Electricity Industry Reform Amendment Bill — Second Reading In Committee Third Reading 
Text is incorporated into the Bound Volume 
Electricity Industry Reform Amendment Bill — Second Reading In Committee Third Reading 
[Sitting date: 02 September 2008. Volume:649;Page:18552. Text is incorporated into the Bound Volume.] 
Electricity Industry Reform Amendment Bill 
Second Reading 
Hon LIANNE DALZIEL (Minister of Commerce) 
 on behalf of the  
Minister of Energy 
: I move  
That the Electricity Industry Reform Amendment Bill be now read a second time 
. The Electricity Industry Reform Act of 1998 required ownership separation between electricity lines companies and electricity supply companies in order to facilitate competition in the electricity industry. I actually recall being in the House when that particular interesting legislation was passed and I recall Max Bradford being the Minister responsible for it. I also recall the promises of lower costs of electricity but that was not to be.  
The reason for this amendment bill is to follow up on amendments passed in 2001 and 2003 which allowed electricity lines businesses to own generation up to specified quantities if they complied with corporate separation and arm’s-length rules. This bill seeks to encourage lines companies to invest in permitted generation particularly renewable generation. It proposes to achieve that by relaxing some of the corporate separation and arm’s-length rules relating to generation and retailing and by allowing electricity lines businesses to sell more electricity to hedge the output of their generation and to invest in generation and retail without limit outside their own lines areas.  
Of course this bill has been to a select committee since the time it was introduced so I feel that that is sufficient for my contribution on the second reading of this important legislation. I recommend the bill to the House.  
LINDSAY TISCH (National—Piako) 
: 
 It is very interesting that the Electricity Industry Reform Amendment Bill which we are having a second reading on now is in line with the National Party’s policy at the last election in 2005. Here we have a bill that will be passed and National is supporting this bill because it is something that we have identified as being important. It is actually consistent with National’s 2005 policy that would have allowed line companies to enter into generation. 
Lines companies have an interest in electricity distribution. They also have very stringent limits on what they are able to invest in at the present time. Some have the ability to invest in generation and this bill implements policy changes firstly to make it easier for owners of lines companies to sell the output of the generation they are permitted to own under the 2001 and 2004 amendments to the Electricity Industry Reform Act 1998 often referred to as EIRA. The objective is to encourage owners of lines businesses to invest in permitted generation especially generation from renewable sources. That is fine; that is something we subscribe to. It will be achieved by allowing retail sales of electricity to go up to 100 percent of the nominal annual output capacity of permitted generation by allowing trading and financial hedges by allowing grid-connected generation to count as local generation in certain circumstances by requiring at least one independent director and not permitting executive directors by allowing the same person to be a manager of both companies up to a threshold of 30 megawatts and by allowing the cost of corporate separation and compliance with arm’s-length rules. 
The second policy change is to narrow the scope of ownership separation requirements in order to focus on the geographic areas where there is potential for the exercise of market power and anti-competitive practices—namely where lines and supply are co-located. And the third main change is to amend the definition of “renewables” to include all renewable energy sources. 
We have just debated another bill that has had its third reading the Commerce Amendment Bill which adds value to the points we are now debating under the Electricity Industry Reform Amendment Bill. Year in and year out we have power shortages. Not a year goes by when there is not some concern about whether there will be enough electricity over the winter periods in particular to be able to have the lights on in our homes in Auckland and to be able to keep industries operating. Even this year with having experienced so much rain in the Waikato we find that the Southern Lakes are still below their normal levels. Yet given that we have had so much torrential rain one would expect that the Southern Lakes would have had the water. But that has not been the case and it has not been the case for over the last 9 years. One of the things in terms of generation and in terms of the whole energy sector is that this Government has made it far too difficult for investment in these areas. 
Hon Member 
: Bollocks! 
LINDSAY TISCH 
: Well it has because in the 9 years of the last National Government we put in 1600 megawatts—1600 megawatts of new electricity came on line. What has it been under Labour? What has it been under Labour’s 9 years? It has been less than 700 megawatts. So why is there no generation? Why are we having these challenges each winter as it comes up when people talk about shortages of power and of maybe having to cut back? I will tell members the statistics; I am not making them up: in the 9 years of a National Government we put on line 1600 megawatts—1600 megawatts went into the grid so that we could have security of supply in our homes in our businesses and wherever we live. This Government which is on its last legs now has put in only 700 megawatts or less over the last 9 years. That is an absolute insult when energy is part of that infrastructural area we need to be so mindful of whether in terms of energy roading or broadband. This Government is found wanting in those three areas. 
Let us put this in the energy distribution concept—electricity distribution is important in underpinning New Zealand’s economy. The Government has $6.3 billion worth of assets and that compares with Transpower’s which is separate at $2.4 billion. There are 1.9 million connected consumers. There are 149000 kilometres of lines and that compares with Transpower’s 11000 kilometres. The forecast investment is $3 billion to $5 billion over the next 5 to 10 years to meet the needs of consumers. At the moment the demand is of $3 billion to $5 billion per year and hopefully with this bill we will be able to achieve those figures because at the moment we are falling far short. Demand for electricity is growing as the economy grows while spare capacity networks have been consumed and assets are ageing. 
The digital age is driving demand for a more reliable energy supply. Our prices have declined by 4 percent in real terms since 2001. The electricity distribution sector can have an important role to play in distributed generation and fibre optics networks if regulation will allow and that is certainly what we are trying to achieve here. 
What are the potential benefits of this bill and of the Commerce Amendment Bill? There will be some certainty that there will be the $3 billion to $5 billion of new distribution investment over the next decade which could be distributed in a timely manner. The investment will improve security of supply through certainty over longer-range planning. It will increase reliability and quality. We will see new technology implemented sooner and more often. There will be a lower cost of the regulatory environment and something we are always very mindful of is that the costs associated and any regulation that goes with those costs are fair and equitable. 
The new regulatory regime will provide the environment for lines businesses to improve efficiency of energy use—for example by reducing line losses upgrading demand sites and management services and installing smart meters. A number of technologies will become available to be implemented under a new regulatory regime which of course is to increase the distribution generation. 
Strong consumer protection still remains with this bill and the bill will be beneficial to smaller lines companies. There are 28 lines companies and 16 of them are owned by trusts. The bill will be beneficial to smaller lines companies like those on the West Coast in Buller where my colleague Chris Auchinvole comes from. Those companies will be the beneficiaries of this legislation. The bill frees up small companies to get engaged in electricity generation thereby improving their income and securities of supply. It limits of course their independence on imposed costs from other generators. 
Without this bill becoming law it will be extremely difficult for us to progress and to provide that security of supply that we believe is so important. As I said this is in line with what National said in its policy of 2005. We said there that our policy was to allow lines companies to enter into generation. The select committee has made only minor changes to the substance of the bill and the changes were made unanimously. National is happy to support the second reading and we look forward to the Committee stage shortly. 
Hon HARRY DUYNHOVEN (Associate Minister of Energy) 
: 
 As the Associate Minister of Energy it is a pleasure to rise to support the Electricity Industry Reform Amendment Bill. I gave the first reading speech on behalf of the Minister the Hon David Parker on this bill. 
Can I just ask the previous speaker from the National Party whose conservation policy was announced this afternoon by the Labour Party whether National might announce another energy policy and whether National will sell the electricity assets that belong to the three State-owned enterprises belonging to the people of New Zealand. Will National sell them? There is absolute silence. The second issue is whether National’s policy is to go nuclear. Those are the two issues that the people of New Zealand are really interested in. 
In talking about this bill I say that it is absolutely needed simply because of the mess that was inherited and the number of things that over the years have proven to be deficiencies which we are now addressing. 
I commend the Hon David Parker and I commend the select committee. I think the bill is excellent and I am sure the House will pass it—perhaps not unanimously but all the thinking people in the House will pass it 
PANSY WONG (National) 
: 
 The previous speaker who has just resumed his seat is Harry Duynhoven who just typifies the concern the public have. Labour is now so bereft of any ideas that it resorts to announcing National’s policy. Labour has nothing to say. The member had nothing to say about the Electricity Industry Reform Amendment Bill. It is amazing that 9 long years ago the Labour Government thumped the table over what Max Bradford did. Does this bill reverse anything of the 1998 electricity industry reforms? What happened to Labour’s vision for energy security for New Zealanders? Where is the vision? I want to ask this question on behalf of the New Zealand public particularly the good people who live in Botany Downs who told me they are sick of hearing every winter a debate about whether there will be power cut or a blackout. Would the passage of this bill save New Zealanders from facing the awful threat of power cuts and blackouts every year?  
National will support this bill although I doubt very much that sneaking this little bill in under urgency—in the midst of the vacuum the total lack of vision concerning security of energy supply for New Zealanders—will save anyone from reliving the nightmare of the last 9 years. This is a very timid approach to electricity industry reform but unfortunately like the rest of the public we have stopped expecting any vision or any bold movements. A little bit of an improvement is almost welcome because unfortunately there is nothing on offer. So I just want to tell Labour members that although they are continuing to run out of ideas they should stop stealing National’s policies.  
It is a pleasure for me to take a short call on this short bill. It shows a lack of vision and I think it deserves only a short sharp rebuttal from members on this side of the House because I do not believe that rushing this bill through under urgency will convince New Zealanders that the 9-year nightmare of threats of power cuts will be resolved. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 Let me make it quite clear that New Zealand First supports this bill. We will support it right through the process unless something major changes during the Committee stage. But we see it as another piecemeal attempt to add to the Electricity Industry Reform Act of 1998; it is a piecemeal attempt to patch it up. National is claiming credit. In 2005 it wanted lines companies to get involved in generation. We suggested that to Max Bradford in 1998. We said he should not close the door completely on the lines companies. And what did he do? He closed the door completely on them. Let us face it the Max Bradford reforms worked at the time simply for one reason only: we had more capacity than there was demand for electricity. It set up four State-owned generators. Contact Energy was independent but owned by the State at that time and three new ones came on board so there were four competing with TrustPower Ltd to sell electricity to the country and they had more to sell than New Zealanders were using. So there was downward pressure on prices. But gradually bit by bit that was eroded. The demand went up and the capacity was not coming on stream. We were told at the time that we needed to bring in 150 megawatts or more per year. Lindsay Tisch told us that in the last 9 years 700 megawatts have come on stream. I do not know whether he is correct but I know it is a good deal less than 150 megawatts per year. 
Lindsay Tisch 
: It is less than 700. The figure’s right. 
PETER BROWN 
: I will take the member’s word but if it is not correct it is close.  
Hon Parekura Horomia 
: I wouldn’t. 
PETER BROWN 
: On this occasion I will because I think he is on the right side of it. I say to this House that concerns around electricity are major issues with the public. There is the issue of security of supply and the issue of price. [ 
Interruption 
] I think we are having a two-way conversation across the Chamber in the middle of the debate. Electricity is so much of an issue that New Zealand First has had more correspondence on this issue in the last few months than ever before. The price keeps going up. We are told we have a competitive market but the public are not seeing that. 
New Zealand First passed a remit at its recent convention. Our members want to investigate the feasibility of amalgamating the three State-owned generators—that is Mighty River Power Meridian Energy and Genesis Power. New Zealand First members want to give consideration to the feasibility of amalgamating those three. To answer Harry Duynhoven I say I have had more correspondence in recent times on this country having nuclear power. It is not a position New Zealand First supports but I have to say we have had more correspondence in recent times about going nuclear. 
Hon Dr Michael Cullen 
: It’s more expensive. 
PETER BROWN 
: It is good to hear the Minister of Finance say it is more expensive. But people are concerned about the environment and the cost. That is where we measure the debate and I would take the Minister of Finance on over that. I am not advocating it. New Zealand First’s position is to stay nuclear free but I am just pointing out the concerns of the public. They want the concerns of the electricity industry addressed. This bill goes some way towards that. It allows lines companies to get involved in generation which is something we said to Max Bradford as I recall in 1996 or 1997. So it is all very well for Pansy Wong to say National had the idea in 2005. We said and I think Labour also said at the time: “Don’t cut it straight down the middle.” This bill allows the lines companies to have more generation. 
Pansy Wong 
: Tinkering. 
PETER BROWN 
: The member should read the bill if she wants to know what it says. This bill will certainly get New Zealand First’s support. 
Let me tell the House what we should be trying to achieve as politicians in terms of energy. We want an abundance of supply. We do not want to keep worrying year after year about whether the lakes are low. We want an abundance of supply. We want a reasonable price. If we have a market then we want a genuine market where companies compete and bring the prices down. That is not happening. We want an electricity supply on a sustainable basis—I think the National members agree with that and I know that my Labour colleagues agree—and of course we want it to be as environmentally friendly as possible. Hence the public concern. 
Some members of the public probably only a small minority are writing in more and more saying that we should look more closely at nuclear power. That is not my position and it is not my party’s position but we are facing realities. There are some people out there who want to take a closer look at doing that. Just to dismiss that idea and to simply say that we will amend things here in a piecemeal attempt in the Max Bradford legislation of 1998 or whenever it was is a way forward but I say that it is not the long-term way forward. We should be looking more closely at the way we supply electricity in this country and it may well be that we will have to amalgamate the three big State-owned players or to show a little bit more vision. I do not know the answer; all I know is that this bill will make an improvement. But whatever we say this is a piecemeal patch-up job. Thank you. 
CHRIS AUCHINVOLE (National) 
: 
 I listened with interest to the previous speaker Peter Brown as I always do. I remember that I followed him in the first reading debate on this bill. I am not quite sure what it is about this Electricity Industry Reform Amendment Bill but here we are debating it in urgency. I noticed from checking back on the first reading speeches that that debate seems to have been held in urgency as well. 
The reality is that there is a great need for urgency in electricity matters—a great need—and a very dilatory approach has been taken to ensuring that we have a secure supply of electricity in New Zealand. I would vary slightly from the view of the previous speaker that we have to have an abundant supply. It is a little bit difficult to convince electricity-generating companies that they should have capital at risk of being used. I think that what we need is a sufficient supply with appropriate back-up where required. 
Hon Dr Michael Cullen 
: Hear hear! Absolutely right. 
CHRIS AUCHINVOLE 
: “Thank you very much.” I say to Dr Cullen. I thought of that all by myself. But it does follow business logic. 
There are of course costs to deferral. If we look at the sad situation of the Dobson dam which was put off for 8 years before it was morphed into the Arnold River scheme we see that there was a huge loss of opportunity cost in that. But the reality is that even though the project now has its approvals and its permits it is not guaranteed because the company involved in building it still has to consider whether it is the most attractive option for it. 
It is a delicate situation but it has not been helped by the figures given to us by my colleague Lindsay Tisch who mentioned just how short the present Government has been in producing electricity generation over the nearly 9 years of its tenure. The Minister of Energy can wax as enthusiastic as he likes about all the activity that is planned for the future current compliant projects but even he has to acknowledge—and he does—that there was a considerable lag during the middle years of this Government’s tenure. Perhaps saying “middle years” is a little unkind because it signifies that there was a beginning and that there might be an end fairly shortly. But there was a pause and that pause has not been without consequence. 
If we look at the Tasman end of West Coast-Tasman we see that there are whole industries up there that drop shifts in the winter to help conserve power which restricts their usage. Consistently now every 4 years we seem to have this stricture on power. Apart from that one of the consequences is that new companies cannot really start up unless they can anticipate having a secure supply. That is where we think this bill will help and National is very happy to support it. 
The purpose of the bill is to better ensure that costs and prices in the electricity industry are subject to downward pressure that the benefits of inefficient electricity pricing flows through to all classes of consumer and that new investments and generation from renewable energy sources occur. 
Quite apart from the other areas this legislation will be of considerable benefit to West Coast-Tasman which has smaller lines companies such as Westpower and Buller Electricity in Buller. The mission statement of Westpower specifies what it does. It distributes electricity generates electricity and provides power systems electrical contracting asset management services and electrical engineering consultancy services. It actually has quite a humming business there. The ElectroNet part of its business has about 120 very skilled employees. Both Westpower and Buller Electricity exist for the community and are owned by the community but the present legislative and regulatory charges on companies the size of Buller Electricity and the larger Westpower company are considerable. 
This bill will allow small lines companies to become engaged in generation particularly hydro schemes as the bill specifies that hydro power is renewable. Without this legislation if Westpower wished to engage in building a hydro scheme it would have to seek a special exemption from the Commerce Commission. This costs a load of hooch and is prohibitive for a small enterprise even to consider. The bill allows companies to look at having hydro schemes for an increased security of supply and a reduction of supply costs. Let us remember when we look at electricity that there is a 20 to 30 percent peak time loss of electricity simply in its transmission. Where it comes up from Lake Coleridge and across Mount Horrible through into the West Coast at peak times we have a 20 to 30 percent heat loss in transmission. In North Canterbury Marlborough Tasman and the West Coast 73 percent of the power used is brought in from outside the area. So we are almost guaranteeing that we will always have high transmission loss. 
We need to grow the telephone book on the West Coast so we need development. Without power there will not be any development. We have 56 rivers we have heaps of creeks but we have limited reservoir capacity. New systems will probably depend on run-of-river operations taking full advantage of the renewable and ever-abundant rain resource that we enjoy so much down on the Coast. There are added advantages. Westpower as I mentioned earlier has a contract subsidiary company called ElectroNet. It employs 120 people with a very high calibre high level of skills. Building generation builds career paths in that sort of company. It is with pleasure that National supports this bill which will none the less still require the National Party’s revision of the Resource Management Act for this to be a truly useful initiative. 
Bill read a second time. 
In Committee 
Part 1Amendments to principal Act  
LINDSAY TISCH (National—Piako) 
: 
 I rise to share with members some of the interesting points that have come out of this debate and out of this bill. I first acknowledge the support of the advisers who are here today because we have had a number of bills including the amendment to Commerce Act and the other power and energy ones and from a layperson’s point of view it is difficult to get involved with and come to grips with some of these complex issues. I must say we have been impressed by them and certainly I have been very mindful of their expertise. So I thank them on behalf of the National Party team.  
I refer to clause 5 “Interpretation” and I will look at the definition “renewable energy source”. It relates to a comment I made in the second reading about power generation which Peter Brown also picked up on—on the amount of generation in megawatts that had been brought online alongside those plants that had been decommissioned. If we look at clause 5 we see that “renewable energy source” means “solar wind hydro geothermal biomass tidal wave ocean current sources or any other energy source that occurs naturally and the use of which will not permanently deplete New Zealand’s energy sources …”. I will not go through the rest of the definition but in essence we are talking about renewable energy sources and the genesis of this bill is about using as much renewable energy as we can.  
So it was of interest when I spoke in the second reading to note that over the 9 years of the previous National Government 1600 megawatts of new generation came online yet over the last 8 years under Labour less than 700 megawatts has come online. I will expand on that point because it is relevant and when we look at renewable energy sources we want to see where the new generation has come from. We have those that have been commissioned and I will start back in 2000 when Contact Energy at Otahuhu B whose fuel type is gas had a capacity of 380 megawatts. I will not go through them all but Contact Energy at Te Rapa in the year 2000 which is gas had 44 megawatts.  
Just so there is a reference point here this information comes from the Ministry of Economic Development’s  
Energy Data File  
of June 2008 at page 132. That is the source of the information just in case some members may think I am making it up which I am not. That is the source. 
Russell Fairbrother 
: That’s unusual. 
LINDSAY TISCH 
: Well I am not making it up and the member will have an opportunity to articulate the Government’s point of view if he wants to take a call.  
Here is another one under gas—Genesis Power at the Huntly project in 2004 had 40 megawatts. I was fortunate to be there for the commissioning when that came online. Also here we have Pan Pac in 2005. But let us look at those of geothermal fuel - type: Todd Energy at Ngawha 2008 had 13 megawatts; Contact Energy at Wairakei had 20 megawatts; Mighty River Power at Kawerau in 2008 had 90 megawatts; Meridian Energy at Manapouri 2007 which is hydro had 130 megawatts. With TrustPower we have a wind one of 93 megawatts; Meridian Energy at White Hill in 2007 whose fuel type is wind had 58 megawatts; Genesis e3p which I mentioned before 2007 whose fuel type is gas had 385 megawatts.  
When we are looking at the whole essence of this bill it is to say that we want to have renewable energy sources. It is really interesting to see where over the last few years—in fact from the year 2000 through to 2008—the actual generation has come from. While there are new plants and what has come on stream there have also been those plants that have been decommissioned. Since 2000—once again the source is the same source—Contact Energy in New Plymouth had plant decommissioned in 2000. 
CHRIS AUCHINVOLE (National) 
: 
 In speaking to Part 1 of the Electricity Industry Reform Amendment Bill I note from the report from the Commerce Committee that the submissions fell into two opposite and probably irreconcilable schools of thought when they were being considered in the committee. I guess with electricity one should expect a degree of polarisation but there is a current of enthusiasm for progress associated with Part 1. It does not generate too many surprises and the recommendations of the select committee incorporate the best of the submission points.  
I would like to follow on from my colleague Lindsay Tisch and select that same area of significance in Part 1—the interpretation clause—which will be of particular interest to electricity lines companies consumers generators and others. The particular definition that is of interest is of a “renewable energy resource”. This is a very significant part of the bill and determines that a renewable energy resource comprises—and I will read out the list so that people are aware—“solar wind hydro geothermal biomass tidal wave ocean current sources or any other energy source that occurs naturally and the use of which will not permanently deplete New Zealand’s energy sources of that kind because those sources are generally expected to be replenished by natural processes within 50 years or less of being used”. The West Coast has 56 rivers and heaps of creeks and this means that with all the necessary compliance conditions being met and all the permits properly gained it will not be necessary now for small lines companies to seek special approval from the Commerce Commission. This means smaller companies can be spared that additional cost and can now consider getting out of the poverty trap that they were previously in.  
We do need the electricity and I would in some measure support the earlier comments of Mr Brown having said that I did not quite agree that we need “abundant” electricity. We have the abundant means of generating it already there but we do need a sufficient amount of electricity to encourage new business and development. The latest projection of power requirement or power demand increases for an area such as the West Coast which currently uses only 46 megawatts with increased dairying with increased mining— 
Hon Parekura Horomia 
: What about the East Coast? 
CHRIS AUCHINVOLE 
: We will come to the East Coast. I would have hoped the member would be the advocate for the East Coast. I am the advocate for the West Coast. But I have no objection to the East Coast. I have been up there a little bit. 
Hon Harry Duynhoven 
: Damien O’Connor does a really good job. 
CHRIS AUCHINVOLE 
: I raise a point of order Mr Chairperson. I was not aware it was normal for Ministers in the chair to interject. 
The CHAIRPERSON (H V Ross Robertson) 
: They can interject but I have my finger here and it goes on the button. Also if they constantly interject then they will be pulled up by the Chair. 
CHRIS AUCHINVOLE 
: Thank you Mr Chair. I am more than happy to advocate for the West Coast particularly in the absence of anybody else doing so. We need that electricity increase for the farms and mines that are developing in that area. It is an interesting list of approved energy sources and I look forward to checking it again in a couple of years and seeing how many of the opportunities have been taken up by small-scale operations hopefully fulfilling the purpose of this bill to drive down the cost and price of power. I note the combination of cost and price. That is a good idea so that the benefit of efficient electricity generation flows to all classes of consumers and to new investment in generation from renewable energy resources. Thank you Mr Chairman. 
PANSY WONG (National) 
: 
 According to the Minister in the chair the Hon Harry Duynhoven the Hon Damien O’Connor is doing a good job on the West Coast. The only question I have if he is doing such a good job is why the Prime Minister and the president of the Labour Party have dumped him so far down the ranking on the party’s list that has just come out. He is unlike our hard-working effective member the next MP for the West Coast Chris Auchinvole who makes so much sense. I think the people on the West Coast deserve a good effective MP. 
Given that the Minister in the chair the Hon Harry Duynhoven is looking forward to taking a call I would quite like him to stand up and explain to us a very important part of Part 1 namely clause 7. He is not very good at making comments about who is an effective MP so maybe he could try to see whether he can do a better job of explaining the meaning of “involved”. I say to colleagues that I have started to think that this bill will generate a lot of business for consultants and lawyers. Apparently there are all sorts of restrictions on who can trade with whom so therefore we get down to the nitty-gritty and have a definition of involvement. New section 7(1) to be inserted by clause 7 states: “For the purposes of this Act a person is involved—(a) in a line if the person conveys electricity by the line or owns or operates directly or indirectly the line or any other assets used in connection with the line either alone or together with its associates and either on its own or another’s behalf:”. I would really like the Minister to take a call and say how legislation that defines involvement in such a way can actually help competition or incentivise anybody to generate more electricity. Actually it gets more interesting. The definition goes on for about five more paragraphs which I do not want to bore the public with. These paragraphs get into the question of how to measure involvement. So lawyers and everybody else need to get around the definition of involvement and how to measure involvement? Is that not intriguing? 
This is very enlightened legislation because there is an example included in the bill of a company called LineCo which has a 20 percent shareholding in a joint-venture company that operates a connected 100 megawatt plant. That means that the company is involved in 20 megawatts of generation. As a very qualified accountant and a fellow member of the Institute of Chartered Accountants I can assure everybody who is listening that a 20 percent shareholding in a joint-venture company does not necessarily translate into 20 percent of the revenue generated etc. The direct relationship is not very obvious but apparently that is the formula that this company has to operate under. Therefore as the example in the bill states “LineCo can sell to connected customers”—and that is interesting; we will have to look for a definition of who is qualified to be a connected customer—“all of the total annual nominal MWh capacity of the 20 MW. The selling cap does not change in proportion to the extent of LineCo’s interest in the business selling the electricity.” I can see that even the Minister has a perplexed look on his face. I am sure that the great listeners to this debate like me really want the Minister to take a call and explain to us in very simple terms what involvement is and how one measures it. Once we get hold of this definition and measurement how can that actually encourage anybody? I can just see people lining up to get into this new legislation so they can get involved and measure how involved they get in generating the much-needed electricity to power those plants. I want the Minister to get up take a call and say how this definition and measurement of involvement can reassure people that there will be no power cuts. 
DAVID BENNETT (National—Hamilton East) 
: 
 If members look at the electricity sector over the last 9 years they will see two features that show what the Labour Government has done to the sector. The first is the tremendous increase in the cost of electricity. The Labour Government has managed to increase the cost of electricity for ordinary New Zealanders. Somehow it has managed to take advantage of the economic conditions of New Zealand and sting the New Zealand public through higher energy costs.  
The other thing that is quite interesting to look at in respect of the legacy of Labour and energy is that its policies have led to a situation where we have fewer renewables as a percentage of what this country actually produces in energy. At a time when any other country in the world is looking at increasing renewables the Labour Government of New Zealand has spent 9 years reducing the percentage of renewables in New Zealand. Is that what members call good governance? In the last week of a dying Government Labour has produced legislation to try to increase the renewable target. What kind of leadership is that? What kind of industry awareness is that? What kind of dedication to the environment is that? What kind of approach to energy issues is that? It is not good enough.  
The New Zealand public deserves better from its Government. It deserves a Government that looks forward and takes action before issues become such a distinct problem as has happened in respect of this Government. This Government has not taken the necessary actions over the last 9 years to encourage renewables. Any members who have been in touch with their constituencies would know that the individual lines companies want to have the ability to produce renewables. Many proposals in the Waikato for example have not got off the ground in recent years and this Government is waiting until the last week to put some legislation forward. The last week is when it decides to do something about it. Well it is far too little far too late.  
The reality is that New Zealand has got into a situation now where we do not have the renewable component that we are used to. It is hurting us economically and it will mean that we have to make a huge investment under a National Government to achieve that renewable target. What is more New Zealanders have had to pay for that electricity over the last 9 years and they have had to pay for dirty electricity not for clean electricity that could have helped our brand as a country and could have helped New Zealand as a leader in the renewable energy stakes. No this Government has charged New Zealanders more for electricity—for dirty electricity. Is that good policy? It is not.  
The Government has had the opportunity over the last 9 years to make structural change to make investment in electricity and to make the progress that New Zealanders demand of a Government. But the New Zealand public did not get that. The Government did not provide that leadership. This bill is just one little attempt in the last week to try to provide that leadership. Well it is not leadership.  
This bill is not leadership. Leadership is about providing some distinct vision about how we can make our renewable target a reality. That will come under the National Government because we will not walk away from the tough issues and we will not put up legislation in the last week of a term to try to find solutions. We will go out there and think about the issues provide solutions and make sure they are workable. 
The CHAIRPERSON (H V Ross Robertson) 
: The member will speak to the bill. 
DAVID BENNETT 
: And I am—to the Electricity Industry Reform Amendment Bill. When we look at this bill we see that it is far too little far too late. It does not cover the issues that the public of New Zealand have had to deal with in the sector. The bill does not deal with the increasing costs that have been put on the public and it does not deal with the lack of renewable electricity generation in this country. They are two immediate failures in the energy policy of this Government and that shows the true intention of this Government not to provide a clean green New Zealand where we can prosper and make the most of the physical attributes of this country.  
LINDSAY TISCH (National—Piako) 
: 
 I wish to conclude the points I was making in the first call I took in respect of the numbers of megawatts that have been commissioned and those that have been decommissioned. I got to the point of identifying some of the plants that have come on stream since 2000. The amount of megawatts commissioned came to 1942 megawatts but for decommissioned plants the capacity amounted to 797 megawatts. So the net figure gain is very very low compared with what it was back in the period of the previous National Government. I just wanted to finish off that point in regard to the capacity we have. 
My colleague David Bennett has talked about the amount of renewables and how they have been reduced considerably yet this bill is focused on renewable energy sources. I want to look at clause 7 “Meaning of involved”. There have been some changes here because originally an issue that one of the submitters came up with was to say that we needed to amend the definition of “involved” and this concerns clause 7. The effect of the broad definition of “involved” in the Act will be to include the generation capacity of the entire wind farm or any generation in a calculation of generator cap even if the lines business owns only a small proportion of the wind turbine. I refer to one of the submissions which was from WEL Networks and it had this to say: “One potential structure of ownership being considered by WEL Networks is the ownership of a proportion of turbines in a wind farm so as to come within limits of generation prescribed by the legislation. If the 30 megawatt restriction continues to apply in section 2(9) schedule 1 of the Act the effect of this broad definition of “involved” will be to include the generation capacity of the entire wind farm in the calculation of WEL Networks’ connected generation even if WEL Networks only owns a small portion of the wind turbine which amounts to below the 30 megawatt capacity.” So that change was made because that very good point came up during the WEL Networks submission. 
Another point I raise came from the Vector submission and relates to the regulatory impact statement consolidation of November 2007. The submission said: “If line companies invest in electricity generation it is likely to be within their own lines networks or other distributor generation. This is because generation in their own region enabled line companies to (a) develop a more diverse portfolio of assets capable of meeting consumer demand such that is possible to defer or avoid investment in new capacity and (b) ensure better local optimisation between investment in lines generation and demand sign management as noted in the November 2006 Cabinet paper.” 
It is interesting to note that when we are looking at bills we need to know exactly what the regulatory impact analysis is. A lot of bills that have come forward before this Parliament have not had a regulatory impact statement and we have seen that with the KiwiSaver legislation as an example and with the Waste Minimisation Bill. It is important that when we are looking at legislation we know what the costs associated with that legislation will be by way of a regulatory impact analysis. Those are the only points I want to bring to the attention of the Committee. There is no need for the Minister to respond to my questions unless he wants to. National is in support of this legislation and with those comments I will finish. 
Part 1 agreed to. 
Part 2Amendments to other Acts and transitional provision  
The question was put that the amendments set out on Supplementary Order Paper 242 in the name of the Hon David Parker to Part 2 be agreed to. 
Amendments agreed to. 
Part 2 as amended agreed to. 
Schedule  agreed to.  
Clause 1  agreed to.  
Clause 2  agreed to.  
House resumed. 
Bill reported with amendment. 
Report adopted. 
Third Reading 
Hon HARRY DUYNHOVEN (Associate Minister of Energy) 
 on behalf of the  
Minister of Energy 
: I move  
That the Electricity Industry Reform Amendment Bill be now read a third time 
. This bill will encourage lines companies to invest in permitted generation particularly renewable generation and it amends the Electricity Industry Reform Act 1998. That was a ridiculous ideologically driven Act passed by Max Bradford and the National Party with considerable opposition from people like myself Peter Brown from New Zealand First and others who have since come along and said that they absolutely agreed with what was done by the Opposition of that time in fighting that legislation. That legislation forced local electricity businesses to be split up into lines companies retailers and generators. It all but stopped local lines companies generating electricity despite their long history of doing so cost effectively. For example in my own area the New Plymouth Municipal Electricity Department had a very good little local hydro station which it was forced of course to separate off from the lines business. 
This bill makes four main policy changes which were outlined earlier each of which will enable lines companies to get back to generating renewable electricity. 
I thank the Commerce Committee for its work on the bill and also those who made submissions. I also thank all those who have spoken in the debate because they have raised issues that were raised during the process of this bill through the Commerce Committee. I commend the Electricity Industry Reform Amendment Bill to the House. 
LINDSAY TISCH (National—Piako) 
: 
 We have supported the Electricity Industry Reform Amendment Bill right through all its stages and it is with pleasure that I take the last call on—[ 
Interruption 
] No I think we will have other colleagues who want to have a say so I will not be taking the last call— 
Hon Members 
: Oh! 
LINDSAY TISCH 
: There is a window of opportunity and I know that my colleagues with their esteemed knowledge and expertise will want to articulate and crystallise the arguments that will be forthcoming. 
We have supported this bill mainly because of the construction of renewable energy generation capacity and that is vital for New Zealand if we are to reduce our carbon emissions. There is a strong view that if we are to be serious about carbon emissions then the whole area of renewable energy generation should factor that in. So that is one of the reasons behind what we have done here. We believe that this bill will move in that direction and help that although we have heard from my colleagues who have spoken that in fact renewable generation has gone down. That is a sad indictment on this Government—renewable generation has actually gone down. In fact the point that I made which I have made twice but I will make for the third time is that generation—the number of megawatts—in the 9 years of a National Government was 1600 yet in the last 8 years of this Government less than 700 megawatts of new energy has gone into the grid. That is an indictment on this Government. 
What this bill does and which we support of course is allow lines companies to enter into generation. That is important; it will facilitate a lot of those companies that would like to move into generation. The Commerce Committee did not make many changes because the original bill had support and with the help of the advisers—and I mentioned their contribution earlier—we were able to move this one along. The bill is beneficial to the smaller lines companies and I mentioned my colleague Chris Auchinvole from the West Coast because it is on the West Coast and in the Buller region that this bill will be beneficial. Those people will be able to capitalise on the changes that this bill envisages. The bill frees up these companies to become engaged in electricity generation thereby improving income and security of supply and limiting their dependence on the increased costs imposed costs from other generators. Without this bill if Westpower were to build a hydro scheme for example it would have to seek a special exemption from the Commerce Commission. Making an application for an exemption is not a cheap exercise and the associated costs are very restrictive. 
My final point is that the Resource Management Act is still a major impediment a major shackle that we have to get over if we are to have speedy construction of renewable energy generation. The Act needs reforming and National has a plan to do that. National will be releasing its policy on the Resource Management Act in a timely fashion but I can say that over the last few years over half of all the net generation that this Government has put in place—and that is not very much from the figures I mentioned before—has come from thermal sources and not from the renewables that we have considered. 
With those few points I will leave the final words to my colleagues who will be finalising the debate in support of this bill. 
PANSY WONG (National) 
: 
 I suppose that after 9 years of the Labour-led Government which has no vision and has taken small steps we should be grateful for tiny steps. I started to take comfort in the passage of the Electricity Industry Reform Amendment Bill because my good colleague Lindsay Tisch has said that the passage of this bill will do a lot of good on the West Coast particularly with an effective MP like Chris Auchinvole who will I am quite sure monitor its implementation. I hope he can explain “involvement” in the new section 7A “How to measure involvement” to encourage the flourishing of renewable resources in New Zealand. As we have all said for the last 9 years the volume of renewable generation of energy has gone down so for that reason National will support this bill even though it is a very tiny step towards reversing that.  
The last thing I want to say is that every time the Hon Harry Duynhoven stood up he raved against the Electricity Industry Reform Act 1998 but I have not seen any attempt in the last 9 years from that member or from any members on that side of the House to repeal the 1998 Act. I imagine that if they think the particular legislation is so bad they obviously do not have any solution. It is a pleasure to take a short call on this legislation in order to take one very small step for New Zealand humankind and to encourage more renewable generation starting from here. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 I will also take a short call mainly to respond to some of the concerns that have been raised in the debate thus far. First of all I listened with keen intent to Chris Auchinvole. He took issue with my saying that we should have an abundance of supply. He seemed to say that we should have just enough with sufficient back-up to cover for emergencies such as low lake levels and extra demand.  
I say to the honourable member and indeed to the House that if we settle for that then we will not have a true market. A true market depends on having a surplus and on having people compete because they need the incentive to sell. If we settle for having just enough with a back-up for emergencies then we might as well go back to the old ECNZ days. Indeed as I said earlier there are people in New Zealand First who want us to look at amalgamating Genesis Mighty River Power and Meridian Energy into the old ECNZ if for no other reason than that there would be only one head office and it need not be on the waterfront in Wellington.  
It is important that a genuine effort is made by generators to sell and they must have a surplus to have that genuine incentive to want to sell their products. We are talking about trading. If I want to sell something ahead of someone else I must know that if I do not sell it somebody else will otherwise it is a monopoly-type situation.  
This bill allows lines companies to produce more generation and New Zealand First supports that principally to keep us up to speed with the amount we have right now. It is not advancing the situation. The price of electricity is a very key issue for many New Zealanders and it is important that we have a structure that keeps as much downward pressure on prices as is possible. This bill will not do that. It will simply bring a little bit more electricity on board to ensure that we do not fall over in an emergency situation.  
I want to respond to Dr Cullen. He said that nuclear power is very expensive. The fact is that the infrastructure is exceedingly expensive but as I understand it the production of electricity is relatively cheap. If we compare other forms of electricity the cost of the infrastructure is reasonable but the cost of production is reasonable also.  
The reason for this country not going nuclear is a political one and it is a reason that I agree with personally. I am not advocating for nuclear power; I am simply saying that there are New Zealanders out there who say that politicians should have a closer look at it. I am not one who supports that but I say to the House that more and more people are putting up their hands to say that we should have a closer look at it. They might well be a minority a very small minority but because of the price of electricity and because of the environmental concerns more and more New Zealanders are saying: “Please have a look at it.”  
New Zealand First supports this bill but we are not kidding ourselves. It really is a patch-up bill to keep us up to speed. It does not advance the electricity industry in this country very much at all. 
HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Kia ora Madam Assistant Speaker. Kia ora tatou katoa e te Whare. The Auckland Energy Consumer Trust recently announced it would be paying dividends from Vector to 300000 beneficiaries in Auckland City Manukau and Papakura of about $320 each. This is a welcome windfall for people who have been suffering high electricity costs for far too long. It is a windfall that makes the Government’s offer of about $112 in compensation to soften the effect of the emissions trading scheme—and wait for it in 2 years’ time—look kind of measly miserly and mean-spirited in comparison. That one-off compensation payment will disappear at great speed when power bills go up about 5 to 19 percent once the electricity sector becomes part of the emissions trading scheme in 2010. 
This bill is supposed to be about developing renewable energy resources. One approach is to define “new renewables” to include hydro and geothermal power so that lines businesses can invest in them as well. This will be good news for Maori resource trusts like Nga Awa Purua which 5 months ago announced a new $450 million geothermal power station in partnership with Tauhara North Mighty River Power and the Sumitomo Corporation and which is planning a second operation at Rotokawa that will generate enough energy to power a city the size of Tauranga. We hope that any future innovation in renewables—hydro wave wind and geothermal—will include fair negotiations with mana whenua as well. 
We know that Aotearoa benefits hugely from electricity generated in Ngai Tahu - Ngati Whaoa territory even though these iwi derive very little benefit from the resource. We also know on the other hand that geothermal stations like Ohaaki can cause great damage to iwi and that in fact of the five marae in the area four of them can no longer fulfil their functions because of subsidence caused by geothermal development. Indeed the latest predictions are that within the next 5 years the area will suffer widespread flooding and that after only 10 years the whole area will be regularly underwater at high-water level on the Waikato River. With all these impacts we naturally support benefits coming back to iwi from the rich resources that drive the nation’s power stations. 
This bill also proposes to allow owners of lines businesses to get involved in generation and retail to encourage a bigger market for generation of renewable energy resources. The New Zealand Wind Energy Association welcomed this move believing that it might help to reduce potential barriers to investment by lines companies. Others however thought that the bill went too far and that relaxing the corporate separation could possibly push prices up for consumers. 
Finally the bill sets in place incentives to provide better conditions for the owners of lines businesses to invest in generation from renewable energy sources. 
The Maori Party has consistently spoken out about the need to prepare for the reality that coal gas and oil production are going to peak and we have challenged members of Parliament to work together to learn how best to adapt to the end of cheap oil and energy to become proactive and energy-literate and to properly evaluate energy options. Ohaaki for example reminds us that the environmental impacts of geothermal energy may in fact be too great to bear. We know too of marine alternatives like marine energy which is close to commercial development but we also know of the massive impact on local iwi in and around Kaipara for example of Crest Energy’s proposed harbour turbine project which will stop fishing diving and even boating across 17000 hectares of traditional fishing grounds. 
We are happy to support any idea that will help create a larger renewable energy pipeline now and we know that time is of the essence not just for the ending of urgency but for real solutions to reduce oil dependence and consumption and to our ultimately becoming energy independent here in Aotearoa. Tena koe Madam Assistant Speaker. 
Bill read a third time.