Shirley Ken: Electricity and Gas Industries Bill — Second Reading 
Shirley Ken: Electricity and Gas Industries Bill — Second Reading 
[Volume:619;Page:14737] 
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.