PAUL Well, so what do our panel make of what Gerry Brownlee had to say about the electricity industry and the amount of money we pay for our power. So what do you make of that, do you get the feeling he's on top of halting the ridiculous electricity price rises - Mr Neilson.
- Former Labour MP
If I was one of those people that during this very cold winter has opened a power bill recently, you'd say, I want to know two things, one, is the power price going to come down, and secondly, am I going to have security of supply, and I doubt whether you would have been persuaded from that discussion that the government has it in hand.
Well in fact to me he deliberately evaded or deliberately avoided saying I will bring prices down. The point was they will slowly increase but you know when it was put to him will prices come down he was very careful to make sure he didn't make that promise.
- Former National
Well I don't think you're ever going to get a Minister who's ever going to go on camera and be able to deliver that message, but I think he performed very well, he's clearly on top of his portfolio, he campaigned on ensuring security of supply, and he's hinted at a few things that will do that today. The issue of the rebate to customers, I think that's something that voters will be able to understand, but it may just be a cunning way of making sure that energy companies never come to you with a problem.
PAUL As a Minister.
PETER But the ten dollars doesn't work does it, because basically what it says is the power prices go up when we have a shortage of hydro capacity, or diesel prices are very high. At that point you want people to use less not more, and at that point the Minister's saying we'll give you a cut in the price of electricity.
PAUL Can I just play what Gerry Brownlee said on this matter of the ten dollars rebate.
Gerry Brownlee: 'I'm pretty enamoured of the idea that if in fact those who supply the industry, come along to a Minister of Energy and say look it's really bad we're going to have to have a public conservation campaign, then we have a mandatory arrangement whereby consumers are paid out for the power saving. So you might start at something like ten dollars a week, direct rebate to consumers and so as the demand falls, the payment rises.'
PAUL Now I have a problem getting my head around that because if there's a power shortage, and the power generator is going to be punished ten dollars a week off my account, then I'm gonna use more power, which will increase the shortage of electricity.
ANDREW Listening to him again there, I'm not sure that's what he's saying. I think he's saying if you reduce your power usage you'll be paid out for the reduction, so if you were using X amount one month and you use X minus something the month you'll be paid for the fact that you've saved on that month. That was my understanding.
PETER When it first came out it sounded as though he was giving the money, effectively asking the company to pay, what he's saying there in terms of the replay it looks as though it's going to be a reduction to the customer. That may have some impact. Effectively again the same issue comes back to, at that point when the prices spike, it's when we have a shortage of generation capacity. You want people to use less at that point. He saying he's going to reward them, which of course everybody's gotta have a smart meter in order to be able to respond to that, because how's the power company going to know you're actually reducing less, until your power bill gets checked maybe in three or four five months.
PAUL I've got to say to you, you said this is a Minister on top of his portfolio. I didn't really get the impression this was a person motivated by getting power prices down or containing power prices really.
KATHERINE Well I think he's hinted at a number of things, I mean National campaigned on security of supply, environmental issues, and exploration of oil and gas, and he's hinted at changes to the Electricity Commission which many would ask what has it done to enhance the process. He's talked about - or he's hinted at reform in that area, we'll see tomorrow if there are any announcements relating to that. Bringing the Electricity Commission back to being just a regulator and not having overlapping roles which causes problems.
PETER But a few months ago the Minister was using the 4.3 billion dollar figure as if not without ever accepting it, and now he comes up and says have you got something that's gonna take away the 4.3 billion - oh not really I'm doing some work on it.
PAUL Also the number's contestable.
KATHERINE I think he was being diplomatic about the 4.3 billion, he said it's a debate, but actually anybody who has looked at that figure knows that you can drive a bus through it.
PAUL How debilitating for New Zealand industry do you think our power prices are? How debilitating for the country?
ANDREW Well Gerry Brownlee didn't seem to indicate it was the power price that was debilitating for industry, it was this question of security of supply, and the fear that you know you've set up an industry here and then next year there may not be enough power to run your machines, which is the uncertainty that business hates. So I think price is the problem for the consumer, supply seems to be more of a problem for industry.
PAUL Why haven't politicians really been able to get the power prices under control?
PETER Well partly the problem of course is that our system is basically hydro based, that's where our core power goes. No politician can control the weather, no matter what they believe they could do, the reality if there's a shortage of water prices go up, that happens in any other market, it's not a failure of the market, it's just that politicians haven't got out there and said this is the reality of the market.
PAUL Do we have an over reliance on water?
PETER Well you could argue that what can politicians do in the long term, they probably could create more storage so there is more water available, less uncertainty about different years, you could talk about having more players in the industry, but you know in the UK they've only got one more player in the electricity market than we have here, so you would expect that there are economies of scale, but pretty hard to reproduce by having an increased number of players.
PAUL What's this newspaper article you've got, because people are mad about it aren't they, people are mad about the power prices.
ANDREW Well this is the politics of it, this is Otago Daily Times that I was reading on aeroplane as I came up yesterday. Mad as Hell over Power Costs, the Central Otago Mayor complaining that his constituents who live right next to the dams on the Clutha and so on are having to pay what he regards as exorbitant prices for power, and I mean that's the politics that's really lying behind this, and people are starting to get very very angry about just the increase in cost that's taking place.
PAUL It's so confusing though power isn't it? It doesn't really have the capacity to really damage or upset a government does it?
KATHERINE Well there's no politics in power because I mean most people don't want to and can't understand the complexity of transmission grids and other things, but they look at whether or not they can switch on a light, and the price of their bill, and that's what I think any Minister has to react to.
PAUL Now another thing that I found most interesting that Gerry Brownlee was talking about was increasing the competitiveness of the structure by forcing a shorter time within which one can change power supplies. For example he said this.
Gerry Brownlee: 'On average 23 days, and it's too long, I agree with you we need to do something about that.
Guyon: What will you do about that?
Gerry: Well I would like to see it reduced depending on all the technicalities of how it happens and I'm not the engineer that works this out, but I think two or three days should be the norm that is aimed for.'
PAUL Two or three days of course it sexy and it makes it possible for one power supplier to do a great new deal, and for people to switch immediately.
PETER It's worthwhile having, but I think the reality, that's the retail market. The underlying driver of what the electricity price will be, will be what's the availability of the fuel source. No hydro power, dams are not full, the price is going to increase.
PAUL Three of those power companies, is it three - three of them are SOEs aren't they, of the power generators. So why not force them to use that social obligation thing that rests within the SOE legislation? Bring the prices down a bit, because then the suppliers will rip them.
PETER No doubt under the law that could be done, but of course what would happen is, if you hold prices down at the very point when you have a water shortage, demand is likely to increase, therefore you're then going to have a security of supply problem because you won't be able to meet the requirements. So effectively it sounds good but in the short term it doesn't actually work on the problem at the point where it occurs.
KATHERINE Well under the SOE Act a business does have to act in a socially responsible manner, but they're more likely to do that for those customers who are poorer or can't pay their bills, and I mean they are able to do it, it's just if there's a will to do that.
ANDREW The other problem is really to build more supply costs a lot of money, and to build a new dam, to build a wind farm, I mean hundreds of millions of dollars investment and that's gotta come from somewhere.
KATHERINE And this is where the RMA
becomes a bit problem.