fifth of its cost is less than 0.2 percent of our power bill. That is the cost of running the Electricity Commission. Other things are paid through them. The bill for consumers would go up by far more than that. I am afraid that this sounds like the National Party’s electricity policy for the next election. It will obviously come along and say it will dump the Electricity Commission. The last time National was in power Max Bradford and the National Government ruined the electricity system. National really is a risk as shown by its members’ ignorance on what is an absolutely fundamental part of the electricity system.