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Electricity Industry Bill 2000: Third Reading

Hon Pete Hodgson Speech Notes

[For the third reading the bill has been split into the Electricity Amendment Bill (No2), the Commerce Amendment Bill (No 3), the Electricity Industry Reform Amendment Bill and the Ministry of Energy (Abolition) Amendment Bill (No2)]

I move that the Electricity Amendment Bill (No2), the Commerce Amendment Bill (No 3), the Electricity Industry Reform Amendment Bill and the Ministry of Energy (Abolition) Amendment Bill (No2) all be read a third time.

This Government inherited half an electricity system. These Bills, arising out of the Electricity Industry Bill, take steps to fix up the mess created by the previous Government and give consumers the deal they deserve from the electricity industry. They reflect the Government’s overall objective to ensure that electricity is delivered in an efficient, fair, reliable and environmentally sustainable manner to all consumers.

The Electricity Industry Bill was referred to the Commerce Committee, which received more than 90 submissions from a wide range of interests and which subjected the Bill to intense scrutiny.

However, as members know, the National and ACT members of the Commerce Committee took the petty, pointless and undemocratic decision to vote against any report back of the Bill. This was a gross waste of Parliamentary time and resources and an insult to all those who went to the trouble to make submissions.

I therefore introduced Supplementary Order Paper No 156 to the Electricity Industry Bill that included every amendment developed by the Committee. So despite the childish antics of National and Act we have ended up with a better Bill.

The amendments contained in the SOP clarified and enhanced existing policy as contained in the Bill originally introduced. There were no policy shifts. I want to take this opportunity to discuss several of the more significant areas of improvement.

A number of submitters, including the Regulations Review Committee, made a valid point in arguing for advance warning from the Minister if the Industry Electricity Governance Board (IEGB) is to be replaced by a Crown Entity. They also recommended a transparent process with adequate consultation.

The SOP introduced a transparent process that would give the industry time to remedy the Government’s concerns. There will also be an opportunity for public submissions and provision for urgent action if this is in the public interest.

A trigger mechanism was added to that process. If in two consecutive years the Auditor-General issues an adverse opinion on the IEGB’s annual report, and the Parliamentary Commissioner for the Environment reports that there has been a significant and overall failure of the industry to achieve environmental objectives and outcomes specified by the Government Policy Statement, the process of giving notice of an intention to establish a Crown Entity will automatically begin.

The Green Party did not think that went far enough and introduced an SOP widening the scope of the Auditor-General’s powers. The Government was happy to support this amendment. The Auditor-General will now be required to assess whether performance of the IEGB is actually meeting the Government’s requirements as set out in the GPS and as spelt out in a performance agreement at the beginning of each year.

The Government has listened to the concerns expressed by the Regulations Review Committee and others such as the Law Society about the wide scope of the regulation-making powers in the Bill. The Regulations Review committee made six recommendations, all of which have been addressed.

The SOP provides that any regulations or rules made under the Act will be subject to the Regulations Disallowance Act. To clarify the policy and narrow the scope of the regulation-making powers there are now objectives to which the Minister must have regard when making regulations. Additional redrafting improves the way policy is defined in the regulation-making powers.

For regulations relating to the wholesale market, the power has been left wide, recognising that government intervention may be required across a broad range of areas to ensure supply security. However, criteria to which the Minister must have regard have been added there too.

Publicity when the Bill was introduced raised concerns in the rural community that new responsibilities were going to be placed on landowners for maintaining line company lines and access tracks. In fact, the Bill did nothing of the sort.
However, a number of improvements have been made.

The definition of the “point of supply”, and the related issue of responsibility for maintenance of high voltage parts of farm service lines have been clarified.
A clause which meant that lines built before 1993 would be deemed lawful unless it could be proved that there is an unresolved dispute over them has been dropped.

Comfort clauses have been added to the existing works provisions to clarify that landowners are not responsible for the maintenance of those works, or the access tracks to them, unless there is a local agreement providing for this.
A change suggested by Federated Farmers – that the familiar concept of “injurious affection” of the land be used to distinguish between maintenance and new works – has been adopted. It has also been made clear that the Bill does not override the planning processes in the Resource Management Act.

Further changes will require the line companies to give proper notice of maintenance work, and enable the landowner to set reasonable conditions for the access.

The SOP also made amendments to respond to energy trusts concerns about the Bill's provision for energy trusts to be audited by the Auditor-General. An approach along the lines taken in the Companies Act has been introduced, so that an annual general meeting of trust beneficiaries will now appoint the auditor of the trust.

In a separate SOP No 164 the Government has closed a temporary loophole relating to Transpower’s abilty to recover its charges. The problem has emerged as a result of recent Court decisions that Transpower cannot automatically recover charges from electricity generation and line companies that have not explicitly signed contracts. The importance of a secure national electricity supply means the Government obviously cannot have generators and line companies being cut off from the national grid.

This Government is establishing a process to determine the best methodology for transmission pricing. But this will take a year or more to work through. So SOP 164 amends the Electricity Industry Bill to ensure that from 26 July 2001, Transpower can recover its charges.

It is appropriate that I make some comment on the present electricity situation.

We are moving closer to possible power shortages. There is a moderate risk of blackouts in September or October before the spring snowmelt, if inflows remain low or if there is a major generation plant failure. We are not yet at the situation faced in 1992, but it is prudent to keep ahead of developments because of the potential for the situation to worsen considerably.

A growing number of businesses are feeling the pinch of high wholesale prices. The market system introduced by Max Bradford has just struck its first dry winter.

I convened a meeting of industry stakeholders last Friday and again this morning. We have made substantial progress on initiatives to increase supply and reduce demand. We will meet again next week and continue to work together as necessary to manage New Zealand through this difficult situation.

This legislation shapes the future of the electricity sector. It will result in a better electricity system for New Zealand and I want to finish by briefly outlining how this system will look. It will include:
- regulation of monopoly lines companies that abuse their monopoly power;
- a wholesale electricity market that involves active demand-side participation, so that buyers can directly benefit from reducing demand when wholesale prices rise;
- an efficient hedge market, so that retailers and large consumers can have no excuses for not managing wholesale market risks properly;
- an agreed process for the removal of transmission constraints;
- arrangements to ensure that consumers who want to switch can do so in a timely manner, with the possibility of fines for the companies at fault if that doesn’t happen;
- low fixed charges and higher variable charges so that households can see real reductions in their power bill if they conserve electricity;
- systems in place that make it easier for wind and solar generation to feed into the market; and
- an independent process in place for resolving consumer complaints about electricity companies.

These are some key features of the electricity system that New Zealanders deserve, as opposed to the one that has been thrust upon them.


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