Brownlee Gerry: Questions for Oral Answer — Questions to Ministers 
Brownlee Gerry: Questions for Oral Answer — Questions to Ministers 
[Volume:607;Page:4540] 
8.  
GERRY BROWNLEE (NZ National—Ilam) 
 to the  
Minister of Energy 
: What did he mean when he said in relation to electricity generators “There is no benefit in the generators bringing the country to its knees because the Government would bring them to their knees.”? 
Hon PETE HODGSON (Minister of Energy) 
: 
 I was repeating the Government’s position that electricity generators must ensure that they manage any forthcoming difficulties this winter to minimise any disruption. In other words generators must make the market system work or the market system will not survive. That is a position the industry understands very well and freely accepts. It has remained unchanged since it was first given in the winter of 2001. 
Gerry Brownlee 
: Is the Minister aware that similar comments from the Prime Minister last week wiped millions of dollars off the capital value of Contact Energy; can he tell us whether he has discussed those threats with the Minister for State Owned Enterprises; and can he also tell us how bringing generators to their knees helps the current crisis? 
Hon PETE HODGSON 
: The point that I made in my primary answer and that I will make again—and that I made in the media interview that the member has decided to become excited about—is that if the competitive environment is the one in which the five generators wish to play then they ought to play. It needs to be made to work. The generators well understand that. That is why they are active with the demand-side management that is why they are active in finding more winter fuel that is why they are active in cross-insuring and so on. 
Mark Peck 
: Has the Minister received any advice recently about Government planning for more electricity generation? 
Hon PETE HODGSON 
: Indeed I have. Two pieces of advice come to mind. The first says that the Government should be more involved in planning future electricity generation. However the second says that the market is working perfectly and that a return to more central planning and State control would be a backward step. Unfortunately both these suggestions come from the Opposition spokesperson on energy. 
Peter Brown 
: Does the Minister accept that to ensure the necessary security of supply the electricity industry needs—in areas—more regulation more enterprising ideas and more investment; if he does accept these assertions what is he doing about it? 
Hon PETE HODGSON 
: Those are sufficiently broad and good ideas that it would be hard to disagree with them. 
Hon Ken Shirley 
: What if any steps does he intend taking to address the regional monopolies of the State-owned enterprise “gentailers” which allow them to price gouge major electricity users on spot-market prices while offering very unattractive hedging options? Will the Minister introduce more markets and more competition or will he retrench into ever-increasing regulation? 
Mr SPEAKER 
: Two of those three questions can be answered. 
Hon PETE HODGSON 
: It is a very good example of why the industry needs to make the competitive market work. About this time last year I drew generators in and said that we need to have more retail competition around the country. As a result of that the proportion of New Zealanders who have access to only one retailer has dropped—from memory—from about 30 percent 18 months ago to about 3 percent now. 
Jeanette Fitzsimons 
: Does the Minister agree that what would bring the country to its knees is a continuation of the present 5 percent annual growth in electricity use which requires a doubling of our whole power station capacity every 14 years; if so does he think that the National Energy Efficiency and Conservation Strategy can bring demand growth under control before it bankrupts the country? 
Hon PETE HODGSON 
: I do not accept that demand growth bankrupts a country. I do however accept that 5 percent growth if it were to occur year on year would be contrary to the idea of trying to de-link economic growth and electricity growth. The important thing about the 5 percent or 4 percent—or whatever it is—growth this month over March 2002 is that if we go back 2 years we find that growth was also about 4 percent. That is to say growth in March 2002 compared with that in March 2001 was modest indeed. 
Gordon Copeland 
: Does the Minister believe that market forces alone will supply New Zealand’s electricity demand even in low-water years or will it in his view be necessary for the Government to provide a reserve generating capability? 
Hon PETE HODGSON 
: I have never believed that market forces alone work in the electricity system and they do not work anywhere in the world. The question of whether we need extra capacity clip-on—a regulatory clip-on to the system—is one of the many issues that is being studied by the infrastructure committee of Cabinet. 
Gerry Brownlee 
: In relation to his statement regarding electricity markets and generators where he said: “This is your sandpit. You make it work or the political process will take it off you.” in what way does he intend the political process to take it off the generators? 
Hon PETE HODGSON 
: The competitive model bequeathed to me by that member’s predecessor Max Bradford— 
Gerry Brownlee 
: It was supported by Labour for 4 years. 
Hon PETE HODGSON 
: —indeed it was—needs to be made to work by those people who operate in it. I have said repeatedly on any number of occasions that the system needs to be made to work by those major players. What has happened is that we did get ourselves through 2001 though only with intervention—if you will—from a political source. We did get ourselves better competition but probably Ken Shirley would say it was still not good enough—and so would I. That is the situation we are in. We are in some form of transition and whether the market will work adequately without some further intervention is a question before Cabinet’s infrastructure Ministers. 
Gordon Copeland 
: Does the Minister agree that the current lack of new investment in electricity generation capacity has more to do with uncertainty about future fuel sources than with the wholesale electricity market structure? 
Hon PETE HODGSON 
: I rather suspect that it is a bit of each. I rather suspect that if the Maui field were running out—if you will—on time instead of 2 years earlier we would not be talking about a capacity constraint.