Chauvel Charles: Electricity Industry Bill — Second Reading 
Chauvel Charles: Electricity Industry Bill — Second Reading 
[Volume:665;Page:12487] 
CHARLES CHAUVEL (Labour) 
: 
 What is needed now in the New Zealand electricity sector is security of supply and transmission of electricity affordability predictability of pricing and sustainability as far as production and use are concerned. The Electricity Industry Bill fails to deliver any of those priorities. 
The bill fails even to meet the Government’s own stated goals and objectives for the sector. It is all very well to seek to improve competition—which is what the commentary on the bill says it will try to do—to seek to constrain price increases to seek to increase security of supply and to seek to ensure effective and streamlined governance of the sector; those are the three stated aims of the bill. But in the end what we need to do in this House is judge legislation by its likely effect based on the evidence we hear rather than on pious intention. The House needs to hear from members who served on the Finance and Expenditure Committee that the evidence before the committee was damning as far as the likelihood of this bill’s ability to achieve its aims was concerned. 
New Zealanders are struggling to keep up with the rapidly increasing costs of living. It has been interesting to hear the speeches in the House tonight about how high electricity prices have been. After nearly 2 years of this Government in office those prices have continued to rise and rise. 
Hon Members 
: No. 
CHARLES CHAUVEL 
: There is a howl of protest from across the House. How about some evidence? How about some facts? In the last quarter the CPI increased by 0.3 percent while electricity prices increased by 1 percent. There is runaway price inflation in this sector and members opposite have done absolutely nothing while they have been in office to address it. It is a trend that will only be exacerbated by a 2.5 percent increase in GST from 1 October. We heard Mr Boscawen talk earlier about the price gouging that we have seen from generators-retailers. He mentioned a 4.5 percent price increase from one generator-retailer as a result of the implementation of this Government’s completely substandard emissions trading scheme. 
If this Government was really serious about addressing the problems in this sector it would not be stripping assets from one State-owned enterprise and giving them to another in order to ready both State-owned enterprises for privatisation if the Government wins another term. Clearly that is the only purpose of and the only end for these asset strips and asset swaps. 
This Government and the Minister of Energy and Resources just do not understand what has gone wrong in this sector since the Bradford reforms in the late 1990s. The problem is the ongoing failure to treat electricity as a public good where fair access for everyone not just for those who can afford it should be the ultimate goal. It is true that when Labour was in Government it made the mistake of leaving the Bradford system in place which led to increased prices. Phil Goff apologised for that at last year’s annual conference of the Labour Party and the House can be assured that the Labour Party will not make the mistake again—when it is our privilege once more to lead a Government—of leaving the market in place in this area. But make no mistake this bill by seeking to apply “more market” reforms rather than “fewer market” reforms will just make the problems worse not better. 
This bill is a bad piece of legislation. It fails to balance the essential priorities that should be balanced. Instead it will exacerbate the problems identified by seeking to implement proposals that have not even been properly evaluated. With something as essential to everyday living and commerce as electricity any reforms should be evidence-based. But what did Treasury tell us about these reforms? Well here are three comments from Treasury’s evaluation of these reforms. 
Firstly the Government should “have included a more comprehensive discussion of the risks associated with proposed options”; secondly it should “provide a better idea of the magnitude of costs and benefits of the options discussed in comparison to the problem they are trying to address”; and thirdly it should have “better reflected the range of views received during consultation”. Those are strong words from Treasury yet this Government and this Minister are simply rushing to appear to be doing something in the electricity sector that will in fact weaken security of supply and increase the rate of costs in the sector rather than doing the opposite which is the stated aim of the bill. 
In reality the measures in the bill that claim to seek to increase security of supply will put huge upward pressure on prices and that demonstrates the fundamental conflict at the heart of this legislation. Contact Energy told the Finance and Expenditure Committee that it will need to raise retail prices by 5 percent per annum from now on. This cannot mean that we will see lower price rises in the sector. We will not see any “[taking] the sharp edges off the recession” for ordinary consumers because that is the price rise level that Contact Energy needs to put in place to keep putting generation assets in place in order to keep the lights on. There is not any way round it if the Government keeps the market in place which is what the Minister intends. 
It is also contradictory that the bill’s overall thrust is said to be to increase competition and to provide more market-based solutions in the energy sector when in fact many of the changes that the bill would implement run the risk of entrenching natural monopolies and their anti-competitive behaviour. We all know that monopolies and anti-competitive behaviour lead to prices rises as sure as night follows day. 
What are some of the short-sighted entrenchments of monopolies in the bill? They include the removal of the role of consumers and sustainable energy suppliers and the conversion of the present electricity market rule book to a new code. There will be no place for consumers or for representatives of sustainable energy suppliers on the new governance body. The proposed standardisation of distribution price schemes will limit lines companies’ opportunities to reduce costs to their own networks because their ability to offer differential tariffs to their customers is severely limited by the legislation. Why bother to bring lines companies into the equation if they will be told that they cannot price imaginatively or innovatively and cannot compete properly on the market in the areas where they can offer real strength? 
Another real problem is establishing Transpower as the system operator by statute; actually enacting that it should have a monopoly role in this area rather than providing by contract between the parties as now that that is its role as long as the parties continue to agree. The bill also allows lines companies back into retailing while having no regard to the real risk of creating huge barriers to other players entering the market once those retailers have entrenched themselves in their natural monopoly areas. These are really bad ideas that run contrary to the rhetoric in the bill about introducing more competition in the sector because for those reasons competition will in fact be lessened. They are essential areas that need to be addressed and were not adequately addressed by the select committee. 
Lastly this bill does nothing to bring coherence to the energy policy framework. The Government is rushing to legislate without providing any certainty over the status of the New Zealand Energy Strategy something that the Minister said 18 months ago he would update but on which we have heard no further announcements. He is simply putting all his faith in this legislation which the experts say is contradictory and unlikely to work. The bill fails to address any of the major issues that face the electricity sector even the issues highlighted by the Government in proposing it. It fails to address the major issues facing everyday New Zealanders such as the increasing cost of living and will in fact increase those pressures. At the earliest opportunity a Labour-led Government will repeal this legislation and replace it with a legislative framework that ensures that New Zealanders have an environmentally sustainable supply of electricity that is affordable secure and priced predictably.