Electricity and Gas Industries Bill — Second Reading 
Electricity and Gas Industries Bill — Second Reading 
[Volume:619;Page:14733] 
Electricity and Gas Industries Bill 
Second Reading 
Debate resumed from 5 August. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 When the House adjourned the other night we had just listened to contributions from the Hon Harry Duynhoven Brian Connell from National and the Minister the Hon Pete Hodgson. I would like to open by complimenting Brian Connell in particular. The man has a remarkable skill. He can stand and talk for 10 minutes without pausing or taking a breath and without an “um” or an “ah” and say nothing at all. I tried desperately hard to work out what message he was delivering but I could not work it out. If Don Brash had been listening he would have made a mental note or noted on his jotter pad: “For goodness’ sake don’t let Roger Sowry go just yet.” He would have written that on his pad. 
I wish to enlighten that National Party member that the free market such as was established for electricity by the Bradford reforms does not work in so far as it does not have a social conscience. That is particularly so with a commodity like electricity of which we barely produce enough to get by. We need regulation to ensure there is fair distribution. New Zealand First made that clear to Max Bradford at the time in 1998 but he did not implement it. He put a provision in an Act—which I think ACT supported from memory—that acknowledged there could be regulation but he did not put in any regulation at all. In particular he desperately wanted to amend the provisions concerning control on lines companies just before the 1999 election. I repeat the free market does not have a social conscience. We need regulation to cover that aspect. 
New Zealand First has looked long and hard at this bill. We believe that something has to be done about our electricity industry because people are hurting. We asked ourselves whether this bill addresses three specific questions. The first is whether it addresses security of supply concerns. Well it does. Whatever we say about the bill it certainly does that by giving “teeth” for want of a better term to the Electricity Commission so that the commission can ensure that all participants work for the common good. 
The second is whether the bill delivers electricity at a reasonable and fair price. New Zealanders want electricity at the flick of a switch delivered at a reasonable and fair price. 
Hon Ken Shirley 
: Market price. 
PETER BROWN 
: The honourable member is talking through his head—through the top of it not the front of it. 
This bill does nothing to ensure that electricity will be delivered at a reasonable and fair price. The Minister is about to introduce a compulsory reduced line-charge of 30c a day plus GST. People who elect to go on that will pay more for their power on a unit basis but will win in the longer run if they use less than 8000 kilowatts a year. That is a reasonable move for low-paid people or people on fixed incomes like retired folk. But in general this bill will not deliver electricity at a reasonable and fair price. 
The third question New Zealand First asks is whether the bill encourages investment so as to ensure ever-increasing capacity. We have some doubts about that. It is essential that more and more electricity is generated each year. The required estimate is something like 150 megawatts a year but we doubt whether the bill will do a great deal in ensuring supply in that respect. 
A question which we should endeavour to answer arose in the Commerce Committee of whether lines companies should be allowed to invest in electricity generation again. Members will recall that the Bradford reforms segregated lines from generation and now a good argument exists that lines companies should be allowed to come back and invest in generation. Basically put the argument is that they have the money and if they are not allowed to invest in electricity in this country then they will invest in electricity probably in Australia or worse still they will invest in some other type of industry altogether rather than in generation. So there is a good argument for allowing lines companies once again to play a major role in generating electricity. I note that Roger Sowry has announced that that is what the National Party stands for and what it will be promoting. New Zealand First is not yet convinced that that is the way to go but we do recognise it is an area of concern that we should be looking at. 
We also should acknowledge that currently lines companies can produce a little bit of electricity generation but it is very small. This bill will allow them to increase their generation somewhat but it will still be very limited. The question we should be asking ourselves as MPs representing New Zealanders is whether we should allow lines companies back in to invest in generation in an unlimited manner. In other words should we remove the cap totally? 
New Zealand First believes that this country should make better use of coal. The Government in particular tends to treat coal as a poor cousin but we have oodles of coal—something like 15 billion tonnes. Of that 15 billion it is estimated that close to 9 billion can be accessed with reasonable ease and delivered at a reasonable price. New Zealand First believes that New Zealand should be further investigating the use of coal as a fuel to generate electricity. That will not please the “greenies” or some of the other people who have concerns about it but my understanding is that most of the “nasties” for want of a better term can be taken care of—the major problem with coal is carbon dioxide. I also understand that in Australia a group has been set up to investigate modern technologies in the hope that in a few years’ time carbon dioxide can be taken care of. My understanding is that both Solid Energy and Genesis Energy pay into that. I think it is right and proper that we should be investing in research because we should be making better use of coal. 
New Zealand First desperately wants the electricity concerns in this country addressed. We know it is of major concern to retired folk and people living on fixed incomes but we do not believe that this bill as written will do it. I am hopeful the Minister will make some amendments to it in the Committee stage but at this point New Zealand First cannot support the bill. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I acknowledge the touching faith of my colleague Peter Brown in the Australian research into carbon sequestration. He hopes it will work. I guess we all hope it will work otherwise we are going to be living on an uninhabitable planet. But some of us believe it would be prudent to do more than just hope. Some of us believe it would be prudent to have an alternative strategy so that we move towards renewables if in fact coal sequestration does not work. 
We already have 50 years of experience of the nuclear industry saying: “We haven’t solved the waste disposal problem yet but let’s just go ahead and build the stations and then sometime in the future we will solve the waste disposal problem and we’ll just store it until we do.” Well they are still storing it and they are no closer to solving the waste disposal problem than they were 50 years ago when they started building nukes. Let us not do that with carbon dioxide.  
However I move on to the subject of this bill. The Greens welcome a regulator for the electricity industry. We predicted in 2000 when the self-regulating industry governing board was set up that it was unlikely to work but agreed to give it the benefit of the doubt for a while provided there were backstop provisions in the Act. An interesting analysis was published in the Christchurch  
Press 
 recently by a couple of academics from that city pointing out that it is obvious under economic theory that in an industry such as electricity competition is going to have to compete on price and that competition will prevent investing in security of supply because that raises costs. Nobody will do that and stay in the market and therefore eventual shortages are inevitable. This is what has happened in the electricity market.  
It is also noteworthy that over recent years we have moved away from competition to the establishment of virtual regional monopolies in the electricity industry as companies have retrenched to the areas where they can make the most profits and moved out of others. So we really do not have a competitive industry any longer. We also have experience of various ways in which the market can be gamed and there has been no regulator to take care of that.  
We have a very good Government policy statement in terms of what is wanted from the electricity industry but absolutely no indication that the industry unregulated can deliver those outcomes. The Government policy statement asks for energy efficiency it asks for minimizing greenhouse gases it asks for safeguarding security of supply it asks for moving towards renewables and distributed generation and to demand-side participation in the market. None of those things happened at all while the industry was in charge of itself and in the end even the industry could not agree on what the rules should be. So now we have a regulator and I am glad that we do. Of course the jury is still out on whether the commission itself will be able to deliver on those outcomes but I have a lot more confidence that it will than I did when we were looking at self-regulation.  
Let us look first at the question of security of supply which is one of the biggies. Under the bill the commission may contract for reserve generation to ensure that the lights do not go out in a dry winter and that is a very good thing. In the meantime the Government has taken some steps it tells us to secure supply by building a 155 megawatt power station at Whirinaki which is ironically replacing a very similar power station that was there until very recently. It was sold off by Contact Energy as surplus to requirements when the National Government sold Contact Energy and it was thinking only of the short term and not of long-term security of supply. However the Whirinaki station has been re-established and we are told that is for security in dry years. In fact Mr Hodgson tells us it is designed not to be used yet in this very wet year when the hydro lakes are way above their normal capacity it has already been run 12 times we learnt from the  
Dominion Post 
 recently.  
So clearly security of supply is not triggering the Whirinaki power station but price is and I have to say this is not now reserve generation that is there for use in a dry winter. It has become part of a normal operating scheduling of stations when the price looks like going up a little bit. That gives me real concern about what will happen next year if it is in fact dry. However in the absence of this legislation the commission has not had the power to set criteria for the running of Whirinaki. With this legislation in place maybe it will do so and maybe it will return to being what it was designed to be and that is a station for security of supply rather than just for keeping prices down.  
I note that the commission under this bill is empowered to levy for providing greater energy efficiency and that it has the power to put some of that money itself directly into encouraging energy efficiency on customers’ premises. We have therefore a very confused situation under law. We have a small Crown entity set up in the year 2000 under its own Act—which I must say I introduced to Parliament—which required it to develop a national energy efficiency and conservation strategy which it has done with only $12 million a year in funding and a great deal to do. Now we have a large and better funded organisation with a mandate for energy efficiency but with no guidelines at all as to how it carries that out. We assume that it will be subject to the National Energy Efficiency and Conservation Strategy but we do not know—there is no guidance at all in the legislation—and they are reduced to developing their own memorandum of understanding with the Energy Efficiency and Conservation Authority as to who is to do what in this new environment. I think that leads to a lot of operational uncertainty and I think the Government needs to tell the commission what its role is meant to be in energy efficiency rather than leaving a turf war perhaps to eventuate between its two Crown entities.  
On the question of transmission Transpower is under the amendments to this bill able to contract for distributed generation and this is exactly the sort of cost-benefit analysis and trade-off that we desperately need to have happen. Many speeches are made in this House and elsewhere about how we need to expand transmission lines because we have transmission constraints. Well in some areas we do but in other areas there is a very much cheaper and more reliable way of overcoming those constraints and that is by building small-scale capacity close to where the end-users are. There needs to be a proper analysis of each proposal to expand the lines to see which is the best way to overcome that particular constraint and I hope that will be done under this legislation.  
Finally I have to say that I do not understand why the select committee finds it necessary to allow lines companies to build generation of any kind up to 50 megawatts. We already provided in the 2000 legislation for them to have unlimited scope to build new renewable generation because that is something the Government wants to promote. The non-renewable—in other words diesel sets—were constrained to 10 megawatts or 10 percent of their load. Now all of a sudden they are to be allowed to build quite sizable fossil fuel – fired plants and given that they are capital rich and have a wish to expand I really wonder whether this will take us further from our sustainability objective and from our greenhouse gas agreements. 
Hon KEN SHIRLEY (ACT) 
: 
 The ACT party opposes the Electricity and Gas Industries Bill. In doing so we note that in many respects we are ending up with the worst of both worlds. For any country energy security is important particularly for an island nation such as New Zealand. It is fine for Germany which can import nuclear energy from across the border in France and indeed for the UK which can import energy from Europe very readily through the tunnel or whatever. But as an island nation that is quite remote we are on our own. Therefore energy security—something we have always taken for granted certainly in recent decades—is critical to us. 
 The reason I say we have the worst of both worlds is that we have abandoned the central integrated model that was run by the State up until corporatisation and market reforms in energy. That model did give security but at a price. The price was that it was inflexible. It lacked innovation and more particularly optimal pricing. We never knew whether we were doing it in an efficient optimal way because there was no pricing mechanism. The State ran it and supplied it. People say that we had cheap power. But that is a myth because it was subsidised. We had price control and it was paid for by the taxpayer. Nothing is free; it is a question of how it is paid for. We had an inefficient sector with its inefficiencies disguised through price control subsidised through taxation. That is why we were paying up to 66c in the dollar in tax. In fact many people would have been paying more indirectly for their electricity. So we embarked on the market reforms starting in 1989 and continuing through the 1990s. The problem is that those reforms were not carried through. 
We are now in a hiatus situation where we do not have competition—and we know that it is competition in markets that ensures that supply meets demand at optimal pricing—because we have ended up with State monopolies again. This Government has ensured that about 70 percent of generation is held by the State-owned enterprises—Meridian Energy Mighty River Power and Genesis Energy—which have monopolies. It gets worse. Those generating monopolies have swapped and traded the energy supply base and now are “gentailers”—generators and retailers—with regional monopolies. There is no competition. The private sector which was emerging with TransAlta and other foreign firms that were starting to invest in the New Zealand electricity sector has been driven out. The main reason those firms have left is because of Government interference—heavy-handed regulation and the Government trying to pick winners. One cannot beat city hall and one cannot compete with the State. This Government sent the signal that it would confiscate property rights and it is not alone. 
The Bradford reforms which I believe were good for the most part had some serious deficiencies. The forced split between energy companies and lines companies was not necessary. Property rights were confiscated without compensation and drove foreign investors out of this country. We should welcome foreign investment in our energy sector as our country has been built by foreign investment. Our dairy and meat industries were built by foreign investment. Vestey’s Borthwicks and all of those other big names invested in New Zealand and gave us a world-competitive meat industry. It is the same with the energy sector. We need to bring in managerial skills innovation and new technologies instead of having this xenophobic “fortress New Zealand” attitude with regard to energy. 
Regrettably this bill is heavy-handed regulation and brings in more State control. It is really a step back to what we had in the past and it will not do the job. It is a step back to heavy-handed regulation. I was appalled at what Peter Brown from the New Zealand First Party said—that markets have no social conscience. He implied that the State will somehow get it right but that has never been the case. I reiterate that the best way to have supply meet demand at an optimal price is through healthy competition. That is what we do not have in our energy sector. It is not a lack of market; we need more market and less Government if we are to have a successful energy sector. This bill is a major step back down that wrong path of more regulation and the Government trying to pick the winners. 
We have a looming energy crisis in this country and it is partly structural. We have the problems I have just outlined where we have the worst of both worlds in the situation we are in now but we also have a growing fuel problem. We know that in dry years hydropower which we are dependent on cannot sustain us. It is unreliable. It is also clear that New Zealanders do not want to dam any more rivers—as was seen in the reaction to Project Aqua. I find it a bit rich in this debate for Jeanette Fitzsimons to say that we need more local generation because we had such a proposal for the West Coast. TrustPower identified a site at Card Creek in Dobson on the West Coast where an existing power station could be upgraded from 5 megawatts to 65 megawatts. This would have made the coast self-sufficient and obviate the need to upgrade the transmission line from Kikiwa and Islington. We know of the crisis that exists in the lines situation north of Christchurch. All the West Coast is fed north of that critical node. So it was what Jeanette Fitzsimons was advocating but it was the Green Party together with the Government that condemned that very sensible sustainable renewable energy source on the West Coast. It was in a water-rich area and would not have suffered the constraints we see across the divide in the Waitaki and other Canterbury catchments. That is absolute hypocrisy. 
The Greens should walk the talk. If they say that they want local renewable hydro-energy schemes it is no good condemning a proposal such as the one outlined because it might drown a few gorse and broom bushes. They cannot have it both ways. That is the problem with the energy debate in this country—we do not want to dam our rivers we do not want to use our coal we turn our backs on the nuclear option and will not even consider it and we say that wind will provide the answer. But if we quadrupled our wind generators the energy produced would not be even 2 percent of our generation capacity. The interesting thing about wind generation is that it is more intermittent and less reliable than water. At least we can predict when it will be dry; we cannot predict when the wind will not blow. Therefore we would have to match wind generation with equivalent thermal generation to back it up. 
There are other issues. Windmills are noisy and in many people’s eyes a blot on the landscape. So there will be those who will oppose them under the Resource Management Act. The other problem as people are finding all around the world is that wind generators chop up birds. Where they are built in the flight path of our native birds large numbers will be chopped up when they fly through them. There are some serious environmental problems with windmills. The Green Party advocates for wind power and says that everything is great with wind. But I assure members that whatever option is chosen in the energy sector there are problems. That is why we need a clear direction and a clear policy. 
In conclusion the market will find the best way of supply meeting demand at optimal prices so that this country can have a competitive energy sector. This bill is a step in the wrong direction back to more heavy-handed regulation. The ACT party will be opposing it. 
GORDON COPELAND (United Future) 
: 
 United Future will support the second and subsequent readings of the Electricity and Gas Industries Bill. However as I will explain that does not in and of itself signal that we believe all is well with the electricity sector. I will refer first to some specifics arising from the bill. Following the cancellation of Meridian Energy’s Project Aqua I called upon the Hon Pete Hodgson Minister of Energy to move the 25 megawatt limitation in this bill in relation to non-renewable generation investment by lines companies. I was pleased that by way of immediate response the Minister signalled his willingness to double the figure to 50 megawatts and the bill has been amended accordingly. 
Following further discussion with the lines companies however I went back to the Minister and suggested that given the critical importance of bringing new generation on stream—whether renewable or otherwise—as quickly as possible he should look at the total removal of any limits on lines companies. In my subsequent discussions with the Minister he indicated that he maintains an open mind on that question and would be prepared on a case by case basis to look at investment above 50 megawatts by one or more lines companies but with the important proviso that it must relate to new generation. I agree with the Minister’s sentiments in that regard. The purpose of increasing the old 5 megawatt limit is to encourage new generation rather than simply to reshuffle the ownership of present generating capacity. 
 I am in constant touch with all the major players in the electricity sector and it is very clearly their consensus view that New Zealand is likely to face electricity shortages beginning in either 2006 or 2007. In addition it appears inevitable for reasons that I will mention that the price of electricity to all our industrial commercial and residential consumers looks set to rise quite appreciably also from around that date. Those dates are significant if only because they are on the other side of the 2005 election and therefore may tempt the Government into some complacency secure in the knowledge that the crisis should it occur would be blamed upon the next Government be it National-led or Labour-led. 
Any such complacency however must be dispelled immediately because this issue has the potential to seriously impede New Zealand’s economic growth and to create real hardship for our citizens. If supply were disrupted everything from the use of our computers and cellphones through to home heating and the running of our manufacturing enterprises would be disrupted and the entire engine of our economy would begin to splutter. Real jobs could be lost and New Zealand’s international competitiveness seriously eroded. Therefore these are matters of the gravest concern—indeed in my opinion they are the single greatest risk to our economic growth and prosperity in the years ahead. 
I want to identify two problems now and move on to a third in my third reading speech. The first is a shortage of fuel to meet the demand for new electricity. To meet that demand Bryan Leyland has recently estimated that we will need an average of 320 megawatts per year of new generation for the next 20 years. That is a whopping 6400 megawatts of new generation—80 percent of all that we have in service now. It is estimated that at least 4000 megawatts of that will have to come from coal large hydro or nuclear generation. Gas wind and small hydro generation—good as they may be—will come nowhere near to filling the gap. 
We may be able to lower demand growth through energy efficiency measures—and they of course have my full support and the full support of any fair-minded person—but until we actually project concrete gains from that activity into the estimates that I have mentioned then we must squarely face up to the problems that confront us. The Government must ensure that all opportunities that exist are carefully examined. Nothing must be ruled out of the mix. With that in mind I renew my call for the Government to revisit the Conservation Act of 1987 to allow potential major hydro projects to move to resource hearings where all the conservation and other factors can be exhaustively and objectively evaluated. Unless we do that we are playing Russian roulette with our own economy and it makes no sense. 
We have to get away from the false dichotomy of suggesting that conservation values and hydro schemes cannot coexist. All the evidence points the other way for we already have hydro schemes in Fiordland National Park and Tongariro National Park to mention just a couple. The Government may rest assured that I in conjunction with major players in the industry will not give up on this demand either before the 2005 election or afterwards. We cannot given the critical future that the sector faces. 
Our second major challenge is to do with the transmission grid. Our best energy resources—coal hydro and gas—are in the lower South Island. The demand growth is from one end of the country to the other but with the greatest chunk in the North Island. We need a transmission system to get electricity from the point of generation to the consumer just as we need roads to transport oil for example from our ports to the consumer. Most of the existing transmission system was built 40 years ago and is now in need of significant refurbishment and upgrading. The total bill will run into billions of dollars. This year already we have faced a crisis in the Nelson region with the spot price of electricity going as high as $10000 per kilowatt hour. That is a direct result of capacity constraints in the transmission grid in that area. I was astonished to see that occur and have asked industry players—since everyone has known that the Nelson region has grown rapidly—why on earth no one had the foresight to put in place the new transmission grid that was necessary. Their response has been along the lines that yes they knew demand was growing and that they had already gone to capacity but that no one could agree on who should pay for the necessary new lines. What a tragic and pathetic response that is. 
I can tell the House today exactly who will pay for new transmission lines: it will be either the electricity consumer through higher prices or the taxpayer. That is the reality and the Government and others should do the nation a service by being frank concerning that reality. Simply saying that the problem will be fixed does not make it so. 
The Electricity Commission established under this bill will assist that process but the Government too should examine carefully how price impacts can be mitigated in the interests of all New Zealanders and our economy. I suggest for example that the Government look at the possibility of converting Transpower from a State-owned enterprise to a Crown entity. The Government would then need to borrow the funds necessary to upgrade the transmission grid at the cheapest possible rate and to stretch the repayments over about 30 years so that the servicing of the debt would minimise impacts on electricity prices and on the overall health of our economy. 
Transmission lines have a long life so it is right and proper to stretch that debt servicing on to an inter-generational basis. Recently about 35 MPs spent a day with Genesis Energy. We were taken in a bus down the southern motorway from Auckland to visit the Huntly Power Station. On the right hand side of that highway one can see two parallel sets of transmission lines which are part of the national transmission grid. We want to upgrade those from 220 KV to I think it is 400 KV per hour. Unbelievably underneath one of those transmission grids right now as we speak brand new houses are being built. I understand that the building of brand new houses underneath the transmission grid happens nowhere else in the world. Putting those houses there means that we will be unable to upgrade those lines to the necessary capacity because it would be dangerous to the residents. As Murray Jackson the Chief Executive Officer of Genesis Energy informed us we have two options. We will either have to pull the houses down or go underground. 
So there are tremendous problems in terms of the transmission lines and the transmission grids. We need therefore to concentrate on the cash flows and address the issue of return on capital employed as we do for roads rather than through a State-owned enterprise structure because as I have already pointed out the transmission grid is the electricity equivalent. The Government cannot afford to sit back and expect the Electricity Commission to resolve these issues on its own. 
MOANA MACKEY (Labour) 
: 
 I am very happy to rise to support the second reading of the Electricity and Gas Industries Bill. I think it is fair to say that like most members of Parliament electricity is probably the single issue I get the most correspondence about—in particular correspondence around the issues of consumer protection competition and security of supply. It is for that reason that I am proud to support this bill. In particular I indicate the work that has been done by the Commerce Committee. 
This bill puts in place the decisions made by the Government this year about electricity supply security and about the governance of the electricity and gas industries. The bill will provide certainty and stability in the electricity and gas markets. It contains measures to promote the security of supply to give consumer protection competition and to improve the governance of the electricity and gas industries. In particular I draw attention to the fact that this bill updates the Electricity Act to reflect the establishment of the Electricity Commission. The Electricity Commission has come under fire from opponents to this bill but I believe that through information provision and contracting it will be able to meet its primary objectives. I think the commission will have to resort to using its regulation-making powers very infrequently. This bill is a good step in the Government’s commitment towards greater energy efficiency and a sustainable energy future and I look forward to its passage through the House. 
Hon ROGER SOWRY (National) 
: 
 It is apparent that that member has never read the bill. This bill is a shocking piece of work—an absolutely shocking piece of work. It is OK for United Future members to get up and waffle on about why they support this legislation but this bill does nothing at all to drive up investment in our infrastructure and electricity and lines companies to guarantee security of supply to see new generation facilities built to create a proper hedge market or to sort out problems that are now occurring with the market. What it does is establish a massive bureaucracy over our electricity industry. 
I want to bring to Government members’ attention the submissions from Dr Graham Scott. I wonder whether the Government member who spoke before me Ms Moana Mackey who got up to say this was a great bill has read those submissions. [ 
Interruption 
] No she has not. Well Dr Graham Scott on behalf of all the electricity companies all the generators and most of the lines companies— 
Moana Mackey 
: He’s biased. 
Hon ROGER SOWRY 
: Oh she says that he is biased. I tell the member that the lines company in the seat she wishes to stand for says—and I quote from the submission—that it has seen this legislation before “in the Eastern European nations that grew out of the Soviet Union”. That is what it thinks of this bill. 
Dr Graham Scott an eminent New Zealander who is a former Secretary to the Treasury came before the Commerce Committee and said that this legislation makes him think of legislation he has seen from the nations in Eastern Europe that came out of the old Soviet Union—and Moana Mackey stood in the House and said the bill is good and United Future members say they will support it. 
National strongly opposes this bill. We oppose the fact that the Minister can give directions to the commission so it is not independent. We oppose the fact that the commission makes the rules interprets the rules and then makes the judgment on whether an energy company has broken the rules. That is outrageous. We oppose the fact that the Minister makes decisions on what the commission must do but can then ignore the commission’s recommendations and does not have to follow them at all. We oppose the fact that under this bill Labour is corrupting the independence of the Commerce Commission by appointing members to the Commerce Commission who are joint members of the Commerce Commission and the Electricity Commission. I ask the Labour Government: who outside the Labour Party supports that? Those members should name one submission. 
Hon John Tamihere 
: Everyone. 
Hon ROGER SOWRY 
: Well Mr Tamihere who is about to launch his book says “everyone”. He should name one. None—he cannot name one because not one person outside the commission or the Labour Party supports cross-accreditation of the Commerce Commission and the Electricity Commission. So the Commerce Commission using its independent powers has to sit and make decisions on lines companies’ charges and the same members sit on the Electricity Commission making recommendations and taking orders from the Minister about those charges. It is a nonsense and it borders on corruption. It will not work and it will have to be repealed within 12 months. It simply will not work. 
No one in the industry is prepared to say it will work—not one company; not one of the State-owned generators. The Government appoints its own lackeys to the State-owned generators. The president of the Labour Party sits on the board of Genesis Power. 
Darren Hughes 
: Good fella! 
Hon ROGER SOWRY 
: The junior Government whip says he is a good fella. Well his company made a submission totally opposing this bill. Genesis Power is totally opposed to this bill. So did the president of the Labour Party tick off on the submission? Oh those members do not know about that. They are not sure about that. Perhaps he is not such a good bloke after all. 
Also this bill does not go far enough. The Minister wimped out about lines companies and decided not to let them enter into full generation. He kept a cap on them thereby giving the monopoly to the existing State generators. That is what the Minister has done; he has kept the monopoly with the existing State generators. 
But even worse is what this bill does to the gas industry. At a time when this nation desperately needs another gas find and desperately needs investment in gas infrastructure can members of Parliament believe that Labour and United Future are supporting a bill whereby if an explorer discovers gas brings the gas on shore builds the processing plant to process the gas and is using it and another explorer finds gas and wants access to the first processing plant but cannot negotiate it the Government will deem access to be given? 
So the bill effectively nationalises the gas infrastructure. Large gas explorers have been into this Parliament sat in Labour MPs’ offices and told them they will not invest in exploring while this legislation is on the books. Labour MPs have said: “We’ll go and see Harry Duynhoven about that. This cannot be right we’ll go and see Harry Duynhoven about it.” Well they might have seen Harry Duynhoven but he has done what he does best—not a thing! He has sat on his hands and hidden away and that is why this bill is such a disaster. 
I am very surprised that United Future support this legislation given the assurances that we were told those members had given people in the industry but it is not uncommon for that Christian-based party to give one assurance to one person and another assurance to a different person. That is something that those members have to live with themselves. 
The next National Government will repeal this bill. This bill is a nonsense it is growing a massive bureaucracy and it is not supported by one player in the industry or by any of our major industry groups. The major energy users in this country do not support the bill. 
Moana Mackey 
: What about the public? 
Hon ROGER SOWRY 
: Well I tell the member that we received precisely no submissions from members of the public on this bill—not one. 
Moana Mackey 
: That’s not surprising. 
Hon ROGER SOWRY 
: Oh she says that is not surprising. Well the public did not make submissions on this bill because it harms industry and does not provide competition. In her district her own energy company strongly opposes this bill. 
Darren Hughes 
: What do the consumers think about it? 
Hon ROGER SOWRY 
: Consumers thought that the part concerning consumer complaints—which is two clauses—was good. They thought the rest was nonsense and that it would do nothing for extra generation nothing for competition and nothing to drive prices down but that it would do everything to create a massive bureaucracy. That is why we oppose the bill. 
CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I rise to support the bill and all I can say to that member after that contribution is: “Isn’t Hannah’s looking good?”. Today as members look at this bill and analyse it I want to tell the truth about that member because he forgets that he sat in Cabinet and said “Yes”. He was like one of those little dolls with a spring in their necks that just nod in agreement all the time. He could not wait to say “Yes” to Max Bradford’s reforms. He was led by the nose and backed them and he still backs them—although judging from some of his quotes he does not quite know what he backs. Now he has not even been reshuffled—he has been put out to grass. He has cut and run. The energy spokesperson for the National Party on the cusp of being put out to grass to wade through a few daisies suddenly finds a voice and some intestinal fortitude on energy policy. It is great that he has done that but it is a pity he could not have done it 3 or 6 years ago. [ 
Interruption 
] Oh no. To assist the member I said that he did have and has found some intestinal fortitude. I did not say that he has none—that would have been unparliamentary. That member was the shadow leader of the House before he was put out to grass. He has found his voice though. 
We know that that National Party is split over its energy policy. The spokesperson on energy Mr Sowry said in a speech to the Electricity Industry Reform Conference on 31 May 2004 that he will “support lines companies being able to enter in generation with no limit on the amount of generation they may own”. 
Hon Roger Sowry 
: That’s right. 
CLAYTON COSGROVE 
: I am glad the member confirmed that. Yet that amounts to a repeal of National’s Bradford reforms of the 1990s. The member forgot about those yet he said “That’s right.” So now he is against the Bradford reforms. His Government and he like Noddy nodded yes to Mr Bradford. Now he has undergone a “road to Damascus” experience. He has seen the light and— 
Government Member 
: Flip-flop! 
CLAYTON COSGROVE 
: He has seen the light and has flip-flopped just days weeks or months before he wanders back to a Hannah’s shoe store and asks for his old job back. 
I ask him where his credibility on this issue is. For 5 years in Opposition Mr Sowry has sat and done nothing. Now he stands up refers to the Electricity and Gas Industries Bill and tries to shed the cloak of what he was in a National Government—a yes-man. The problem is that Mr Sowry could never learn and that is why he got done like the proverbial dog’s dinner twice by my red-headed—or red-blooded—colleague Mr Darren Hughes. He was done like dog tucker because he thinks that New Zealand communities are stupid. The problem is that they are brighter than that member will ever be and they saw through him three or four times. But today he stood up and attempted to throw off the cloak of the yes-man under the Max Bradford reforms. He told people that he has changed his mind and that his Government had got it wrong. Then he poured cold water and scorn on a bill that attempts to put right the stupidity and mismanagement of the Government that he was a senior member in. 
I ask what credibility that member has. I suggest he sit there and attempt to listen to what this bill is trying to do. The purpose of the bill is to update the Electricity Act and to reflect the establishment of the Electricity Commission. The bill is interesting. It talks about regulation. Well what the Government expects out of the Electricity Commission is for it to achieve its objectives primarily through information and contracting. Regulation-making will become a last resort. 
As I conclude I say to that member that I support this bill. I suggest he go back down his hole to his office pick up his  
Hansard 
 and read some of the things he said but that he now contradicts in this House. Mr Hughes I am sure will support me in saying that Mr Sowry should go back to the people of the electorate he once represented for a short time—Otaki—and apologise to them for the disgrace he was as a Minister and as a member of Parliament over the mismanagement of the electricity sector. 
I conclude that the truth on the matter is that if we had been having this debate with that member still in Government as a Minister we would be having it under candlelight not under light bulbs. That is the situation that his mismanagement would have produced. I invite the people of Otaki and the people of New Zealand to reflect on that member’s speech and render their verdict again—as they have done two or three times already on that member—as to the level of credibility he has even to rise and take a breath in this debate. 
PHIL HEATLEY (National—Whangarei) 
: 
 The biggest favour and the bravest favour that the National Party can do when it is elected to Government next year is to repeal this legislation. Sadly although Clayton Cosgrove says that “it attempts to fix some of the problems” in the electricity and energy industry I say that it fails. Mr Cosgrove is quite right in saying that it does attempt to put it right but I am correct too in saying that it fails—which is a sad thing. 
I was reading over the introductory speeches to the bill made by Labour Party members. There were only two sentences from a number of members but David Cunliffe launched forth with more than two; he risked more. He said—and sadly this was in November 2003: “We want the lights on. That is why we cannot afford to have another 2 years of dilly-dallying. Let us get this bill passed.” That member and his more inexperienced colleague Mr Cosgrove should be reminded that they were part of the Government for the 3 years leading up to the time of that speech. They were in the Government that Mr Cunliffe refers to as “dilly-dallying” and they were among the Government members who have come through with this bill. After those years of dilly-dallying and after 12 months of absurd bureaucracy coming together they have achieved nothing. 
This Electricity and Gas Industries Bill will determine the legislative framework for the electricity and gas industries for the foreseeable future. That is true and it is a sad thing indeed. Firstly and probably most important the bill puts together the Electricity Commission and the legislation that will underpin that commission to be an authoritative but ineffective body. The problem is: how authoritative and how effective will that body be? My concern which I would like to put to the House is how this bill—and it is a good question—promotes investment in the sector. It does not. How does this bill promote investment for security of supply? It does not. How does this bill expand compliance costs? It certainly achieves that. 
I would like to address the issue of compliance costs first. The Electricity Commission’s design creates an institution with advisory operational and regulatory roles which will place it at risk of serious performance failure and judicial review. Under the Act the commission has to be a policy adviser a proposer of regulations and rules and a purchaser or provider of market operations. That is three things. It also has to be a purchaser of reserve power and a seller of electricity in dry years. It has to be an adjudicator of fines and penalties and an industry facilitator. It has to be a promoter of energy conservation. That is eight roles. The ninth role is that it has to be a decision maker over the investment services and prices of State-owned enterprises. The tenth role is that under the Commerce Act it has to be a regulator of the prices and services of distribution and transmission companies. 
There are 10 roles. Which of those will it focus on and which ones will it bill the electricity and energy companies for? Who will fund all this? That is a good question to ask. We know that it will be the industry and ultimately the consumer. Who will determine out of those ten roles which are the priorities? Well we can see the Indians coming over the hill. We can see the levies skyrocketing. They will become taxes and there is no way that the Electricity Commission will be able to track back to the levy-payer—who ultimately will become a taxpayer—what the levies are for what roles they fund whether those roles are worthwhile funding and what value comes from it. The levy provisions are currently proposed to look far more like a tax than a cost-recovery levy and the costs imposed on the industry will be unrelated to the services provided. 
 I can tell the House that I am sure the Regulations Review Committee which I believe Richard Worth chairs at this time will be very very busy after the passage of this bill. The combination of poorly defined objectives and roles—and there are 10 of them—an open-ended power to impose levies and a limited discipline on the commission to attribute costs to services directly will see a rapid rise in the costs of operating the commission. We will see bureaucracy grow upon bureaucracy and regulation grow upon regulation and ultimately the power consumer will pay. We will keep a close eye on matters and ensure that the costs recovered from the industry are only those related to services provided to that industry—in other words the levy payer gets the benefit from the levies—and exclude services provided to the Government such as policy advice. 
Why should electricity companies and those out in the power sector be paying levies to drive the Labour Party’s policy machine? Why should they be there to drive the National Party’s policy machine or any party’s policy machine? Those levies should be related only to services provided to the industry. 
Our second major concern about the bill relates not just to compliance costs but also to issues of investment. We are quite concerned about how this bill provides very little in the way of safeguarding against the regulator changing rules related to political waxes and wanes leaping from here to there. When investment is committed by the companies they need security; they need to know what the regulations are today and what they will be in the future. If they know that a Government is going to interfere in some way—and through this bill of course the Government can having appointees to the Electricity Commission and not being subject necessarily to its recommendations—once investments are made those investments will be undermined. Therefore we ask where the incentive is to invest. 
National will not be supporting this bill. It does not support investment for security of supply. It ratchets up compliance costs and that is absolutely unacceptable to the consumer. We oppose this bill. 
A party vote was called for on the question  
That the amendments recommended by the Commerce Committee by majority be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 8; Maori Party 1; Independent: Awatere Huata. 
Question agreed to. 
A party vote was called for on the question  
That the Electricity and Gas Industries Bill be now read a second time. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 8; Maori Party 1; Independent: Awatere Huata. 
Bill read a second time.