Smith StuartSTUART SMITH (National—Kaikōura): Well thank you Mr Chair. It's a pleasure to speak on this Fuel Industry Amendment Bill. The National Party doesn't support this bill. In fact we see some real risks with this particular bill. Price controls often have perverse effects. If they were a good idea everything would be controlled—every price would be controlled rather than it being a very rare event. We saw through the Economic Development Science and Innovation Committee very little in the way of justification for price controls. There were some significant questions around that. A good example of where price control doesn't work is in the UK with the gas market over there where price caps were brought in with rising wholesale gas prices and in fact it led to widespread failures and a de facto nationalisation of the gas industry over in that area. What's to say that's not going to happen here? There certainly hasn't been a case made for it other than wanting to have central control—unjustifiably in our view.But in new section 29A Interpretation and overview" inserted by clause 4 it goes through particularly in new section 29A(2)(a): "the Commission holds an inquiry into whether to regulate the terminal gate prices and then makes a recommendation to the Minister under section 29G:". But in new section 29A(2)(d): "for each [of the] regulated terminal gate price (or group of regulated terminal gate prices) the Commission makes a determination under section 29L specifying the pricing principles or [the] pricing methodologies that apply." So what I would like the Minister to tell us is what the definition is of the pricing principles. What pricing principles are acceptable? What pricing principles are not acceptable? I can't see any definition in the bill of what those principles are and I'd really like to hear from that. It also says "or pricing methodologies that apply." Again I would like to know what the definition of those pricing methodologies is and what would be viewed as good methodologies what would be viewed as bad methodologies. What would lead to the Minister or the commission recommending to the Minister that price controls be implemented? That is a key part to this piece of legislation and I think most members would agree that if you're going to have price controls that needs to be incredibly well defined. It needs to be beyond reproach. It's a significant impost on a free market having a body like the Commerce Commission reaching into those businesses and actually telling them how to run their day-to-day business by setting a price. How do we know? Because what normally happens is that the market will settle and the market will settle at a price that might be not the lowest price; they'll work it out not by collaborating together but with those sorts of controls in the market you're not going to find the innovators. The innovations are not going to come to lead to lower prices which is what ultimately the consumers would benefit from and our economy would benefit from but instead we'll end up with a controlled sector that will have unnecessarily high prices probably. I think that's a likely outcome from this particular bill. But if we could have an explanation for what those pricing principles are and what those pricing methodologies are that might help us understand what was the genesis for this bill and how that's mechanically going to be worked through so that we can see whether the actual work went in behind this before this came out or was it a knee-jerk reaction? There is a thing in the fuel sector known as the Gull effect—that is where the Gull company goes and sets up in business the prices drop in that region which is exactly what a free market does. That's what happens. Why don't we allow that to happen? No no because we're going to control it. It's also Timaru Oil Services and in my patch anyway NPD. They are probably the lowest. They've certainly had a lowering effect. All of the fuel companies try to keep up with them but they have innovative pricing promotions that they put out on quite a regular basis. They email their customers when it's coming up and their fuel stations are widely frequented when they've got those low-price deals on. So what I want to know is: will these pricing methodologies and pricing principles preclude companies from doing that? Why would they bother if the price is going to be fixed anyway by the all-knowing Commerce Commission? I think it's highly unlikely we'll end up with a very fair pricing regime at all; we'll end up with more expensive prices. But I'm sure that the Minister's going to give us a good answer and tell us exactly what those principles are."