2 August 1999
POWER PRICE NEGOTIATIONS
At New Zealand First's recent convention I urged all political parties to make MMP work for the New Zealand people.
This is what we set out to do on the issue of power pricing.
I want to thank my colleague Peter Brown MP for his efforts to achieve lower power prices for everybody.
A number of points need to be made very clear.
The Energy Minister Max Bradford approached New Zealand First on the afternoon of 13 July requesting that we support
this bill, and stating further that the bill would lapse without our support in which event he would blame other parties
for unacceptable power prices to consumers.
We mutually entered negotiations on a 'no comment on detail' basis until negotiations were concluded and it was for that
reason that the bill was delayed.
I was dismayed to learn last Friday afternoon that Mr Bradford was going to progress the bill in the House regardless of
our support or otherwise.
Such an approach simply represents a breach of good faith.
That action begs the question of why the bill was delayed for almost three weeks and why we were asked to give the bill
urgency status last Thursday.
No further communications have been entered into with Mr Bradford over the weekend or today.
There simply appears to be no point to that - given the Government's changed position, undisclosed to us.
I am releasing the correspondence between New Zealand First and the Government.
The real issues are canvassed in the following letters.
1. Letter to Bradford 13/7.
2. Letter to Bradford 19/7.
3. Bradford reply 24/7.
4. Letter to Bradford 27/7.
5. Letter to Bradford 27/7.
6. Bradford reply 28/7.
7. Letter to Bradford 28/7.
8. Bradford reply draft (final) 29/7.
9. Bradford final letter 29/7 - new penultimate paragraph added.
The critical letters are the letter to the Minister 29/7 referring to sections 53 and 54 of the Commerce Act, and Mr
Bradford's final letter of the same date - the ultimate paragraph declining to give an assurance that he would use the
powers he has with respect to retail companies.
Mr Bradford has asserted that he has the powers to regulate electricity retailers and in theory he is in right. It can
be seen from our letters though that an intention not to use these powers in practical terms means that there are no
powers at all.
I am releasing a Treasury paper on Telecommunications dated 9 June 1998, which I requested when I was Treasurer.
In it, page 2, no's 5, 8 and 9, inter alia and page 6 point 29 in particular, are recommendations for the Government to
take regulatory action in the interest of Telecommunications consumers.
I progressed that report in a speech on the 4th of August 1998 - Saturn Communications launch. Despite this
recommendation the government has refused to take any action for a year. It has always had the power but refuses to use
it, and New Zealanders have been price gouged as a result.
The Government cannot now refuse the following as a result of our representations at the Select Committee and our
1. Abolition of switching charges.
2. A prompt inquiry by the Commerce Commission with a report back date three weeks later than the date set in the
Minister's correspondence i.e. Friday 22 October 1999.
3. Properly provisioning the Commerce Commission to complete this job.
4. Tabling the Commerce Commission Report within five days of receipt.
5. Publicly disclosing all components of power prices so that consumers are aware of the composition of these prices.
6. That government funded Consumers' Institute's "Powerswitch" be required specifically to monitor for price disclosure
and advise accordingly.
7. On the wholesale market and electricity sector reforms the Minister has agreed to a prompt investigation by an
independent consultant such as NZIER on any barriers or impediments to effective competition.
8. That investigation is necessary in particular to determine the practicability of capped minimum lines charges for
particular categories of domestic consumers.
9. The Minister says he has the powers to regulate the retail companies where monopoly positions arise. He is right. We
challenge him now to give a public assurance he will use these powers.
We had reached agreement on all issues raised, except the Ministerial assurance to use his powers against unfair price
rises at the retail level. More than half the retail side of the electricity business is now overseas owned and those
foreign interests paid very high prices for ownership.
There is no doubt that they will be seeking a large return on their investment and we are not prepared to allow another
"Telecom" situation to develop.
This is proof that the Government is not sincere in its approach to achieve lower power prices, and that it unlikely to
act against the retail part in particular of the power industry when the crunch comes.
New Zealand First challenges Mr Bradford to proceed with his position of last Friday of putting his bill up regardless
of where the support lies and we ask Labour, Alliance and non-National MPs to support amendments which deliver on the
substantial progress we have made, including a statutory commitment to regulate retail in monopoly circumstances where
there is price gouging.
New Zealand First is aware of Labour's position but a price freeze on lines companies to 1 July 2000 is to cement in
unreasonably high prices already. It helps no-one whereas this bill will making savings on lines charges retrospective
to 1 April this year. That helps consumers - Labour's option does not and their opposition to these proposals would be
Failing that, New Zealand First would draft its own legislation and seek support from Labour, the Alliance and other MPs
to deal with power prices as a matter of urgency.
We will create a regulatory and watchdog system to investigate power prices and any increases not found to be justified
will be forced down and backdated to the 1st of April this year.
I would urge all MPs who want lower power prices to support this position.