Fitzsimons Jeanette: Electricity (Disconnection and Low Fixed Charges) Amendment Bill — Second Reading 
Fitzsimons Jeanette: Electricity (Disconnection and Low Fixed Charges) Amendment Bill — Second Reading 
[Volume:646;Page:15448] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 This Electricity (Disconnection and Low Fixed Charges) Amendment Bill is a very unambitious little bill that will not change the status quo very much. The Greens will vote for it because it does no harm and it may do a little good but it will not take us very far towards the further unravelling of the Bradford mess that was created a decade ago now. 
Nobody could disagree that vulnerable consumers with perhaps a poor command of English with health problems on low incomes and with all the vulnerability that goes with that socioeconomic status ought to be protected from the terrible fate of the Muliaga family. I think that nobody would object to the fact that there will be guidelines that can be regulated and made mandatory if the industry does not play ball. I am quite sure that the industry learnt its lesson from the tragedy that occurred in Auckland and the publicity that surrounded it. I am quite sure that the industry will take a lot more care in future not to let that happen again but just in case there is a power to regulate here and we support it. 
The other main thing the bill attempts to deal with is tweaking the low fixed charges. Low fixed charges came about initially as a compromise offered by a former Minister of Energy the Hon Pete Hodgson when I approached him to implement what used to be Labour’s policy on energy. It is still Green policy that there should be no fixed charges. Many other industries have high overhead costs as well. They have fixed costs and they cover those fixed costs in their per unit charge. If I drive on to the forecourt to buy petrol I do not have to pay $20 to get on to the forecourt before I start filling up and then get the petrol at 50c a litre. The high fixed charges the petrol station has are covered by the per unit cost. 
So it should be for electricity because having any fixed charge is a very perverse incentive. It is a perverse incentive to save electricity because electricity at the margin is cheaper and one is locked into this fixed cost regardless of how much one uses. It is a perverse incentive to invest in energy efficiency as it mitigates particularly strongly against those on low incomes who use small amounts of power and it makes electricity proportionately cheaper for the homes with spa pools underfloor heating three bathrooms air conditioning going all summer and five heated towel rails that are never turned off. It has always been Green Party policy that there should be no fixed charges and it was for many years Labour Party policy that there should be no fixed charges but that was dropped when Labour came into Government. 
In 2000 or 2001 I debated this issue with Peter Hodgson and he offered the compromise approach whereby every company should be required to offer an optional tariff where the fixed charge was no more than 30c a day. That would make sense if people were low users and it would not make sense if they were high users. Well it was a very compromised ineffective solution as it turned out. It was probably slightly better than nothing but not a whole lot better. 
The Minister is now tweaking it so that the level at which that low fixed charge becomes economic for people varies depending on the climate zone they are in and that is a sensible thing to do too. But it does not go any way at all towards addressing the real problem of electricity pricing which is that electricity pricing is trying to do two things at the same time. It is trying to make electricity affordable for those who can least afford it and who still have to keep warm cook their food and have light. It is a social necessity and we should make sure that it is available to all citizens. At the same time the pricing needs to send a signal that people will save money if they save electricity that it is worth being efficient that it is worth putting in more efficient technology that it is worth investing in insulating houses and that it is worth putting in solar heating and all the other things that can be done. 
How do we do both those things at once? The first one requires low charges; the second one requires high charges. There is a solution to that problem. I have put it forward many times. I put it forward in my first reading speech on this bill. The solution was considered by the Commerce Committee and discounted and I put it forward again now. It is that people should pay a low rate for the first part of their power bill and pay a higher rate for the last part of their power bill. In other words the price at the margin needs to go up to give the signal that it is cost-effective to be energy efficient and the price for the baseload needs to go down to make sure that a basic amount of electricity to keep body and soul together and warm is at an affordable price. It has been done in other countries. It is entirely doable. We give every household a basic block of power at a relatively low tariff and then we have ascending steps of tariffs above that with the top tariff being quite a bit higher than it is now. 
The intent is for the overall system to be revenue neutral. We would not be asking the power companies to subsidise anything. We would simply be following the costs of supply in that our old hydro lakes which everybody deserves a share of are cheap to run and everyone should have a share of those. The power that is really expensive is the last thermal station that was built which is much more expensive to run. We should let the people who make that necessary pay those higher prices. It is a well-established formula and it could be achieved. But unfortunately there was nobody on the Commerce Committee that considered this bill who understood progressive pricing. The Greens with only six members in the House do not have the right to a seat on the Commerce Committee so we were not there to argue the case. 
The select committee report states: “Some submitters said that they would prefer progressive pricing to low fixed charge tariffs. … However we disagree with this view for the following reasons. First designing a progressive pricing scheme is complex”—well I would ask whether anybody can point to anything in the electricity industry that is not complex these days—“and raises issues such as how to prevent retailers from raising other prices to recover the loss of revenue resulting from the restriction.” Well that is exactly what retailers are meant to do. Retailers are meant to design a stepped tariff so that they recover the revenue from the top step to make up for the revenue they lose on the bottom step. That is the whole purpose of it and it is meant to come out revenue neutral. It is a little bit like a progressive tax system where people who earn only $15000 a year pay a lower rate of tax than those who earn $150000. So I do not think that the select committee’s first concern stands at all. 
The select committee report goes on to state: “Secondly a progressive pricing scheme might encourage retailers to actively seek to shed small consumers to minimise loss.” That is a genuine concern but I think that it can be managed through the regulatory system and there is a prohibition now on just disconnecting people. The report goes on to state: “Thirdly progressive pricing tends to distort marginal cost price signals resulting in less efficient consumption and investment decisions.” I am sorry but that is absolutely what it does not do. Progressive pricing gives us a high marginal price signal which encourages people to invest in energy efficiency and renewables and it thereby saves the cost of the next power station which is always more expensive than all the preceding power stations. So it is really unfortunate that nobody on the Commerce Committee was prepared to take this up and therefore the bill remains largely unchanged in this respect.