Rt Hon Winston Peters
Member of Parliament for Northland
New Zealand First Leader
12 NOVEMER 2015

Speech to Energy Trusts of NZ Spring Conference
Copthorne Hotel, Waitangi, Bay of Islands
7pm, 12th November, 2015

Too Much Ideology in National’s Energy Policy

Thank you for the opportunity to address this conference of the Energy Trusts of New Zealand (ETNZ).

Collectively, the 22 energy trusts are a major stakeholder in the New Zealand electricity sector.

It is understood that member trusts have total investments of around $6 billion in companies that operate electricity distribution networks (that is, the lines companies).

This talk is a chance to explain New Zealand First’s thinking on energy policy particularly in relation to the electricity sector.

Energy Trusts

In relation to the Energy Trusts, NZ First commends the work you do.

Your remit is to manage the assets you are entrusted with in order to serve the interests of your beneficiaries and communities – and you have done that.

You have provided responsible stewardship for the community assets you are entrusted with.

There is no doubt that the annual dividends you return to electricity consumers are of real benefit to hundreds of thousands of New Zealanders.

Those distributions mitigate the impact of exorbitantly high electricity prices that have become the norm in New Zealand.

And there are many worthwhile community projects that have benefited from the Energy Trusts.

NZ First Energy Policy

NZ First’s energy policy starts with some straightforward principles.

We see the electricity system as fundamental – it is the lifeblood of daily life, business and commerce.

The electricity sector constitutes core infrastructure and as such its primary purpose is to serve the public and underpin the economy.

Because it is so critical to New Zealand’s prosperity and future success NZ First considers energy policy must be shaped first and foremost by what is in the overall national interest.

Applying those principles, the overall aim of energy policy should be to ensure that electricity is available to all New Zealanders at the lowest reasonable price, consistent with the maintenance of a viable industry over the long term.

Ideology is not a good basis for energy policy – in fact as has been shown in New Zealand it is deeply damaging.

In our view there has been far too much ideology shaping the electricity sector and not enough common sense.

The present National Government has a habit of wanting to erase history – in everything from the New Zealand flag onward – and it has tried the same tactic in regard to the electricity system.

But it is worth recalling that once New Zealand had a world-class electricity system run by the state as a natural monopoly.

Under this system, duplication of generation and transmission was avoided, management overhead was minimised and electricity costs were some of the cheapest in the world.

It was a cutting edge advantage for our businesses and o0ur homes.

In what National would have us believe were “the bad old days” New Zealand electricity consumers actually benefited from having the comparative advantage of significant hydro power as a source of sustainable generating capacity.

In contrast, today, the electricity sector is characterised by ever escalating electricity prices and a fragmented and complex industry structure.

What we have in reality is a deliberately bewildering array of quasi-monopolistic organisations.

We do not regard the electricity and energy sector as fixed and immutable – for one thing technology is not static - but what we have ended up with does not serve New Zealand’s interests.

On a previous occasion NZ First said that looking for logic in the New Zealand electricity sector is like looking for unicorns!

What we do see in the generating companies is chief executives with total remuneration packages in excess of a million dollars.

And beneath them is an iceberg of highly paid managers.

Is it any wonder that people consider the electricity sector has been turned into a gravy train of epic proportions at the public’s expense?

There is an awful lot of rhetoric about the so called “electricity market.”

But the public are not fooled – they know most of the talk about an electricity market is a self-serving and misleading facade.

To sum up - in NZ First’s view the so called “electricity reforms” did not deliver what was claimed and what the public was led to expect – lower prices and better services.

State Asset Sales - Part Privatisation of the Generating Companies

The current structure of the energy sector is designed to baffle and confuse the public.

For a population of 4.5 million people we have an absurdly convoluted system.

Effectively, the dividends that the Government has been extracting from the generating companies amount to an undeclared tax on the public.

However to the extent that the generating companies were in public ownership at least that money went to strength public finances.

Now thanks to the National Government’s partial privatisation the public no longer even has the dubious consolation that the dividends are at least going back into the public purse.

In our view the power company floats of Meridian, Mighty River Power and Genesis were an outrageous insult to the public – selling back to the public what generations of New Zealanders had already paid for.

Those sales were a direct attack on the investment and savings strategies of previous generations that had the wisdom and common sense to build those valuable assets in the first place

When the issue was actually put to the public there was massive opposition to selling off the generating company shares

We should remember that in the citizens initiated referendum over a million New Zealanders expressed opposition to the Government's partial sell-off of state assets.

New Zealand First’s long-term strategy is to buy back the shares of the state owned energy companies sold by the National Government.

We recognise that this undertaking will require detailed planning and a long-term approach but it is the only way to ensure that the electricity sector serves New Zealand’s national interest.

New Zealand First will not agree to a future of ever-rising power prices and an electricity sector that does not have serving the overall national interest as its primary objective.

Foreign Ownership

In NZ First’s view far too much of New Zealand’s core infrastructure has ended up in foreign ownership.

NZ First’s foreign investment strategy is based on the premise that investment in strategic assets must be in New Zealand’s interests – and we consider the electricity sector to be a strategic asset.

In practice, most foreign investment in the electricity and energy sector has simply involved a transfer of existing assets.

For example, we fail to see how having Wellington’s electricity distribution network owned by an overseas owner – Cheung Kong Infrastructure Holdings - actually serves New Zealand’s interests.

This is not the way to build New Zealand’s long term prosperity – quite the reverse in fact.

NZ First wants much stricter and more rigorous tests to apply to the potential foreign acquisition of strategic assets.

Under our policy, all potential deals would be examined from a national interest perspective and the current rubber-stamping of deals by the Overseas Investment Office would end

Security of Supply

In October there was a massive power outage in Northland.

In our view this event raises very disturbing questions as to whether Northland and indeed other areas of New Zealand are getting the electricity infrastructure investment they need to ensure security of supply

In the Northland outage power was cut to over 30,000 homes and businesses. That is a massive disruption and the potential loss to business if the break was prolonged would be phenomenal

The electricity and energy infrastructure must be robust and resilient or essential services and our economy are at risk

One of the basic principles for New Zealand First's energy policy is to ensure that the security of supply of electricity is maintained

Climate Change

The future of the Energy Trusts is closely linked to developments in the broader energy sector and responses to climate change.

In this connection, New Zealand First acknowledges that man-made climate change is real – it is happening - and it presents profound challenges for all countries.

New Zealand First opposes the Emissions Trading Scheme because it too complex and cumbersome, too easily manipulated – and has had done almost nothing to curb carbon emissions.

The December 2015 Conference on Climate to be held in Paris (COP 21) is the next major opportunity for the international community to make major significant progress on the issue.

We will be reviewing our climate change policy in the light of any international agreements reached at the Paris Conference.

Overall, we believe we have a well-balanced pragmatic approach to climate change based on developing sector specific plans to cut carbon emissions.

We also support ‘net metering’ whereby electrical retailers will be required to purchase power generated by customers at the price it is normally sold to the customer.

This is to encourage smaller scale electricity generation as the cost of generating electricity from renewable sources such as solar and wind power falls.

In particular, here is no doubt solar power will create new challenges for the existing electricity generating system and lines structure.

As the relative cost of solar capacity declines and battery technology improves more consumers and businesses can be expected to install solar power.

Potentially this means electricity infrastructure costs – including local lines networks – have to be spread across fewer customers.

But the reality is that in the future we will be making greater use of solar power.

That is just one of the challenges facing the energy sector that also has implications for the Energy Trusts.

Conclusion

In conclusion let’s restate that we see Energy Trusts as being an important stakeholder in the energy sector – a sector that is of fundamental importance to all New Zealanders.

You face an exciting future! Technical innovation is going to happen in a dynamic sector like energy in areas such as battery technology, smart metering and the so-called “two way grid.”

Maintaining a reliable and affordable supply for electricity consumers is essential while integrating the more intermittent and unpredictable output of solar and wind generation will take innovative thinking.

Fundamentally however New Zealand will still need an electricity grid to be in place.

As outlined today, NZ First is not satisfied with the status quo in the energy sector.

Our view is that the current structure fails a fundamental test – it does not put serving the overall interests of New Zealand and New Zealanders first.

You can expect NZ First to keep asking awkward and critical questions in the pursuit of common sense change.

ENDS

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