Electricity Industry Bill — First Reading 
Electricity Industry Bill — First Reading 
[Volume:659;Page:8565] 
Electricity Industry Bill 
First Reading 
Hon GERRY BROWNLEE (Minister of Energy and Resources) 
: 
 I move  
That the Electricity Industry Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be referred to the Finance and Expenditure Committee for consideration. The purpose of this bill is to improve competition in the electricity industry and to constrain price increases to improve the security of supply and the management of dry years and to improve governance arrangements in the sector. The bill also generally tidies up and consolidates other electricity legislation. 
In April this year I set up a ministerial review of the electricity market in response to serious concerns about security of supply inadequate governance and rising electricity prices. The review team which included an advisory group of six independent experts released a discussion paper in August with a series of recommendations. One hundred and thirty submissions were received and considered. The ministerial review team concluded that first although a large part of the increase in electricity prices over the last decade could be justified prices have risen faster than increases in the cost of new generation; second retail margins for consumers are high and increasing and competition is weak outside the main centres and in particular in the South Island; third some generators have market power in dry years when water levels are low; and fourth current governance arrangements are unsatisfactory and could be improved. The Government made decisions earlier this month on the review’s recommendations and this bill implements those decisions that require legislation. 
I will briefly mention electricity prices. The bill includes several measures to put downward pressure on prices particularly for residential customers. The measures include a limited reconfiguration of the three State-owned generator retailers. The Tekapo A and Tekapo B stations currently owned by Meridian Energy are proposed to be transferred to Genesis Power. This will improve the geographic balance of the State-owned enterprises by giving Genesis Power a generation and retail presence in the South Island and it will increase the diversity of views of the management of hydro storage resources. The three State-owned enterprises will also be required to enter into one-off long-term financial hedge contracts and the Whirinaki power station would be as it is proposed transferred to Meridian Energy. The asset reconfiguration aims to increase competition particularly in the retail market. It is expected that the State-owned enterprises will carry out these changes at the Government’s request but there are provisions in the bill to enable Ministers to direct the State-owned enterprises and to provide immunity to directors as a backstop. That procedure has been used in previous reforms of this nature. 
It is also timely to allow the lines companies back into retailing to encourage further retail competition. Part 3 of the bill will replace the Electricity Industry Reform Act which separated the industry in 1998. The bill however retains corporate separation rules and other provisions needed to prevent the re-emergence of anti-competitive practices and to make sure that consumers benefit from the changes. The newly formed Electricity Authority will also be required to put in place a liquid hedge market and to introduce a mechanism for hedging against price risks caused by transmission constraints. These are long-overdue changes to open the market up to new generators and retailers. There are temporary backstop powers for the Minister to amend the new electricity industry participation code to deliver on these improvements if the new regulator fails to do so. 
A suggestion is also coming through that sufficient new generation is being built although there is a widespread perception that New Zealand has a fragile and vulnerable electricity supply system. Frequent dry years over the last decade have highlighted that concern. Currently some market participants have incentives to call for conservation plans to lower spot prices in tight times—in other words the participants ask others to bear costs while they get benefits. The reserve energy scheme introduced in 2004 also reduced the incentive on parties to manage risks for themselves. When the lakes get low enough the Whirinaki station has been cranked into action. Consumers over and above their prices through levies paid $90 million last year for diesel to fuel the Whirinaki power station. The bill puts in place several measures to address these issues. It does away with the reserve energy scheme retailers will be required to compensate consumers during public conservation campaigns and a floor will be put on spot prices during supply emergencies. Along with other non-legislative measures these changes are designed to improve the incentives for better management of dry years and other supply risks. 
The Electricity Commission was set up in 2003 following the failure of the industry’s self-governance arrangements. However it was poorly designed with too many objectives too many functions and too much dependence on the Government of the day. This bill disestablishes the commission and replaces it with an independent Electricity Authority. Its independence from the Government will improve certainty and predictability for the industry. The objectives of the Electricity Authority are much narrower than those of the Electricity Commission. The proposed objectives are to promote competition in the electricity industry promote the reliable supply of electricity and promote the efficient operation of the industry for the long-term benefit of consumers. In contrast the commission has all of those objectives plus fairness environmental sustainability the promotion of energy efficiency and seven other more detailed requirements. The authority’s functions are narrower and more tightly defined. Its focus will be on rule-making and on improving the operation of the market. It will develop and administer an electricity industry participation code replacing the current governance rules. Changes to the code will not need to be approved by the Minister and that will bring New Zealand more into line with Australian and British electricity regulators and regulations. 
Overlap with other regulatory bodies will be reduced and synergies will be improved by the transfer of a number of functions to other bodies. The systems operator will take over the management of emergencies as well as responsibility for forecasting and providing information on the security of supply. The promotion of energy efficiency will be considered and consolidated in the Energy Efficiency and Conservation Authority. The approval of grid upgrades will be transferred to the Commerce Commission to ensure that all grid expenditure is considered in an integrated manner. There will also be a security and reliability council to provide senior-level expert advice on security issues to the systems operator. 
The bill incorporates the provisions of the Electricity (Continuance of Supply) Amendment Bill as reported back from the Commerce Committee in July of this year. It also incorporates provisions from the Electricity Industry Reform Act which is repealed by this bill and the Electricity Act. These provisions are part of the framework for the regulation of electricity and as such fit within this bill leaving the Electricity Act to focus entirely on access to land and electrical safety matters. 
This bill implements the measures requiring legislation that come out of my review of the electricity market. I believe that the overall package of changes will help to constrain prices improve the management of dry years and ensure that the regulator is focused on making timely and overdue changes to the market. As I said at the start of my speech it is my intention at the end of this debate to move that the bill be considered by the Finance and Expenditure Committee. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 There we have it! Max Bradford is back and he looks a bit like Gerry Brownlee. Max Bradford would be very very proud of the National Government today. It has picked up his failed tertiary education reforms dusted them off and passed them through the Committee stage of Parliament this afternoon. Now it has picked up his failed reforms to the electricity industry and it is to give them another whirl as well. 
The Electricity Industry Bill is another example of National’s blind faith in the market: it believes that increased competition will lead to lower power prices. But of course that worked so well the first time around! It also believes that the market will provide security of supply. That worked really well the first time round too! Does anyone else remember that in 2001 a year after the Labour Government was elected Max Bradford was still on TV saying the market would result in lower power prices and a greater security of supply? How did that work out? We had an electricity shortage in 2001 and then we had another shortage in 2003. Now the National Government is going back to the failed policies that Max Bradford pushed through in the late 1990s. The former National Government got us into this mess and now National is getting us even deeper into it as well with its blind faith in the idea that the market will provide everything. 
One thing that people who are watching at home will have noticed from Gerry Brownlee’s speech is that there was no mention of the lower power prices that the National Party promised New Zealanders prior to the last election. Does anyone remember that? Gerry Brownlee and John Key went up and down the country talking about the fact that power prices were too high and that a National Government would deliver lower power prices. Yet nothing in this bill delivers lower power prices; it is not even close to doing that. The best that Gerry Brownlee can do is to tell people that they need to shop around. If they want lower power prices he says they need to shop around. There is nothing in this bill that would lower power prices. 
People who are watching at home will be interested to know that the Government has done absolutely nothing to address the growing gap between the prices paid by the large industrial users of electricity and domestic users. Although the prices that people at home pay for electricity have continued to go up in the last year or so the prices paid by the industrial users of electricity have gone down. Interestingly when Gerry Brownlee put his Cabinet paper through he left out the graph of power prices in the most recent year. Why did he do that? Because it highlighted the huge and growing gap between the power prices paid by people at home and those paid by the big commercial users. This bill being forced through by the Government does absolutely nothing to address that particular gap. 
Once again this bill is another example of hotchpotch legislation from the National Government which has no coherent strategy whatsoever. Gerry Brownlee promised us some time ago at the end of last year I think it was that he was going to release a new energy strategy and that it would be released at the beginning of this year. He promised that in early 2009 there would be a new energy strategy. We are still waiting for it. There is no sign of the new energy strategy from the Minister of Energy and Resources. There is no sign either of the new energy efficiency strategy that the Minister also promised. Again here we go: we have hotchpotch legislation with all sorts of different measures but there is no coherent strategy. 
One of the words that were missing from the Minister’s speech was “sustainability”. While John Key and the other representatives of the Government are overseas in Copenhagen talking about emissions reductions sustainability and climate change there has not been a single word about that in the Minister’s speech. Sustainability is invisible in this bill. There is no talk about sustainability whatsoever yet sustainability is a critical part of New Zealand’s energy future. 
The Labour Party believes that any reforms of the electricity sector need to deliver on three key priorities: sustainability security of supply and transmission and affordability and predictability of pricing. To take sustainability first I tell members that the New Zealand Energy Strategy released by the previous Labour Government was designed to achieve a low-emissions energy system with renewable sources accounting for around 90 percent of baseload generation by 2025. That was the goal. We wanted to move to a system that had more renewable electricity generation yet the Government has completely turned its back on the idea that New Zealand should have 90 percent of its baseload generation from renewable sources. Of course that is completely consistent with other measures that this Government has taken. This bill is completely consistent with the decision late last year to repeal the thermal restriction which would have meant that new baseload generation came from renewable sources unless it was required for security of supply. That was out the door as soon as National became the Government. Of course it repealed the biofuels sales obligation which would have created a sustainable biofuels industry in New Zealand reduced our carbon emissions from transport and helped to lead to a more sustainable energy future. 
There was no mention of sustainability in the Minister’s speech this evening. As I have already mentioned he announced that he is scrapping the Energy Efficiency and Conservation Strategy but he has not given a clue whatsoever as to what the new strategy will look like. That is very important in the context of the international discussions that are going on at the moment around climate change. Although the Government may be talking about reducing carbon emissions to 10 to 20 percent below their 1990 levels it is yet to articulate a single policy that will reduce New Zealand’s carbon emissions. No consideration whatsoever is given in this bill to emissions pricing. 
The second priority that I mentioned was ensuring the security of supply and transmission. I think it is important that we put the security of supply in context here because Mr Brownlee’s own ministerial review found that there had been in fact sufficient new generation to meet the demand. So there is no security of supply crisis here. The review that the Government itself commissioned found that sufficient new generation capacity had been added to meet the demand. 
In the longer term the best way for New Zealand to ensure that it has a sustainable secure supply of electricity is to make sure it is renewable because renewable energy sources—Aaron Gilmore is shaking his head and I cannot possibly understand why. A renewable energy source will naturally lead to greater security of supply because if it is renewable then it keeps on going. I will tell Aaron Gilmore what is running out: gas and oil. They will run out eventually and so will coal. If we had renewable electricity it will firstly be cheaper because as the non-renewable energy resources of the planet diminish they become more expensive and renewable energy will become relatively cheaper. In the long term the use of renewable sources will lead to lower electricity prices and to a more sustainable supply of electricity. 
I come now to the third priority that I mentioned: ensuring the affordability and predictability of power prices. Absolutely nothing in this bill will lead to more affordable electricity for New Zealanders at home who are struggling with rising power prices. Some of the power price increase can be explained by the fact that electricity in New Zealand has been very cheap over a long period of time. Maui gas ran out— 
Jonathan Young 
: It is still pumping right now! 
CHRIS HIPKINS 
: It is still pumping but it is running out. The lifting of the cap on the price of the Maui gas caused by the running down of the Maui gasfield has led to a significant increase in power prices which highlights how vulnerable our system is if we rely on non-renewable energy sources to create electricity. 
The solution is to generate more renewable electricity. There are plenty of alternatives to more hydro dams: wind farms tidal electricity and geothermal energy. Geothermal energy has been barely mentioned by the Government; no strategy for geothermal energy has come out of the Government so far. If Mr Brownlee wants to have a more secure supply of electricity then perhaps he should get his act together and start to look more closely at geothermal generation. 
This bill is another example of a bill that is driven by blind ideology on the part of the National Government and it will not work. 
Finally I want to talk very briefly about the asset swap that this bill proposes. That is another thing that will not work and I say the only people who will benefit from the asset swap are the potential private owners who want to buy the State-owned enterprises when the National Government sells them in its second term. National only ever committed itself to retain the generating State-owned enterprises in Government ownership during its first term in Government. This measure is partly driven by National’s desire to get those State-owned enterprises ready to be hocked off. It does not make any sense; it is a completely backward move. The breaking up of the Waitaki hydro system could lead to a loss of water efficiency so it is a short-term thing. Forcing Meridian Energy to take on Whirinaki could result in that station being hocked off to the private sector as well. 
This is a bad bill. It is ideologically driven and the Labour Party will be opposing it. 
AMY ADAMS (National—Selwyn) 
: 
 Is that not interesting? The National Government introduces a comprehensive electricity industry reform the Electricity Industry Bill and Labour’s response is that everything is fine and we do not need to change anything. 
Let us just recap on the last 9 years under the previous Labour Government when power prices went up by 72 percent― 
Hon Members 
: How much? 
AMY ADAMS 
: ―72 percent—compared with a 28 percent rise in inflation over that time. The Labour Government took $3.1 billion of dividends out of those power companies while prices were skyrocketing―$3.1 billion. What is Labour’s response? It says: “There is nothing to fix. Why are you guys fixing it? It’s fine.” 
The electricity industry is not fine. We have had an excellent technical advisory group looking at it. It has reported to the Minister and Cabinet has come back with a series of recommendations that will focus on three things: security of supply which is fragile and is not reliable; the inadequate inflexible and overburdened governance system; and most important why prices have been going up at such an astronomical rate under the current system. 
For us those three things mean that the system is not fine and that it does need work. So for Mr Hipkins to tell this country that everything is fine and that this Government should not be fixing anything is deluded. The electricity system needs major reform and Minister Brownlee has done the hard work that that member’s party did not do during 9 years in Government. He is now putting in place the steps to ensure the industry can have a secure supply that it can have effective governance and that we will not see future price rises galloping ahead at the rate they did under the Labour Government. 
Let us look at some of the provisions in this bill. In terms of increasing competition which is one of the major factors that will lead to lower increases in electricity prices we will now see retailing by lines companies. Automatically we will see more competition in the sector as the lines companies are allowed back into the market. To complement that the strategic asset swaps between the power companies will mean there is far less regional focus. Meridian for example will not have the monopoly it currently has in the South Island. 
I am a South Island power consumer and we pay huge power bills. I can tell members right now that in the South Island we can choose any company we like as long as it is Meridian. I ask Mr Hipkins what sort of competition that is. It is no competition at all. These asset swaps will seriously address that. Along with getting the governance under control and addressing security of supply this is the first step to a much-improved power sector in New Zealand. I commend the bill to the House. 
Hon DAVID PARKER (Labour) 
: 
 May I start by saying that I agree with the provisions in the Electricity Industry Bill in respect of penalising generators and retailers if a conservation campaign is necessary for retail consumers. Indeed I hope that I was one of those who brought to bear that thinking. Last year we had repetition of an event that occurs periodically in New Zealand. New Zealand has a very high dependence on hydroelectricity and it is true that if we have a high reliance on hydroelectricity which most of the time is a real benefit if we have a very very dry hydro inflow sequence the system comes under pressure because we do not have as much water to flow through our generators. Last year for 3 months we had the lowest inflow sequence since the 1940s―for over 50 years. 
Two things were clear from that. Firstly despite that very low inflow sequence the system coped. So despite the lowest hydro inflow sequence for 50 years we maintained security of supply in New Zealand even with the doom and gloom predictions at the time from amongst others the Hon Gerry Brownlee. Secondly it became apparent that it was easiest for industrial users and generators to sacrifice the interests of residential consumers. The industrial users generally have tariffs that are lower than those paid by residential consumers but they face a loss if they have to reduce their production as a consequence of a shortage of electricity in inordinately dry years. They resist that by complaining that other people other than them should bear the pain. In the case of electricity generators and retailers unless they have a hedged position if there is a low hydro inflow sequence they also face the real risk that they will be burnt during a low hydro year because they have an obligation to supply their big industrial users and their other users. If they cannot generate enough electricity they suffer a loss because they cannot generate as much as they have promised they will sell. So they too have a financial interest in causing someone else to turn off their electricity. 
Both of those major groups the retailer generators and the industrial users have an interest in putting the costs on to residential consumers. The cost to residential consumers is obviously higher on a per unit basis than it is to commercial users because they generally have to pay a higher per unit charge. As the system is currently configured it does not have any economic disincentive for the generators or the industrial users to prefer the interests of residential consumers or to properly take them into account. Accordingly this change to allow conservation campaigns to trigger a financial cost to the wholesalers and retailers and indirectly through that mechanism to industrial users is a welcome change to settings and I congratulate the Minister of Energy and Resources the Hon Gerry Brownlee on following that through. 
However there are some other problems. I agree with Chris Hipkins in that I cannot see the sense in breaking up the Lake Tekapo assets. The Waitaki system assets run from Lake Tekapo though the Ohau canals through the Pukaki system through Benmore through Aviemore then the Waitaki system. They are all hydrologically linked. They are most efficiently run as one unit. This bill is putting an artificial financial market outcome higher than the natural physical configuration of these assets. That is not good policy. It will increase costs in the long term it will see the water less efficiently used and it will add to the costs of the generators because we will have different engineers and different managers of these same assets that are in physical proximity to each other. It just does not make sense so that is a mistake. 
The next mistake is in respect of the abolition of some of the Electricity Commission’s powers. Let us reflect on why the Electricity Commission was formed. Max Bradford’s reforms had this fiction that we would somehow have competition in lines companies. As a consequence there was a rule for Transpower—the organisation that runs the backbone of New Zealand’s wires. There is only one it is an absolute monopoly and there will never be competition in it. Yet Max Bradford had a rule that was written by Treasury for him and was put into effect by the last National Government. It said that Transpower could invest in upgrades only if its customers agreed that the upgrade was necessary. It was a nonsense. Meridian Energy Mighty River Power Genesis TrustPower and Contact Energy would never agree. As a consequence TrustPower never had any confidence that it would get paid for additional investment that needed to be made in our transmission infrastructure so it did not make it. That is absolutely reflected in the amount of money that was spent on transmission upgrades in the period of the late 1990s and early 2000s when that rule applied. The amount that was spent was less than $100 million per annum. In fact sometimes it was in the tens of millions—closer to zero than to $100 million per annum. 
Since we have changed that rule because investment in transmission capacity was most obviously overdue transmission expenditure has increased not twofold not threefold but tenfold. There has been a tenfold increase in transmission expenditure. That comes with risk; the risk for a monopoly is that it will over-invest in its infrastructure. We have to control against over-investment as well as under-investment. We did that through the Electricity Commission. Through the Electricity Commission we have had approvals of the big upgrade through the Waikato. That upgrade process saved New Zealand consumers about $70 million because it knocked costs off an overly costly model that was initially proposed by Transpower. We have had approval of the new HVDC upgrade across Cook Strait. We have had approval for a ring supply into Auckland; there has been a linear supply into Auckland and when we had the outage at Otahuhu a few years ago we saw how fragile that supply was. If a linear supply breaks—and there is always a risk that kit will break—there is no alternative way to route power into Auckland to any substantial degree and therefore we have moved to a ring route to Auckland which is well through the Electricity Commission process. We have had upgrades in the South Island. We have a tenfold increase in expenditure on transmission and it was necessary. 
We have also had good transmission planning. We told the Electricity Commission throughout the previous Labour Government that we wanted more renewables. The Government is now saying that those environmental outcomes are irrelevant to replacement for the Electricity Commission. That is a mistake. Through those prior provisions or the current provisions in the principal Act we told the Electricity Commission that renewables were important. The commission had a look at the issue it saw that geothermal was the important source of new renewables in the central North Island and it came forward with plans to approve major expenditure on what is called the Wairakei Ring to get all of that geothermal out of the central North Island into the points of demand in Auckland and also south of Auckland. The current provisions work well there compared with the prior provisions of Max Bradford. 
In terms of allowing lines companies to re-enter retailing that was impossible under the Max Bradford reforms because again they were left unregulated. Despite being absolute monopolies those local lines companies were left unregulated. Some of them overcharged and under-invested so consumers ended up paying twice once through the inflated prices which were unregulated until the previous Labour Government resolved that and second because these companies had distributed all their profits consumers had to put up with the reality that additional money was needed for spending on that infrastructure. Now that those lines companies are regulated in their price path through the Commerce Commission it is probably not so bad if they re-enter retail competition. We will look at that. But it is nonsense that we are taking energy efficiency concerns from the Electricity Commission. We now have a system where all of the participants have an interest in selling more electricity rather than there being an economic return on increased efficiency to sell less. The Electricity Commission was not the whole answer to that but it was making progress—it brought forward energy-efficient light bulbs in New Zealand. Gerry Brownlee does not like energy-efficient light bulbs but the Electricity Commission did very well in bringing them forward. 
John Hayes 
: Nanny State! 
Hon DAVID PARKER 
: That is just absurd. Helping New Zealanders have lower power prices through improved efficiency makes economic as well as environmental sense. I am dismayed that the National Government does not see that obvious truth even now. So taking away the commission’s conservation function is nonsense. Indeed I think that the Government should be pursuing something Labour started in Government but did not finish which was to give an economic reward to lines companies for increases in efficiency and investment in efficiency rather than just rewarding them for additional sales of power. I think it is still a moot point as to whether there is sufficient competition in electricity. I do think this bill cures the problems identified by the Wolak report. It really is just changing seats rather than changing the fundamentals of an ineffective market. 
DAVID CLENDON (Green) 
: 
 The one proposition that the Greens can agree with in the Electricity Industry Bill is that there is certainly work to be done and considerable scope for improvement in the interests of assuring a reliable and affordable supply of electricity to New Zealand homes and businesses. The reforms dating back to 1998 which is over 10 years ago have clearly fallen well short of delivering on the outcomes that were promised at that time. The intention of this bill appears to be at least to remedy some of the issues around security and pricing and that intention can only be applauded. However the Greens will not be supporting this bill given that it would be relying far too heavily on one key assumption and one mechanism. That singular focus represents a missed opportunity—indeed a number of missed opportunities—to make more meaningful and positive changes in the sector. 
The bill seeks to promote increased competition within the sector and relies on that competition to effect efficiencies that will flow on if not to give price reductions to consumers then at least to slow or stabilise the inexorable rises in electricity prices that we have seen since the last major round of reform a decade or more ago. We could support moves to make the electricity retail market more competitive and more efficient if we thought it likely that the reforms would deliver economic and environmental benefits. But there is a distinct lack of evidence that in a market of the size and nature of New Zealand’s this proposed model would achieve those goals. 
One of the many options missing from this bill is any reference to the real solution or set of solutions that must address issues of demand and conservation of energy rather than be so tightly focused on managing and manipulating the price of supply. We can remake and remodel the electricity retail sector but that will do little to affect the fundamentals of supply and demand. We will look in vain for long-term sustainable savings for households or businesses until such time as we invest in energy conservation measures and provide incentives for a distributed supply network based on renewables. This proposal to effectively reshuffle the deck in regard to ownership of the key assets of the three State-owned enterprises may serve to avoid the so-called regionalisation of competition but along with the so-called virtual asset swaps the obligation to enter into long-term hedging contracts would seem to add up to very complex mechanisms inevitably with a very high level of transaction cost. The previous speaker David Parker noted the attempt to impose an economic solution in a context where ecologically and physically it makes no sense. 
The proposal to disestablish the Electricity Commission in favour of a much more narrowly focused electricity authority is also of concern. The commission has had some success. It has built up a level of expertise and skills that are likely to be lost to the sector and the reduced ambit of the new authority reflects an unfounded confidence in market solutions. It puts responsibility for key outcomes in places where there is little or no likelihood of them being adequately managed. We are far from persuaded that the proposed reallocation of other functions of the commission would in fact be picked up in any satisfactory way. The expectation that the Minister should be responsible for making regulations to ensure fairness in dealings between retailers and distributors and their consumers represents a triumph of hope over experience given that conflicting political and economical demands and expectations are sure to land on that Minister. 
The bill proposes that the promotion of energy efficiency should be consolidated in the Energy Efficiency and Conservation Authority but nowhere does it reflect on any increase in the Budget or other resources available to that agency to advance that work. We would argue that in any case every agency involved in the electricity supply chain should be actively engaged in the promotion of energy efficiency and demand reduction. 
The proposal that generic environmental policy and law notably the Resource Management Act should be relied upon to ensure the environmental sustainability of the sector is a remarkably disingenuous approach which denies the value of a national strategy for a sustainable supply that could help to future-proof the industry and protect its consumers. The generic approach ignores the reality that Resource Management Act provisions have often been inadequate to prevent the consenting of some projects like the wholly unsustainable Rodney Power Station proposed by Genesis. The residents and other objectors very early in that process recognised there could be no certainty of gas supply to fuel it and even less certainty that the gas might be available at a price that would make the project viable although the applicant has only much more recently arrived at that same conclusion. 
We note that there is no place reserved on the new governing authority for consumers or a consumer advocate despite the fact that they are paying nearly half of the electricity industry revenues. This seems to continue a trend of diminishing opportunities for public participation which was much in evidence in the Auckland governance legislation debated earlier this evening and in the reforms of the Resource Management Act pushed through Parliament earlier this year. 
There is some very poorly targeted spending proposed in the bill including the expenditure of some $15 million over 3 years to promote customers switching between retailers. One would have thought that if the provisions of the bill could achieve a more competitive market as its proponents would suggest then consumers would be astute enough to manage their own switching as indeed they do in the telecommunications market with no substantial contribution of funds from the Government. That proposal would almost certainly be a gift primarily to the advertising industry which would be employed by the power companies to sell the real or imaginary benefits of dealing with one or another of the companies. The added cost of that would just as surely land on consumers in the long-term as we saw in the tertiary education sector when it was encouraged to adopt a competitive approach to the provision of education. Rather than spending $15 million on that rather peculiar market intervention it seems much more sensible to fund for example another green solar water heating programme which could add a further 15000 solar water heaters to homes thus saving householders significant amounts on their bills and reducing the pressure for increased supply. 
Another way to much better spend $15 million would be to invest in the roll-out of smart meters in people’s homes. One of the specific recommendations of the ministerial review that did not get picked up in the legislation was the development of smart meters. The nearest the bill comes to incorporating this recommendation is in clause 120 where there is a brief reference to the creation of flexible tariff options for the consumer and smart meters are certainly a tool that can facilitate that. The Parliamentary Commissioner for the Environment has made a powerful plea for smart meters and in particular a smart meter protocol ideal for New Zealand’s needs the so-called ZigBee protocol which has had widespread use in North America and which has been mandated in the Australian State of Victoria. A rapid adoption of the commissioner’s recommendation would be an enormously valuable addition to this bill. Smart meters and the in-house display units that can sit alongside them have been shown to reduce power bills by some 5 to 15 percent purely through increasing householder awareness of their power usage. Smart timers and plugs are readily available and could save householders money and reduce demand immediately and we could expect to see smart appliances on the market very quickly once meters were installed to exploit their benefits. The Greens entirely support the parliamentary commissioner’s recommendation in respect of meters and to that end Jeanette Fitzsimons has drafted a member’s bill. 
In announcing the review the Minister of Energy and Resources Gerry Brownlee indicated his attraction to the idea that consumers could be compensated in the event of there being conservation campaigns particularly in dry years. I return to my earlier point that far from discouraging energy conservation we should always and everywhere be encouraging it in residences and businesses and in good and bad years. The analysis that was done by Professor Wolak indicates considerable questions about whether the proposed penalties on suppliers would in fact be a particularly effective tool given the history of the large profits made in the sector that will be scarcely dented by the proposed penalties even in dry years. 
Climate change and the end of cheap oil will have massive implications for the price and security of energy given that we are at the end of a very long supply chain. This bill fails to even recognise those threats. It fails to incentivise solutions based on the investment and development of green technology and on renewable distributed generation so it will not be supported by the Greens. Thank you. 
JOHN BOSCAWEN (ACT) 
: 
 It is a pleasure to rise on behalf of the ACT Party to speak on the Electricity Industry Bill. 
I start by thanking the Minister of Energy and Resources the Hon Gerry Brownlee for the way that he has involved the ACT Party in the preparation of this bill and bringing it to Parliament. National has been very good at consulting with one of its confidence and supply partners. The ACT Party will support this bill being referred to the Finance and Expenditure Committee on its first reading. We look forward to hearing submissions on the bill in the committee and to hearing the views of New Zealanders and those with expertise in this area. 
Listening to this debate this evening one would think that the Labour Party is concerned about electricity prices. One might be excused for thinking that the Labour Party actually cares about how much electricity prices go up and how much ordinary New Zealanders—mums and dads—have to pay for their electricity. Nothing could be further from the truth. We heard from Amy Adams just a few minutes ago. She talked about how power prices had gone up by 72 percent in the last 8 years against a CPI that had run at 28 percent. So in the last 8 years under the Labour Government electricity prices came close to doubling. What do we hear from Chris Hipkins? He interjected across the House asking whether power prices are going down. He said that there is no mention of the lower power prices that the Prime Minister and the Hon Gerry Brownlee talked about when they campaigned up and down this country. 
I would like to take members back just 2 weeks to when we were debating amendments to legislation on the emissions trading scheme. The Labour Opposition strenuously opposed those amendments—strenuously opposed them. What did those amendments do? One of the things those amendments did was delay a 10 percent increase in the price of electricity from 1 January 2010—a 10 percent increase I say to Mr Hipkins. It may not concern the Labour Party that electricity was to go up by 10 percent on 1 January 2010 because when electricity has already gone up by 72 percent in 8 years what is the problem with another 10 percent? Labour members have come along to this House this evening pretending to be concerned about ordinary New Zealanders. The Labour Government passed an emissions trading scheme that would have imposed a cost on emissions that would have led to an anticipated 10 percent increase in the price of electricity. 
Hon Darren Hughes 
: $110 billion. 
JOHN BOSCAWEN 
: Only $10 billion the interjections come. A 10 percent increase in the price of electricity. 
The previous emissions trading scheme was strenuously opposed by the ACT Party. It was also strenuously opposed by National when it was debated in this Chamber last year before the change of Government. But sadly what did we see from the National Government? We saw an amending bill that rather than imposing a 10 percent increase from 1 January increases electricity prices from 1 July next year. So electricity prices are to go up. The good news is that they are to go up by only a further 5 percent and that increase will be delayed for 6 months. Electricity prices will go up by a further 10 percent in 2013 which is 2½ years later. 
Labour members come along here this evening to have us believe that they are concerned about the price of electricity going up. They talk about the mums and dads the homemakers and the residential consumers having to pay more for their electricity. If it had not been for that amending bill that went through electricity would have gone up by 10 percent on 1 January next year which is just 15 days away. 
But it is worse than that because the emissions trading scheme works by adding 10 percent to the price of all electricity that is sold. Only those generators that generate electricity from fuels such as coal or gas have to pay that carbon tax so it results in windfall profits. Generators such as Trustpower which is substantially generating electricity from renewables—from hydro and wind sources—is able to increase its prices by 10 percent but does not have to pay the off-setting carbon tax. So for Trustpower it represents a massive profit windfall. That is equally true for Contact Energy Mighty River Power and Meridian Energy. Meridian Energy and Mighty River Power are Government-owned so one might justify this provision on the grounds that it is a tax it will result in extra profits for those generators and that profit will come back to the State. One might justify it that way but why are we having any increase in electricity prices even of 5 percent on 1 July next year just to see it go in windfall gains for Trustpower and Contact Energy which are privately owned electricity companies? 
It was also particularly interesting that Mr Hipkins referred to the need to grow our renewable generation. I absolutely agree. If Mr Hipkins had been a member of the Commerce Committee he would have heard a submission in recent weeks from Mighty River Power about how it has developed the Kawerau geothermal station and its plans to develop other geothermal stations around the volcanic plateau. Those stations operate at very high gross margins. The fuel—the steam—that drives those stations comes out of the ground and it does not cost anything. Mr Heffernan the chief executive of Mighty River Power told us that the profit margin is something like 88 percent so there is a very very good margin when developing geothermal power stations. New Zealand will no doubt have a lot more geothermal power stations all brought on without a need for an emissions trading scheme that will artificially increase the price of electricity for all New Zealanders. 
But I was interested to hear Mr Hipkins’ comments on the break-up of the Waitaki power catchment and those comments were echoed by Mr David Parker. I think that both Mr Hipkins and Mr Parker made very good points. They talked about the inefficiency of breaking up that system they talked about how that water may not be efficiently used and they talked about the need to double up the management and the engineering resources. So that is why I say to the House that the ACT Party will be listening with interest to the submissions at the select committee and we will be interested to see what is in New Zealand’s best interests. 
I would also like to comment on the issue of smart meters or electricity meters which was also raised by David Clendon. I would like to compliment a member in the House this evening Clare Curran who is also a member of our Commerce Committee and who has taken a particular interest in this subject. When this issue was first raised 3 or 4 months ago members of the committee were very concerned about what appeared to be the haphazard nature in which smart meters were being rolled out throughout New Zealand. I commend Clare Curran’s interest in that and it would be good to see some common sense and some consistency. 
New Zealand needs cheaper electricity. It needs more efficient supply. It needs greater reliability and it needs greater competition. The market will work. Mr Hipkins criticised the fact that the market was not working but if there is insufficient competition Labour had 9 years to do something about it and it did very little. 
The ACT Party will support this bill’s first reading and we look forward to New Zealand having cheaper power and a more competitive market. Thank you very much. 
Hon Dr PITA SHARPLES (Co-Leader—Maori Party) 
: 
 There used to be a smart catchcry in New Zealand. It was: “Will the last person to leave please turn out the lights.” Well over the last couple of years the lights probably would have been replaced by a candlestick. Why? Because there has been a massive 65 percent increase in the price of electricity in the last decade while in the same space of time there has been a 34 percent increase in inflation. So one does not have to be an accountant— 
H V Ross Robertson 
: Or a genius! 
Hon Dr PITA SHARPLES 
: —or a genius—to work out that electricity prices have increased at almost twice the rate of inflation which is a 31.9 percent difference. 
Many of us in Aotearoa in the context of electricity will be forever traumatised by the death of South Auckland mother Folole Muliaga hours after the electricity supply was disconnected to the family home. Although the Ministerial Review of Electricity Market Performance suggests that a large part of the increase in electricity prices over the last decade is justified prices to some customer groups especially residential households have risen faster than justified by the generation cost increases. These things cause us particular concern in the context of low-income families so many of whom are Maori. When we learn that Consumer New Zealand is supportive of the bill it has to give us good heart. 
As a party the Maori Party has fought consistently to address the situation faced by low-income families struggling simply to survive. We know that Maori households tend to spend more on electricity and liquid fuels than non-Maori and they also use a greater share of their total weekly spend on such items. When we entered into negotiations around the emissions trading scheme we became aware that although a greater impact on Maori households can be predicted for emissions trading scheme - related electricity price rises this is possibly not the case in respect of liquid fuels given that more affluent Maori households tend to spend a relatively higher share of their weekly spend on fuels than do other Maori and similarly affluent non-Maori. 
That raises a possible case for greater targeting of support to households for emissions trading scheme - related rises in electricity prices. So we were delighted to achieve a 50 percent increase in support in terms of electricity costs for 2 years as part of the Maori Party’s support for the scheme. That translated into a 5 percent increase in electricity prices instead of a 10 percent increase. It all adds up but as always we will not be satisfied until we can come to the best possible arrangements for our people. 
This bill disestablishes the Electricity Commission and instead sets up the Electricity Authority which will have a very specific pro-competition focus. So how exactly will that benefit Maori? We are optimistic that the authority can promote the benefits to consumers of comparing and switching retailers. There is also specific provision for a $5 million-per-year fund to facilitate consumer switching. Although this is positive we wonder whether the $5 million-a-year fund to facilitate consumer switching might be better spent educating New Zealanders on how to consume less rather than on how to switch companies. 
I return to the broader aim of the bill which is regulation of the electricity industry in order to improve competition in the electricity market and improve the security of electricity supply. So the purpose of the bill is to increase competition in order to keep price rises down particularly in the retail market for residential customers. There is some uncertainty as to whether the provisions of the bill will be able to achieve its purpose of increasing competition. Some electricity companies are saying that the asset swap will create uncertainty and risk creating reluctance for companies to expand nationally; others are supportive. 
Another important question we have given the corporate model of electricity supply is whether the increased competition will actually facilitate the minimising of electricity price increases so that households will face only necessary price increases. Will it simply be as ineffective as switching between petrol companies? We are aware that customer switching can effect change and keep down prices such as in the situation with Contact Energy in 2008 when it wanted to raise prices considerably including to cover increased directors’ fees. The company lost more than 40000 customers in a short space of time which is much more than the average amount of switching that goes on which is about 23500 in an average month. Sector-wide it is 12.5 percent and it includes those moving house. 
Significantly we are mindful that the ability of the Minister to regulate on price is being removed via this bill. Although the bill allows the Minister to make regulations relating to fairness issues for consumers which is all very good in many ways it is simply playing with the various chess pieces on the board. The provision is necessary as fairness is not an objective of the new Electricity Authority as it was for the Electricity Commission. 
The bigger picture however is energy conservation and investing in sustainable energy—two objectives of the Electricity Commission that will not be transferred to the Electricity Authority. In many ways then the amendments the bill makes to the energy sector as a whole could be said to be in the wrong direction. It does not address growing energy demand or facilitate the roll-out of renewable energy generation. This is one of the key issues that we will be seeking to receive further wisdom on at the select committee. 
There is a need to continue to invest in sustainable energy generation and to do so within a sustainability framework given that electricity prices will continue to increase with oil price increases and given that electricity production will come with an increasing carbon price tag attached. We are really interested in the range of options our people are currently exploring: the establishment of micro-grids for rural communities consisting of small-scale wind solar micro hydro and anaerobic energy systems while also maintaining a connection with the national grid. This will both lower costs and improve security of supply. 
Finally I return us to the global landscape and I call on the wisdom of those who attended the Indigenous Peoples’ Global Summit on Climate Change at Anchorage Alaska in 2009. The Anchorage Declaration which arose from that summit concluded: “We are experiencing profound and disproportionate adverse impacts on our cultures human and environmental health human rights well-being traditional livelihoods food systems and food sovereignty local infrastructure economic viability and our very survival as Indigenous Peoples.” 
There are many key issues impacting on our people around electricity use. The Maori Party has always sought to promote the development of renewable energy sources including wind and solar in order to protect and preserve limited resources such as oil gas and coal. We have many questions about this bill that still require further discussion but we believe that the basic premise is certainly worth supporting. We are voting in support of this bill at its first reading and we look forward to the evolving debate. 
DAVID BENNETT (National—Hamilton East) 
: 
 I do not want to take too long a call on the Electricity Industry Bill. I think most of its aspects have been canvassed by many of the members who have already spoken. But I think the reality is that all New Zealanders have endured large power increases for many years. Many New Zealanders feel that that is unjustified because they believe that in a country with such a renewable energy base they should have security of supply but also not an excessive increase in prices. It was something that many New Zealanders felt and this Government listened to them. It went out there and did a review. It was not a Labour Party kind of review; it was a review that was taken notice of and something was done as a result of it. That is something that the Labour Party would have no concept of anyway. It was a real review and it came out with some real solutions. The Minister of Energy and Resources has taken those solutions on board and made some real decisions. That is what Parliament has been known for in the last year and what National has put its stamp on in this political system. 
This Government is seen as a decision maker that makes real change for the benefit of real New Zealanders. It is not here just to undertake reviews and to resile from achieving any of the results that people want to see happen. This bill is good. I think of the good people of Mighty River Power in Hamilton who work hard to provide the electricity supply for the good people of Auckland. We have the ability to work on this through the bill and to provide lower prices through the restructuring that this bill provides for. Thank you. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 Almost inevitably we have had yet another round of debate on electricity prices and under whose watch prices went up and by how much. We have had figures thrown all over the place by the Maori Party by the ACT Party and I am sure earlier in the debate by National. Well here is something to think about. In the middle of the last decade the Maui gasfield ran out and the price of gas just slightly more than doubled and gas— 
Aaron Gilmore 
: It didn’t run out the contract price. It didn’t run out. It’s pumping today. 
Hon PETE HODGSON 
: Oh so we have a brilliant operator who has told us that the Maui gasfield has not run out. Well actually he is correct. But what was a stream is now a trickle and we cannot run a decent electricity system on a trickle of gas. The Maui gasfield has run out to all intents and purposes. As part of that the price of gas just over doubled. Most of the time—not all of the time but most of the time—the marginal price of electricity in this country is set by the domestic gas price. That is what sets it not oil as Pita Sharples said and coal sometimes does and occasionally in January it is actually set by the hydro price. But it is nearly always set by the gas price. 
The price of gas just slightly more than doubled. What is National’s excuse? National has not seen any increase in the gas price in the last 13 months. But we have seen an increase in electricity prices. What was the excuse that Max Bradford used when he said in April 1999: “We will see prices decrease.”? In April 1999 they went up in one city by 13 percent in another city by 14 percent and in one other city by 18 percent. I rather suspect all of those increases were rolled into the ones that were levelled against the previous Government by speakers on the other side of the House. 
But enough on prices; we have a reasonable reason. The underlying reasonable reason is that when the Maui Gas contract was originally signed way back in the 1970s probably from memory it has—[ 
Interruption 
] It might have been a Labour Government I do not know. It must be the second-longest contract in the New Zealand economy. I do not think it is as long as our blood bank contract with Commonwealth Serum Laboratories in Australia. I think that contract is about 50 years old. But this contract has to be the second longest. How do I know? Because I spent about 50 hours renegotiating it on the 19th floor of Bowen House with a whole lot of people who were pretty keen to take each other to court and we got there. 
But in the course of those negotiations we rediscovered something that needs repeating. When the original Maui Gas contract was signed the inflator was made by law to be half the rate of inflation. So right through those decades including the high inflation years of the 1970s and 1980s when the inflation rate was 10 percent the Maui Gas price went up by 5 percent and so on year after year. If members want to know why the price of Maui Gas doubled there it is in a nutshell. If members want to know what the large driver on electricity prices was in the time of the Labour Government there it is in a nutshell. Owe it to history. Own up tell the truth—that is what happened. 
Hon Gerry Brownlee 
: And who negotiated the contract first up? A Labour Government— 
Hon PETE HODGSON 
: Gerry Brownlee is now accusing the 1972-75 Labour Government of being the problem in the first place because that Government negotiated the contract. He is right; he is right. So what do we do about that? Do we say that the negotiations that occurred nearly 40 years ago should be visited on this Opposition? Or should we simply reflect on the fact that the history came home to roost in the course of the middle of the last decade— 
Hon Christopher Finlayson 
: I believe in guilt. 
Hon PETE HODGSON 
: Guilt—[ 
Interruption 
] Yes—ha ha! Back then everyone thought they were doing the right thing for everyone else. Back then we did not know that subsidising fossil fuels was a bad idea because back then climate change was not exactly at the forefront of everyone’s mind. 
Hon Darren Hughes 
: Except Aaron Gilmore’s. 
Hon PETE HODGSON 
: Except Aaron Gilmore— 
Aaron Gilmore 
: I wasn’t even born then mate! 
Hon PETE HODGSON 
: —who of course was pre-natally aware. As he attended his pre-natal calculus classes he learnt not only that climate change was happening but how to differentiate and integrate the various equations that were leading to the ultimate outcome that we hope to see from Copenhagen in a week. This guy is amazing! His pre-natal awareness of these matters leaves me gobsmacked. Let us now turn to the bill and leave Aaron Gilmore where I think he should be left. 
Aaron Gilmore 
: I love your work; love your work. 
Hon PETE HODGSON 
: The member loves my work. I want to know from Gerry Brownlee where the vision is because I do not think that shutting down the Electricity Commission and replacing it with the Electricity Authority and the Security and Reliability Council is visionary at all. What is more I have noticed that Gerry Brownlee has said that the Electricity Commission may not play in the area that is known as energy efficiency. Well I think that is a mistake. 
Every time there is an extra marginal need for some amount of electricity one gets it by new generation by getting rid of a constriction somewhere in the transmission system or by improving the demand side. Those are the options. We do not import or export the stuff; we are too far away from anyone else. So those are our three options and Gerry Brownlee has taken option No. 3 away from the Electricity Commission even though it might be that on some future price curve—in fact almost certainly on a present price curve—energy efficiency would be the most economically efficient thing to do. But Gerry Brownlee has said no he cannot do it. It has to be done by the Energy Efficiency and Conservation Authority according to a budget set by Parliament and not done in any way that resembles integrated resource management—that does not in any way resemble integrated resource management. I think that is a mistake I tell Mr Brownlee; I really do. I really think that he could have got that wrong. 
I do understand that Mr Brownlee feels the architecture was a bit messy; I must say that I felt the same. I felt the same with the Electricity Commission the Commerce Commission the Energy Efficiency and Conservation Authority and on it goes. I understand the problem but I am not sure that he has exacted a very fine solution. In fact I think he will come to regret it. That is my view—that is my view. 
Hon Gerry Brownlee 
: Oh we’ve got a wee way to go. That’s why we have a select committee. 
Hon PETE HODGSON 
: OK so it is going to go to a select committee; therefore it might be given a bit of a chance. I do acknowledge that the Government has retained a market. The market was introduced by Max Bradford; we paid a terrible price for that market. We paid a terrible price for that market yet the moment one seeks to reverse the changes of Max Bradford one rolls up against two things. Either one nationalises Contact Energy and TrustPower or one accepts that that part is irreversible. And if it is irreversible then a market is necessary so making the market work as well as possible is a good idea. 
One thing that I find curious about this legislation—and I rather suspect that my colleague the Hon Lianne Dalziel also finds it rather curious—is that we have new law that says that Transpower is the system operator. Heaven forbid! Who did that? Was it done by the Ministry of Economic Development by the Electricity Commission or by the good Minister himself or was it done by the invisible hand of the market? No it was done by TransPower. TransPower is the system operator it has always been the system operator and for as long as it has been the system operator people whose eyes are swirly say that that should be put out to competition. And people whose eyes are straight say to not be stupid. 
I wonder what is so wrong with Gerry Brownlee that he thinks he has to exclude the possibility of the system operator ever being put out to competition by making it illegal in law. Is it that he does not trust his own ideology or the ideology of the fellows over there on the ACT benches? Is that what is happening? Is he getting so much pressure that he is saying “I’m going to get rid of this. I’m going to put it into law.”? Or we can reverse the argument as I am sure my colleague the Hon Lianne Dalziel might. What is it about National that it is agin competition? Why does it not like competition any more? What was wrong with the system operator coming out of maybe the stock market? Why could not it become the system operator? 
Hon Gerry Brownlee 
: They could. 
Hon PETE HODGSON 
: Oh it could. But not any more. It cannot because Gerry Brownlee has said “No no. We’re going to pass a law against it.”—a law against the competitive possibility. Those are very interesting National tactics—the sort of thing that would have been expected from Labour long ago. But no the National Government has done it with no explanation from the Minister on that; I think he owes us one. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I thank the honourable “Professor of History” across the Chamber for giving us a dissertation on the history of the electricity market in this country. 
I take a short call just to reaffirm my support for the Electricity Industry Bill and to reaffirm the principles of the bill which were not canvassed by the previous speaker Pete Hodgson. Those principles are about increasing competition and constraining future price increases. They are about improving security of supply and ensuring effective and streamlined governance. Many have already referred to those principles but those at home listening at a quarter to 10 this evening may ask why they should believe those characters in that Chamber in Wellington who are going on about that electricity market. So I will introduce a few objective statements. One is from a  
Dominion Post  
editorial: “There are reasons to believe the changes will increase competition”. Well that is funny because members opposite do not believe it. Our colleague Jeanette Fitzsimons has said that the Government’s moves to make the power retail market more competitive are good. 
I support this bill for the reasons that my colleagues have already espoused. We look forward to seeing this bill in the Finance and Expenditure Committee to discuss it in more detail. Thank you. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am very pleased to be able to speak on the Electricity Industry Bill but I wish to speak against it. I did not support its introduction. That is because although I agree with the overall aim of the bill I do not think it achieves the aims that have been established for it. As I understand it the first aim is to improve the governance arrangements for the electricity industry. I agree with that but unfortunately the bill does not do that. Secondly it aims to provide for specific regulatory improvements to be made. The word “improvements” is a bit of a barrier. The third aim is to make improvements to the overall structure of the electricity sector. My view is that fixing what is wrong with the sector is a bit like unscrambling eggs and I do not know anyone who has the recipe for unscrambling eggs. 
Aaron Gilmore 
: I’m working on that! 
Hon LIANNE DALZIEL 
: Well that is very nice for the member. This bill proves that the Government does not have a recipe for unscrambling eggs either. 
I found it quite intriguing that a National member stood in this House and invoked the name of Max Bradford in support of this bill. I do not think that that name should be invoked in this House in support of anything other than a mea culpa on that side of the House for the destruction of what was an excellent electricity service in this country under a previous National Government and under Labour Governments before that. It seems to me that that is actually where things went horribly horribly wrong and there is really nothing that the Government can do other than admit that it got it horribly wrong and say that we have to find other ways of addressing the real problems that we are faced with in this particular sector. 
As I said Labour does not support the bill for a lot of reasons. The main reason we have for not supporting this bill is the cruel hoax that was played on the people of New Zealand during the last election campaign when National said that a National Government would stop increases in electricity prices. I recall that. In fact I recall hearing the Minister of Energy and Resources when he was an Opposition spokesperson walking the length and breadth of this country saying that a National Government would make sure that electricity prices did not increase. This bill really fails to deliver on that promise. 
Hon Gerry Brownlee 
: I never said it. 
Hon LIANNE DALZIEL 
: He certainly was very open in his criticism of the previous Government in terms of increases in prices and he said that a National Government would bring those increases to an end. 
National promised it would do everything it could to take the sharp edges off the recession and help struggling Kiwi families. We have heard National members say that since the election but unfortunately the Government’s electricity market review and this bill clearly miss the point. Nowhere does the overview of the bill even mention constraining or reducing prices. Gerry Brownlee will not offer to resign if power prices continue to go up because he knows that they will continue to do so. 
I am concerned that the Government does not have a big-picture vision. I think that the priorities are quite wrong in respect of the approach it has adopted here. Any reforms of the electricity sector need to deliver on the three priorities of sustainability security of supply and affordability and predictability of pricing. Those are the three absolute essentials. The Government might say that that is what the bill is intended to address but in fact it does not address it. These reforms do not address and deal with these priorities nor do they give us any clue as to how to balance the competing considerations at stake. 
Transferring assets between power companies and reshuffling the bureaucracy is really just smoke and mirrors and does not guarantee any immediate relief for Kiwi power users. It has been interesting to hear Government members say that part of what they are trying to achieve here is to encourage a bit of shifting between different retailers. They are going to encourage consumers to shop around particularly through an annual $5 million contestable fund levy-funded to facilitate switching between retailers. I had to ask somebody recently what retailer I would be with if I had never changed since Southpower stopped selling electricity in Christchurch. They said that I would be with Meridian Energy. Meridian Energy is my power company because I like most New Zealanders am the target of any sort of programme that requires people to do nothing. That is what most people do. I know that the Government wants to encourage contestability but a lot of people out there would prefer to stick with what they have. 
One of the reasons why I am very happy with Meridian Energy as my retailer is that it has made a real effort in terms of its responsibility in terms of its carbon footprint. Yet now it is being told to go directly to jail to not pass go and to not collect $200 and it will be given a little gas-fired—or rather diesel-fired power station. We will have that included in my retailer’s— 
Hon Gerry Brownlee 
: You don’t know where your electricity comes from; don’t be silly. 
Hon LIANNE DALZIEL 
: I am making the point that my retailer has certain ownership of certain assets and now they are being swapped. I do not agree with that. I do not get any say in what my retailer is or is not able to do. I do not agree with the transfer of assets occurring. I do not agree that the Government should be shifting them on the board as it is at the moment. 
It seems to me that there is only one reason for these asset swaps to be occurring and that is making certain electricity assets or certain State-owned enterprises more appealing for privatisation in the medium term. John Key said during the last election campaign that there would be no sales of State assets in the first term. I think now that we are at the end of the first year of the first—and I hope the only—term the public will start to click that everything that is being done at the moment is being done to build that foundation for the future sale of State assets. That is exactly why this is being done. 
I turn to the regulatory impact statement. Normally I can pick up a regulatory impact statement and read all of the particular issues that have been debated and consulted on all the different options that have been considered all of the risk benefits the cost-benefit analysis and the risk and opportunity analysis as well. I cannot find that in this bill any more because of a decision that the Government made with a new Minister for Regulatory Reform in the shape of Rodney Hide. It has been decided that bills will no longer contain the full regulatory impact statement; they will contain the executive summary and links. I have not had a chance to go back to my office and click on the link so that I can pull off the full regulatory impact statement. All I have is the short executive summary. It does not give me the level of detail that I require in order to have a proper debate in the House on this subject. When the bill goes to the select committee obviously we will have a copy of the regulatory impact statement. We will question officials about the detail around the process that has been gone through we will look at the cost-benefit analysis we will look at the risks and opportunities and we will assess as a committee whether it comes up to scratch. But I make the point in dealing with this bill tonight that this new process a so-called better process for regulatory assessment and regulatory impact analysis is just not good enough. I should be able to pick up the bill off the Table of the House and read what that analysis says and I cannot do that. I am afraid the Labour Opposition will be opposing this bill. 
AARON GILMORE (National) 
: 
 In the short time available to me I say that Lianne Dalziel was the Minister of Commerce under the previous Labour Government which oversaw a 72 percent rise in electricity prices over about 8½ years. It makes one wonder why the price rises were not even higher during that period of time given the lack of understanding in what was just said. That lack of understanding of the energy sector seems to occur amongst members on that side of the House. 
I am honoured to be part of a Government that understands what the problem is and that has some of the solutions that exist to deal with the problem in the electricity sector. I think that some of the initiatives in the Electricity Industry Bill will work quite well. They include the asset swaps and the ability to bring into place a little more increased competition because it has been proven that about $100 worth of advantage exists for customers swapping from one retailer to another. I think that is a good thing. The ability for that to happen will be a wonderful thing and this bill will deliver it. This Minister of Energy and Resources Gerry Brownlee will help to deliver it and I look forward to being part of the Finance and Expenditure Committee that will debate this bill at length. Thank you very much. 
A party vote was called for on the question  
That the Electricity Industry Bill be now read a first time. 
Ayes 68 
New Zealand National 58; ACT New Zealand 5; Maori Party 4; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Bill read a first time. 
Bill referred to the Finance and Expenditure Committee.