Hodgson Pete: Third Readings 
Hodgson Pete: Third Readings 
[Volume:620;Page:16114] 
Hon PETE HODGSON (Minister of Energy) 
: 
 I move  
That the Electricity Amendment Bill (No 2) the Electricity Industry Reform Amendment Bill the Commerce Amendment Bill (No 3) the Gas Amendment Bill (No 2) and the Crown Minerals Amendment Bill (No 2) be now read a third time 
. These bills arising out of the Electricity and Gas Industries Bill 2003 reflect a need to replace the failing electricity governance regime security of supply problems with electricity and the need to provide for governance of the gas industry. This legislation reflects the Government’s objectives to have electricity supplied in an efficient reliable and environmentally sustainable manner to all consumers. 
More recently security of supply has been a particular concern. The Electricity Amendment Bill (No 2) provides the Electricity Commission with an enhanced tool-box of powers across security of supply enabling the commission to contract for reserve energy in dry years. This legislation gives the commission a full tool-box of necessary powers—the judicious and effective use of which will help the market model function better. 
The legislation extends the commission’s remit to deal with demand side management and energy efficiency. The commission now has the ability to consider both the demand and supply sides when considering security of supply and transmission upgrade issues. The legislation also extends the commission’s brief to cover consumer protection the promotion of retail competition improved information from market participants and development of distributed generation. 
The legislation provides a similar set of powers for the gas industry and enables the establishment of a co-regulatory body. Gas industry co-regulation represents a collaborative approach being taken by the Government with industry—an approach developed with and supported by the industry itself. That this body be established and functions effectively is especially important as the sector deals with the challenge of transition to the post-Maui era. The Government looks forward to working with the industry to ensure that co-regulation is successful. 
Another key provision in the legislation relates to changes to the Crown Minerals Act to promote enhanced disclosure of petroleum reserves and production information. That should encourage increased levels of exploration which in turn may yield new discoveries to help the security of supply concerns. 
The legislation was referred to the Commerce Committee which considered submissions from a wide range of interested parties. The committee subjected the legislation to close scrutiny. I believe that the committee did a great job in further refining it and I fully support the committee’s recommendations. 
Few technical changes have been made to this legislation. They represent general tidy-ups and enhance clarification and consistency across electricity and gas rather than any wholesale change in policy direction. 
I take this opportunity to comment on a couple of major issues of debate surrounding the legislation. Firstly many submitters particularly from the National Party have tried to argue that the Electricity Commission lacks independence and has mixed objectives and conflicting goals. They still do not get it. The Government properly has multiple goals for the electricity sector—reliability efficiency environmental sustainability and fairness to consumers. It is not clear which of those National thinks is unimportant. The commission does have a wide brief and for good reason. I am confident that it can carry it through and make sensible judgment calls when necessary. 
National is also unrealistic in saying that the commission should be left wholly to its own devices. That would be to suggest that the Government wash its hands of its responsibility for the electricity market—a policy that led to the failure of sector governance and the need to establish the commission in the first place. The public expects the Government to be accountable for electricity outcomes. The Electricity Commission’s establishment the scope of its mandate and its being responsible for delivering the Government’s policy objectives in electricity all show how serious this Government is about the sector performing properly for the good of consumers and the wider economy. So although the commission is responsible for the day-to-day and longer term application of Government policy it is the Government itself that remains responsible for setting its direction therefore retaining ultimate responsibility for electricity outcomes. 
Arguments for full independence akin to that of the Commerce Commission are also misguided. The Commerce Commission has a vital but relatively narrow role of administering and enforcing existing competition and consumer law. The Electricity Commission has the wider role of regulating a key sector and has a direct mandate to be involved in many facets of the sector’s operation. 
Conflict of interest arguments are also unfounded. The commission and commissioners have no commercial interest in outcomes. Many checks and balances exist to ensure that good processes are followed. For example the commission is required to evaluate options assess costs and benefits and consult affected parties before making recommendations. It is also subject to the same judicial review and accountability requirements as all Crown entities. Its role as an agent for the contracting of reserve energy also hardly qualifies as a conflict of interest. Across all of their brief the commission and the commissioners have no commercial interest in outcomes. Some critics contend that different bodies should perform different parts of the commission’s brief. That would simply lead to a proliferation of bodies unnecessary duplication of costs and effort and coordination problems. It makes no sense. 
National is also pushing for the reversal of legislation it introduced divorcing lines companies from generation ownership. The limit has been raised to 50 megawatts or 20 percent of network load and the ability of lines companies to own and operate renewables remains uncapped. It has been so for 3 years. It is my view and that of the Commerce Committee that it would be unwise to lift all restrictions without full consideration and consultation on the issues involved. 
The electricity and gas sectors are critical to New Zealand’s economic growth. The need for the proper management of the market is clear. This legislation will ensure certainty and stability for the energy sector and further shapes the future of those sectors. It will result in better electricity and gas arrangements and outcomes for New Zealand which is something that all New Zealanders deserve.