Electricity (Disconnection and Low Fixed Charges) Amendment Bill

Hon DARREN HUGHES (Deputy Leader of the House) Link to this

I move, That the Electricity (Disconnection and Low Fixed Charges) Amendment Bill be now read a second time. This bill has two small parts. The first part amends the definition of a “low-use consumer” in the Electricity Act 1992 so that regulations can be made that will enable a greater number of low-use lower South Island customers to benefit from a low fixed-charge tariff option.

The low fixed-charge regulations were introduced in 2004 to provide low-use consumers with a tariff option that is more equitable for low energy usage and compatible with the Government’s energy-efficiency objectives. At present these regulations require networks and retailers to make available a low fixed-charge tariff option to all domestic consumers whom they service and who have consumption at their primary dwelling of less than 8,000 kilowatts per annum. However, the 8,000 kilowatts threshold has resulted in far fewer consumers in the lower South Island being on the low fixed-charge tariff than in other regions, due to the fact that power tends to be used for heating in colder regions.

This bill alters the definition of a “low fixed charge consumer” from a fixed threshold of 8,000 kilowatts, as currently defined in the Act, to a definition to be provided in the regulations, so that different regional locations and averages can be used. The Labour-led Government believes that this will be more equitable.

The bill will also extend the Minister’s powers to grant exemptions from the application of the regulations to electricity distributors or retailers. This change is directed at small, isolated networks that are not connected to the national grid where the cost of servicing consumers can be far higher than is normal for grid-connected networks.

The second part of the bill responds to the recent concerns about the disconnection practices of electricity retailers, particularly with regard to vulnerable consumers. It amends the Electricity Act so that regulations can be made if electricity companies do not follow the disconnection guidelines developed by the Electricity Commission. The Act does not currently contain sufficient powers to regulate disconnection processes or to regulate the full content of these guidelines. The bill consists of regulation-making powers. It does not alter any of the existing processes or requirements in the Act relating to the making of regulations.

I would like to thank the Commerce Committee—on this occasion all the members of the Commerce Committee for their consideration of the bill—as well as persons who made submissions to that committee. The committee received and considered 11 written submissions and heard four oral submissions. The Commerce Committee was unanimous in its report back, and the only amendment to the bill was a drafting change that was recommended by officials in order to simplify the bill. Apart from this amendment the bill will proceed in the same form as was initially introduced by my colleague the Hon David Parker. The fact that it is proceeding largely unchanged and received very few submissions shows that the bill has widespread support.

GERRY BROWNLEE (National—Ilam) Link to this

The National Party is supporting the Electricity (Disconnection and Low Fixed Charges) Amendment Bill through its second reading, because who could argue against the idea that vulnerable New Zealanders should be protected from the ravages and difficult times associated with having their electricity cut off? It should be very clear that the disconnection requirements, or the enabling aspects, of this bill are not necessarily new for any of the energy companies.

What a lot of New Zealanders do not realise is that the Government still owns about 85 percent of the electricity industry in New Zealand—85 percent of the generating capacity, of the retailing capacity, and, of course, of the national grid, or the distribution sector. The Government is a massive player here. It is worth noting that it was a Government-owned organisation that got itself in the pickle over the disconnection of the Muliaga family in Auckland midway through last year.

No one could be more sympathetic to the situation that that family found themselves in than the people of New Zealand as a whole. But we need to be very clear that that was an event that should not have happened, because the protocols for Mercury Energy, the Government-owned organisation that was supplying the Muliaga family with its electricity, meant that that situation should never have arisen. What has certainly happened inside the industry since that time, with the considerable publicity that surrounded that event, is that all the players—the contractors who are involved in the distribution industry or part of the electricity industry—are much more aware of the protocols that the companies have in place.

I think it is very interesting to note that we are giving speeches that can last up to 10 minutes tonight. I hope not to take as much of the House’s time as that, because one can actually read this bill three or four times in 10 minutes. There is just nothing in it; it is an exceptionally light, little bill. It does, though, create some interesting opportunities for the Government to regulate the threshold at which the low fixed charge should cut in. The Government has very generously decided that although the 8,000 kilowatt hours will remain in place for the vast majority of New Zealanders, in the deep south, where it is colder than it is elsewhere, that threshold level will be raised by just 1,000 kilowatt hours. That is actually not a lot when one starts to think about it. In that part of the country it is cold. It is much, much colder in Southland than it is in Auckland during the deep part of the winter—there are beautiful days of course; people have sunny days there, unlike the rain that falls in Auckland often during the winter. I do not wish to say anything adverse about living in Southland, but there is a reality about the situations that people find themselves in with regard to electricity usage in a particular geographic location.

There is an element in this bill of lip-service being paid—a suggestion that somehow, because this bill passes, there will be no unfortunate disconnections like the disconnection that happened to the Muliaga family. That risk can never be mitigated by any Act, by any law, or by any decree from a Government. It is to be hoped that the lessons that were learnt around that time are well understood by all the energy companies.

I want to go back to my first assertion here this evening: that the Government remains a major player in the electricity industry. The Government is the dominant owner of generating assets in this country. So that raises the question of why electricity prices are so high. This Labour Government holds itself up all the time as the friend of the family, the friend of the worker, the friend of the oppressed, the friend of the low-wage earner, and all that sort of thing, so why is it presiding over a regime that will see electricity prices rise continually for the foreseeable future? The Government has no idea of how it might increase the availability of electrical energy, which in turn would lower the price. It has no idea of how to do that, at all.

I ask subsequent Government speakers to explain to the House why electricity is so expensive for domestic consumers in this country. Why, after 9 years of a Labour Government, has there been very little change in the industry? There has been only the addition of a massive bureaucracy, called the Electricity Commission, which all consumers pay for with a little extra on their electricity bill, month after month. What has ever been achieved by that? I think it would be a good idea if subsequent Government speakers told us how the Government intends to lower the price of electricity for New Zealanders.

I have to say that the Government’s record is to increase prices across the board. We need only to look across the energy sector at the moment to see that gas prices are going up. The Government says that is not caused by it but is because of international prices. But the Government has done very little about telling New Zealanders that in the coming year this country will be a very large exporter of hydrocarbon product. This year a lot of the oil that comes out of the ground will be exported. That is of no benefit to domestic consumers, but, of course, it does make Michael Cullen’s accounts look a heck of a lot better. A Government member should also address the question of the rise in the general costs that people have to pay. It would be interesting to see whether Mr Swain is able to explain how people are so much better off under a Labour Government than they were previously, when all they see is their cost of living rising day after day.

This bill is very short, but if there were a scarcity of a product, then the relativity of a low price is dependent on whatever the high price is. We are on a track that has seen electricity prices rise continually over the last 9 years. The Government has come out now with a project to have New Zealand 90 percent dependent on sustainable energy by 2025. We think that is a good idea, but there has not been one single initiative from the Government, since it announced that project, to try to facilitate the rapid development of more renewable energy in this country—not one. It is laudable that the Government is trying to put in place some encouragement for New Zealanders to look at alternative sources of energy for home hot-water heating. That is a good idea. It is marvellous that there is encouragement for people in some parts of the country to insulate their houses better, but that initiative is very small and concentrated on just a few people: by and large, just a few who can afford it.

One of the ironies is that a family of four or five kids and their mum and dad, low earners, could escape the low fixed charge, simply because they use the electricity that would obviously be used by such a large number of people in a household. They would get no relief, whatsoever. This bill is more about public relations than anything else. We believe that the regulation-making capacity in the bill is useful. We look forward to having that at our disposal, in Government. We do not intend to go about telling New Zealanders that we are doing a marvellous job in energy, when they see their electricity prices go up day after day.

Hon PAUL SWAIN (Labour—Rimutaka) Link to this

I hung off every word there, and I was waiting, waiting, waiting to hear a policy. I was waiting to hear what the National Party would do if it was ever in Government—not in my lifetime, but if it was ever in Government—about electricity prices. That is what I was waiting for. The member Gerry Brownlee led us on a bit of a merry dance down the path. He talked about the issues and the problems—he slowly took off each veil, and suddenly we had the expectation that the naked policy would be there standing in front of us. But unfortunately we got nothing. I will come back and ask some questions around that in a minute, because he did ask us to address some questions.

Of course, the member is right. He chaired the Commerce Committee—and did not do a bad job of it, I have to say—and this bill is about two basic issues: the low fixed-charge tariff, which the member mentioned, and the big problem of the fact that it is now for a standard 8,000 kilowatt hours across the country. Of course, as the member pointed out, in the colder parts of the country that amount gets used up pretty quickly, so the ability to have some flexibility across the country is obviously a good idea. The second issue the bill deals with is the problem of disconnection, and, to some extent, the tragedy that occurred in Auckland. I will come back to those points in just a minute, but I will now take up some of the points that the member raised about electricity issues.

Mr Brownlee asked why it is that electricity prices keep going up. Well, that is a good question, which maybe we should go back and ask Max Bradford. I actually recall Max Bradford saying in this House that as a result of the electricity reforms that the former National Government introduced in the late 1990s—1998, as I recall it—electricity prices would go down.