Swain Paul: Commerce Amendment Bill — Second Reading 
Text is incorporated into the Bound Volume 
Swain Paul: Commerce Amendment Bill — Second Reading 
[Sitting date: 02 September 2008. Volume:649;Page:18318. Text is incorporated into the Bound Volume.] 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 I am extremely obliged to the kind words that the previous speaker has said about me as I am in my twilight zone. 
Hon Trevor Mallard 
: Just about the statesman. 
Hon PAUL SWAIN 
: I know—just about the statesman indeed. I have my boarding pass ready to head off. 
Simon Power 
: What’s the date? 
Hon PAUL SWAIN 
: I would love to know that. The problem is that I am so far out of the loop I cannot even find it. I am part of the unbundled local loop actually. I am obliged to that member for his kind comments. I also I suppose acknowledge the fine work that the member did on the Commerce Amendment Bill as well. 
Simon Power 
: Don’t. You’ll belittle yourself. 
Hon PAUL SWAIN 
: No no. One good turn deserves another as they say. I enjoyed the work on the Commerce Committee because in fact Simon Power had his head around the bill and I thought the committee was interestingly chaired by Gerry Brownlee. Even though the member acknowledges that the bill has come through unanimously it is fair to say it did not always have a smooth passage which is often the case—[ 
Interruption 
] Well I will not even comment on that because that would ruin my speech and I am in a praising mood at the moment. The point is that Mr Brownlee had some very strong views about some things. But I thought that the debate and discussion as the member said improved the bill and I enjoyed the debate.  
I think the point that the member made about the officials is right. Mike Lear is one of those officials and of course he is an old veteran. He was around at the time when the former National Government structurally separated the electricity industry. So Mike knows things up hill and down dale when it comes to energy and it was useful to have him there during this time.  
The member Simon Power makes the point that these issues are enormously complex. One could read a speech in a couple of minutes and say a measure was absolutely necessary etc. but the truth is that when the providers of goods and services do not necessarily face competition one has to be really careful in what one does. I think the classic example of that is in the electricity sector. Lines companies for example are basically monopolies. If one tries to regulate them too tightly there is no real incentive for them to reinvest. Their reinvestment plans get altered and as a result of that the lights go out. That is the really big problem. On the other hand if one does not regulate well enough then the monopoly has the opportunity to price gouge and the consumers are really rorted. So a huge balancing act has to go on in any of those kinds of industries. I think it is a very finely balanced call and the question is always whether it is appropriate to regulate and if so how it should be done. There was a lot of really good discussion and debate around the electricity sector—a sector that I know the National members had some concerns about—and of course around airports too which I will talk about in just a minute.  
One of the important improvements made to the bill was around the purpose statement. I remember that when I became the Minister of Commerce it was a very bald statement that talked about improving competition. There was no mention of consumers in the legislation so in my time we added wording about the consumers of goods and services. What we have done now is to add on “in markets where there is little or no competition and little or no likelihood of a substantial increase in competition.” So we have tried to clarify the purpose of the legislation and I think that is an advantage.  
Simon Power talked about the issue between input methodologies and final appeals. There was lots of discussion around that. It is fair to say that the submitters were very keen on both and I think they are well pleased. In fact the reports I have had from people who have looked at and submitted on the bill are that they are pretty pleased with the outcome. I do not need to say any more about that except to say I think that that is useful. I also share the member’s concerns about the potential capacity of the Commerce Commission here. That is something that the Government will need to keep in mind when this legislation proceeds because in fact there is an enormous amount of work to be done here. I hope the commission will not be shy in coming forward if it finds that it does not have the resources to do the things that it will now be obliged to do. 
I do like the idea of what is called the new fit-for-purpose regulatory powers. Under the old regime it was either price control or not. It was an on-off switch and that was very very difficult. Having been in that position myself I know that it is very very difficult for the Minister to try to make decisions on such complicated matters. So we have a graded process starting with the very light-handed regulation of requiring information disclosure then moving to negotiation or arbitration and further on to a default/customised path which is the approach that has been taken for lines companies. So there are steps in there that can be used to avoid the problem of having to get into very heavy-handed regulation where the Government tries to second-guess market signals. The problem with regulation is that decisions by regulators are always second-best to those that the market can provide. In the first instance we are trying to get contracts negotiated between two parties. If there is a power imbalance between the parties then clearly there needs to be an independent agency like the Commerce Commission that steps in and tries to mimic what in fact a competitive industry might provide.  
I want to make just a couple of quick points around the electricity lines businesses. In that area we decided that the trusts the small consumer-owned companies would be faced with only information disclosure—and I think that is good; it will lower their compliance costs—primarily because the people who are the consumers directly elect the trustees. There is a direct relationship there although there were some issues around whether that would mean the trustees would therefore not want to make tough decisions because they would get voted out if they did. I think there is still an issue lurking away in there. We found some really interesting trust arrangements by the way. We found out that the people who appointed the trustees to Northpower were the member for Northland and the member for Te Tai Tokerau. We thought that was a fine piece of patronage and we considered looking at replicating it around the country—it was one way of dealing with the problem. I certainly would like to see that particular piece of authority in my own area. But to be fair we thought that it probably was not the right way to go and we made adjustments accordingly. Around the other electricity businesses there will be information disclosure and the new default/customised regime will apply to them.  
I have heard from the Electricity Networks Association and it is pleased with what has happened here. It gives it some certainty particularly around the transitional arrangements and the penalty regimes it was potentially facing which we have now amended.  
One of the hot issues was around airports. The issue there is whether Auckland airport is a regional monopoly. Is it a poor cousin to the powerful airlines which can fly elsewhere or is it in a position to charge airlines for things that the airlines do not think they should rightfully pay for? In the end we have decided that the airports in Auckland Wellington and Christchurch should be required at least to provide an information disclosure type of regime so that negotiation around the prices that should be paid for airport services can be effective. I personally think that is the right way to go and I will be watching to see how that pans out in the future.  
In conclusion I think the work on this bill was a really good piece of work from the committee which I enjoyed sitting on. The issues in the bill are complex. Simon Power and I had some interesting arguments and debates with Gerry Brownlee taking sometimes a more bombastic approach to the work in hand. But in the end we engaged in a good debate—a good argument—and came to the point we are now at with regard to this legislation. It was one of the times when select committees work well. As the member said the committee was chaired by a member of the Opposition. This bill is a good piece of work. I think the industry will be happy and well satisfied with it. We listened to the submissions and have come back to the House with a better product and that is due largely to the work of the officials and to some very active work from members of the select committee.  
I recommend that the bill proceed.