Copeland Gordon: Electricity and Gas Industries Bill — Second Reading 
Copeland Gordon: Electricity and Gas Industries Bill — Second Reading 
[Volume:619;Page:14739] 
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.