English Bill: Questions for Oral Answer — Questions to Ministers 
English Bill: Questions for Oral Answer — Questions to Ministers 
[Volume:607;Page:4275] 
3.  
Hon BILL ENGLISH (Leader of the Opposition) 
 to the  
Minister of Finance 
: In light of reports that there is an electricity supply crisis in New Zealand does he agree that a failure to act by the Government could result in significant damage to the economy; if not why not? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Yes but it is important not to jump at shadows. It is premature and unhelpful to talk of a crisis at this point. 
Hon Bill English 
: What does the Minister say to the Engineers Union when Andrew Little the national secretary of the Engineering Printing and Manufacturing Union put out a statement today saying: “We’ve got 350 workers at Pacific Steel mills sitting around twiddling their thumbs and millions of dollars of plant sitting idle because the spot prices are so erratic.”; and why is that not a crisis? 
Hon Dr MICHAEL CULLEN 
: I always thank the Engineers Union for its strong and loyal support for the Labour Party whenever I am talking to its members. Secondly I would be asking them whether this raises any questions about the nature of the electricity market which of course is an interesting question to ask the members opposite. 
David Parker 
: What steps is the Government taking in relation to the security of electricity supply? 
Hon Dr MICHAEL CULLEN 
: Obviously it is monitoring the situation closely and certainly trying to work out the likely shape of the supply situation particularly for the coming winter which relates largely to projected inflows to the southern lakes. The Minister of Energy is working closely with industry to be prepared to put in place options in the event of a shortage continuing through the winter. 
Rod Donald 
: Does the Minister intend to act on the advice of the National Party energy spokesperson Gerry Brownlee who called last Monday for projects to develop renewable energy to be abandoned; if so can he explain the logic of this approach given the current shortage of gas? 
Hon Dr MICHAEL CULLEN 
: No indeed I do not. As shareholding Minister in three of the State-owned enterprises I can say that the Government is extremely keen on renewable energy projects. Indeed projects ranging from Project Aqua through to wind energy give some of the highest prospects for meeting our energy needs over the next 3-year to 5-year period. 
Hon Ken Shirley 
: What steps is the Minister and his Government taking to address the barriers posed by the Resource Management Act and the Department of Conservation for projects such as the expansion of the Arnold River project on the West Coast? 
Hon Dr MICHAEL CULLEN 
: Apart from that project it would be hard to find any significant projects that have been held up in the last 5 years or so by anything relating to the Resource Management Act. Of course that was not the matter of the Resource Management Act; that related more to the decision taken by a consenting authority that had to be involved—the Department of Conservation. I think what has to be said in that respect is that the nature of the modern energy market tends to lead to a situation where there is perhaps insufficient reserve capacity maintained because commercially orientated producers do not wish to employ large amounts of excess capital most of the time. There is therefore a trade-off we have to consider between somewhat higher average prices and higher security of supply. 
Larry Baldock 
: Is the Minister concerned at the effect electricity blackouts or price hikes could have on New Zealand families this winter such as for example elderly people who may have to limit their heating requirements; if so what plans does the Government have to address it? 
Hon Dr MICHAEL CULLEN 
: Yes obviously that is a concern but it is true to say that if one looks at the last 2 dry years particularly 2001 and what is happening at the present time with Otahuhu B down for a few days and Huntly on half power the primary impact is on business because of the nature of the way the electricity market works. It actually works primarily to affect those large users of energy rather than domestic consumers. Domestic consumers will be faced with requests for savings of the sort that occurred in 2001 should the dry year eventuate—which looks possible at this point. 
Hon Bill English 
: Can the Minister confirm his earlier answer that the Government believes that electricity prices need to rise to solve this problem? 
Hon Dr MICHAEL CULLEN 
: It is better not to paraphrase what I said in what is a complex and difficult area of public policy. If we wish to maintain more reserve capacity—say a one in 20 dry-year capacity—that inevitably means maintaining a higher level of capital invested with the industry than would otherwise occur and that means on average somewhat higher prices than would otherwise be the case. But the lower prices are bought at the expense of very high volatility of prices as we have seen in the last 48 hours.