Franks Stephen: Electricity and Gas Industries Bill — In Committee 
Franks Stephen: Electricity and Gas Industries Bill — In Committee 
[Volume:620;Page:15710] 
STEPHEN FRANKS (ACT) 
: 
 I can see the enthusiasm among Government members for my speech. It is very interesting to go to a bill and see what is basically a 1950s sort of Stalinist regulatory prescription. This is the Minister who is going to make electricity by making rules. This Minister says that reserve energy is created by specifying the conditions of securing and using that energy and by specifying the circumstances and terms including volume and price by which that energy must or may be offered on the wholesale market. 
I ask the Minister why the Government lost its nerve to use the sort of mechanism that would have rewarded every consumer. Why does nothing in the bill enable householders who can save when we are short to get the benefit of their saving? If they will not save why does the bill not ensure that the price will give them a signal that power is suddenly more valuable when the rain is short the wind has stopped blowing and we cannot use coal because the Government has signed up to the Kyoto Protocol so that all the coal will be burned in China and India instead? 
 What is it about the market that has failed? We heard the words “market failure” tossed around but what we have is the absolutely predictable outcome of a Government looking as if it is about to panic. 
What investor is going to build any new capacity when the Government is holding a big stick out and saying: “If we don’t like the price you charge and it’s awkward and politically embarrassing we will regulate.”? Why would new capacity go in in those circumstances? 
So what we had last year was a bluff being called. When the market said: “We won’t build new capacity in these circumstances.” the Minister could then turn round and say that he had to go ahead and pay someone to build it. Of course the market is not going to agree when it has a Government that came in in 1999 saying: “We believe in looking active.”—“We as politicians will go out there and earn votes by looking as if we will thump people around who have lots of money.”; “We will thump them first with an increased tax rate and then we will thump them with regulations that tell them what price they can buy at what price they sell at how much and who they supply to.”—together with all the conditions that are now set out in clause 10 and the pages and pages of rules that the Minister can now make. Because it is patently obvious to anyone who reads those rules that it will be politically imperative to respond the next time there is any kind of crisis. 
The Minister will not be able to resist when the major electricity users group the telecommunications users association equivalent comes and says: “We don’t want to pay the real cost of reserve generation for our industries. We would much rather that you took that from the taxpayer or disguised it in a levy or seized it from consumers because you’ve got the power to do it. So please do it Minister.” How will the Minister withstand that kind of pressure? Putting that kind of regime into legislation is an absolute recipe for being able to say—for the next 25 years—that the market does not work because there will not be volunteers in a market whose building is unconstrained and when it is quite plain the Minister can stipulate its rate of return at will. 
This is that self-fulfilling prophecy: the Minister will get up and say: “I fear market failure so I’ll give myself powers to deal with market failure.” and of course there will be market failure. But it is not failure; it is simple market prudence. It is exactly what any investor would do. It is exactly what the Electricity Commissioner said when the Government came in and guaranteed the Meridian investment. The commissioner asked why people would go ahead without the benefit of a guarantee. Who will want to compete when the Government can be panicked into stepping in every time there is a complaint? 
In Part 1 we now have pages and pages of powers—or what look like powers—given to a Minister that in fact will end up as fetters. They will end up as irresistible demands on the Minister because the Minister will not be able to stand there in front of us on the  
Holmes 
 show saying: “Yes I did have the power. No I chose not to use it because I thought that using it would frighten people from investing in generation.” No this Minister will not say that. The Minister will instead pull the levers and try to look as if he is generating electricity by his rules and what we will have instead is a return to the New Zealand of the Muldoon days—the New Zealand where Mr Muldoon managed to fend it off for quite a long while.