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Labour withdraws support, announces price freeze

2000 web site

Labour will not support Government legislation to price regulate electricity line companies, and has instead launched a strong attack on the Enterprise and Commerce Minister Max Bradford.

Labour's energy spokesperson Pete Hodgson has described Mr Bradford's management of the electricity restructuring as "so comprehensively incompetent that his best contribution to his country would be to resign his portfolio forthwith".

"Mr Bradford is now operating in a reality all of his own. He must be the sole remaining New Zealander who believes that recent price rises are primarily due to lines companies not retailers. His statement that increases in line charges have really led to the burst of increases in power charges is beyond belief. The Minister has lost his grip. He has a set of personal beliefs which are provably wrong."

"Labour opposed the breakneck speed of the timetable and the lack of a clear legislated process for determining how the price control would be implemented. The evidence we heard pointed consistently and overwhelmingly to chaos, followed by battles in the courts. National refused to extend the time line, even by three months. Evidence from other jurisdictions is that the process is lengthy. On top of that the Committee learned, to its considerable surprise, that the Commerce Commission currently had only two people working on the issue.

"At one point Labour was prepared to support the bill for the most part because we thought that, though the timing was impossibly tight, at least the Commerce Commission could come up with an interim assessment of a nil increase. It would therefore give itself time to sort through the complexities it faced such as establishing efficiency benchmarks and a uniformly applied set of valuations.

"However that option has become unnecessary now that Labour has been advised that almost all line companies are prepared to offer a one year price freeze anyway, effective till 1 July 2000.*

"That undertaking, sought without prejudice and given freely, means that the residual rationale for supporting the bill has evaporated.

"It means that a Labour-led government can, and will, establish an enquiry into the pricing structure of lines companies and therefore the extent, nature and timing of any regulation. The enquiry will be set up before Christmas and will report well before 1 July 2000. We will act on its findings.

"Mr Bradford's somewhat temporary decision to overturn the Select Committee decision to regulate against existing and potential anti-competitive practices is simply bizarre. His claim that the powers already fully exist is, plainly, wrong. His claim that the committee heard no evidence regarding anti-competitive behaviour is equally wrong. That presumably is why he has today reversed his position, again. I hope he will join Labour in promoting those changes when they arise in the House.

"Competition at the domestic level is a fragile idea. Switching electricity companies is not a straight forward undertaking. If competition is to be given half a chance to work then all anti-competitive practices must be extinguished."

"The last feature of Mr Bradford's legislative mess was an attempt at Trojan Horse politics where he sought to import additional price control powers, not just for electricity, but for all industries.

"Labour spotted that ruse at the time of the second reading and we remain implacably opposed to it. Wide ranging changes of this nature to the Commerce Act should not be ushered in through the back door without proper consultation with New Zealand's business community."

* A price freeze, at the time of writing, has been agreed to by line companies representing over 90% of domestic consumers. Any Transpower price changes will be passed through. Several small companies, representing just under 5% of New Zealand's customer base have already announced price increases, or price rebalancing, which have yet to come into effect. Two companies have not yet replied. (A number of companies have already publicly offered a longer price freeze.)

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