Hon JIM ANDERTON (Associate Minister of Health) : I move, That the Misuse of Drugs Amendment Bill (No 3) be now read a first time. The purpose of this bill is to ensure that the misuse of drugs legislation is better able to meet its objective, which is, of course, to prevent the misuse of drugs. The Misuse of Drugs Act has two key parts. The first is the Misuse of Drugs Act 1975, or the principal Act, which comes under my responsibility as the Associate Minister of Health. The second part, the Misuse of Drugs Amendment Act 1978, comes under the responsibility of my colleague the Hon Phil Goff, the Minister of Justice. The bill will make several key changes to the principal Act, to make it more responsive to changes in illicit drug trends in New Zealand. Those changes are, in summary: moving presumption of supply matters from the provisions of the principal Act to its schedules so that they can be altered more quickly and flexibly by Order in Council, setting the presumption of supply amount for methamphetamine at 5 grams rather than the current default amount of 56 grams, and expanding the membership of the Expert Advisory Committee on Drugs to include a Ministry of Justice official.

The principal Act currently provides for a rebuttal presumption that when a person is found with a certain amount of a controlled drug, he or she possesses that drug for the purpose of dealing or supplying it to others. The onus is on the person found with the drug to prove that he or she was not supplying the drug, and that the drug was intended for personal use. That presumption is referred to as the presumption of supply. Section 6(6) of the principal Act currently provides a presumption of supply that is set at the amount of 56 grams for all controlled drugs, except for those that have a specific presumption of supply listed separately in that section. That situation gives rise to difficulties, as the principal Act must be amended every time there is the decision, on advice from the expert advisory committee, to set or alter a specific presumption of supply for a particular controlled drug. That process can result in unnecessarily long delays. The principal Act will be amended to move presumption of supply matters to its schedules, so that they can be set or altered through Orders in Council. The amendment will allow for a more efficient process than the passing of a new Act of Parliament each time, but it will still allow for scrutiny by the Health Committee and the House as a whole, as well as provide for public consultation.

The Expert Advisory Committee on Drugs recently recommended that the presumption of supply amount for methamphetamine should be set at 5 grams, and thus reduced from the present 56 grams. Accordingly, the new presumption of supply schedule will be set for that amount of methamphetamine. In addition, the expert advisory committee is to be expanded to include the expertise of a Ministry of Justice official.

Changes are also proposed to respond to concerns that the enforcement provisions dealing with precursor substances are inadequate. Concern has centred on ephedrine and pseudoephedrine, which are key precursor substances used in the illicit manufacture of methamphetamine. Currently, there is no offence relating to the import or export of precursors for the manufacture of illicit drugs. In a border situation, only charges for the offence of possessing a precursor can be laid. However, possession is impossible to prove in cargo and mail interceptions, as no person has physical possession or control of the substance. The Labour-Progressive Government has therefore created two new offences. The first will enable customs officers to seize and detain precursor substances that are imported into or exported from New Zealand in the knowledge that they will be used to commit an offence by producing or manufacturing any controlled drug, with a maximum penalty of 7 years’ imprisonment. The second offence will enable customs officers to seize and detain precursor substances imported into or exported from New Zealand without reasonable excuse, with a maximum penalty of 1 year’s imprisonment.

At present the power to detain, search, and seize without warrant is restricted to class A, B1, and C1 controlled drugs. The Government has also agreed that the principal Act should be amended to create a new Part 3 of schedule 4, to extend the powers in section 18(2) and (3) of that Act to enter, detain, search, and seize without warrant the precursor substances listed in the new Part 3 of schedule 4, and to list ephedrine and pseudoephedrine in the new Part 3 of schedule 4. Therefore, this bill will extend the powers of search and seizure without warrant to ephedrine and pseudoephedrine, thereby allowing the police to respond quickly when investigating large purchases of pharmacy-only pseudoephedrine medication to be passed on to illicit manufacturers of methamphetamine.

The last set of changes to the principal Act relates to the offence of possessing needles and syringes. Under the Health (Needles and Syringes) Regulations of 1998, there is a legal defence to the charge of possession of a needle or syringe if the injecting drug user can show the needle or syringe was obtained legitimately through the needle and syringe exchange programme. At present, the onus of proof in the defence lies with the defendant, and that has caused a number of problems, mainly in the health area, of intravenous drug users using used needles. The bill will amend the principal Act by moving the defence to the offence of possessing a needle or syringe from the regulations—where it is now—into the principal Act, and by reversing the onus of proof from the defendant to the prosecution, which will have to prove that the needle or syringe was not obtained through the exchange programme. Fundamentally, that is to encourage the use of clean needles, rather than to have the enormous costs that go with the health problems of hepatitis C, HIV/AIDS, and so on.

The second part of the Misuse of Drugs Act is the Misuse of Drugs Amendment Act 1978. The changes to the amendment Act are intended to provide New Zealand’s law enforcement agencies, namely, the Customs Service and the police, with powers that will enable them to more effectively detect the presence of controlled drugs and take appropriate action. The main changes will be that the provisions in the second part of the Act relating to controlled deliveries will be extended to include precursor substances like ephedrine and pseudoephedrine. Customs officers and members of the police will be able to conduct personal searches without a warrant during a controlled delivery. The law enforcement agencies in New Zealand will be able to facilitate international controlled deliveries without the prospect of the liability of the importer and exporter of the illegal substances being affected by the law enforcement agency’s involvement, and customs officers and members of the police will be provided with the power to personally search persons held under the internal concealment provisions of the second part of the Act.

There is one further issue relating to this bill to which I wish to draw members’ attention. In March 2004 the Expert Advisory Committee on Drugs recommended the creation of a new schedule of the Misuse of Drugs Act. The purpose of the new schedule is to enable some regulation of legal substances that are subject to abuse but that do not warrant, on available evidence, regulation under the current risk classes—the A, B, or C drug classifications. An example of such a substance is the legal high benzylpiperazine. The regulation proposed will allow restrictions to be placed on matters such as the legal age of purchase, and on retailing, supplying, marketing, and labelling in relation to the substances in the new schedule. Such a schedule would not be confined to substances like benzylpiperazine, but would also provide another strategy in the spectrum of measures to reduce the harm associated with volatile substance abuse, which includes solvent abuse. All members will know of the tragic cases of solvent abuse recently before the coroners’ courts. This bill provides an opportunity to put that new schedule in place now. It is the Labour-Progressive Government’s intention to introduce a Supplementary Order Paper providing for such a new schedule in time for it to be considered by the select committee together with this bill. We are taking the opportunity to do that now, because if we do not provide for that in this bill it may be 1 or 2 more years before there is another opportunity.

It is proposed to refer this bill to the Health Committee for consideration. The Labour-Progressive Government is anxious that this important bill be passed this year, if that is possible. Therefore, I propose that the Health Committee endeavour to make its final report to the House on the bill by the end of November 2004, so as to enable that to happen.

JUDITH COLLINS (National—Clevedon) : The National Party will support this bill. We are certainly very pleased to see that some action is being taken to try to deal with the problem of methamphetamines, which is certainly a growing problem. I think the fact that we hear that the police are dealing with more and more clandestine laboratories for the manufacture of methamphetamines indicates that that is simply the tip of the iceberg. Although a number of laboratories are found and dismantled and a number of prosecutions come from that, there is likely to be a significant number that are not found or dealt with, but continue to thrive, no matter how many times people are told about and see the results of the use of methamphetamines. In an ideal world and an ideal country, we would be able to say to people—intelligent, adult people; New Zealanders—that they can just decide on the things that they want to take, because we know they will make the right choices. But unfortunately, when it comes to drugs like methamphetamines, there is no safe dosage. Although the police tell me—as they do—that alcohol is the No. 1 drug that they have the most difficulty with, they do understand, and we understand, that alcohol, for instance, is a drug that does have safe tolerance levels. Methamphetamines, unfortunately, do not.

At this moment I would like to give a bit of praise to the pharmaceutical people, and to the pharmacies themselves. In many ways—certainly in my electorate of Clevedon, and particularly in Papakura—they have gone out of their way to try to stop pseudoephedrine and other drugs like it that are used in the manufacture of methamphetamines from being bought and used for the manufacture of that particular drug. I think that is a very, very good instance of the pharmacy people getting together and deciding that is the right thing for them to do. They are not required by law to do it, and in some parts of the country they do not do it at all. But in places like Rotorua, Papakura, and Manukau City, there is a widespread belief by the pharmacies and pharmacists that they should help to deal with that particular issue. I congratulate them on that, and I think that members of the House would share the view that that is a very, very sensible move. The problem for those of us who do not manufacture methamphetamines, but who may wish to have a cold medicine, is that it does make it more difficult for the legitimate purchaser to obtain those medicines. But those things can be dealt with, and I think that we do owe the pharmacists a vote of thanks.

In terms of methamphetamines, as the Minister has rightly said, there has been a big increase. In New Zealand we are dealing with a rise in not only the amount of methamphetamines manufactured here but also in those being brought into the country by way of illegal importation. One of the issues that is very, very relevant is the resourcing and outputs of people in the New Zealand Customs Service and the New Zealand Immigration Service, to make sure that they are given the resources to be able to deal with the situation. We need to have intelligence-gathering in other countries, and we need very much to have an attitude that we will not accept this country being awash with methamphetamines. I am very pleased to hear the Minister speak in those terms. In this particular area, however, we do need to be vigilant. One of the problems with any sort of legislation is that it is always somewhat retrospective, so we are acting after the event. Unfortunately, methamphetamines have grown in terms of their use, their availability, and the addictions that have come from them in the last 5 years. Too little has been done for too long. I am glad that we are now to take the issue seriously.

I am concerned that some children are being brought up in homes where methamphetamine use is a way of life. Prostitution is being indulged in on the basis that it pays for methamphetamine habits. There is no safe level of methamphetamine use. The brain damage that can ensue from that particular activity is now well documented, and people in this country should know that. Yet we see no public health advertisements or campaigns in relation to methamphetamines. We certainly saw a tremendous number of public health campaigns in relation to passive smoking. Huge amounts of taxpayer dollars were spent to tell people, by way of television—that being considered the most effective way to get the message through—about the possible results of passive smoking. Nowhere do we see anything on our television screens about the effects of methamphetamines or other illegal drugs, such as marijuana—the effects on foetuses, and the long-term effects on users. If we are ever to take illegal drug use seriously in this country, we need to start to get the message out there. We need to stop pussyfooting around and fearing that we may offend someone if we tell the truth.

It is about time that we in this House faced up to the fact that there is a tremendous amount of illegal and illicit drug use in this country. Drugs are illegal and illicit for very good reason: they do incredible harm, and do no good. We need to accept that. I am pleased the Minister takes this issue seriously, and I am very pleased that in Parliament we will be able to get—I expect—almost unanimous support on this issue. I say “almost”, because not everyone will agree that illicit and illegal drugs have no benefits for, and are simply an ill on, the people who use them.

In this country there are people who have difficulty in getting together enough money to pay their rent and to pay for their weekly food. Yet we, as members of Parliament, all know of instances where people would rather spend their money on drugs than on rent and food. In this country there is an attitude that nobody particularly cares whether people spend that money on drugs, because it is their money. Well, I say that when people are taking the food out of the mouths of their babies in order to feed their drug habits, it is about time that we took drugs seriously. I do not subscribe to the 1970s view that drugs are all pretty good and are fine for us. I did not do so in the 1970s, and I certainly will not now in the 2000s.

Simon Power: How old was the member in the 1970s?

JUDITH COLLINS: I tell the member that in the 1970s I was a teenager, which just goes to show that non - drug use does help to keep one young.

I have mentioned earlier the abuse of alcohol in this country. I take that issue very seriously. I take it seriously in terms of children, of the health effects it has on this country, and also of the police resources that are used so much to deal with it. Two bad drugs do not make one good drug; I think we need to make that very plain. We know we could never outlaw alcohol in this country. It is utterly a part of our culture, and has been for thousands of years. We know what happened in this country when alcohol was outlawed: that led to gangs. In this country there is no need for us ever to go down the track of bringing in more drugs that we will have more trouble in trying to control.

Hon MARK BURTON (Minister of Defence) : I will just briefly comment. It is a pleasure to follow on from that member’s contribution. I agree with her. I think this is an area in which this House may well almost unanimously—if not unanimously—agree. We certainly should find agreement in supporting what is good legislation.

This bill seeks to address a blight on our society. Anything that we in this House can do to fight that evil should be done. I commend members for the work they have done to progress the legislation, and urge the House to support its rapid progress.

CRAIG McNAIR (NZ First) : In speaking to the Misuse of Drugs Amendment Bill (No 3), I want briefly to read an excerpt from the explanatory note, to elaborate on that, and then to elaborate on a few other provisions in the bill.

Before I go on to that, I want to say that New Zealand First, like the National Party, will support this bill going to the select committee. I look forward to hearing evidence and submissions to see whether there is any way we can make the bill even better.

I will elaborate firstly on a section of the explanatory note. It states: “Police are attempting to address the increasing illicit trade in methamphetamine through targeting the precursor substances and chemical reagents used to manufacture the drug, principally, ephedrine and pseudoephedrine. The power to detain, search and seize … is restricted to Classes A, B1 and C1 controlled drugs. In particular, the police are concerned that they are unable to respond quickly (ie, without a warrant) when they are investigating shoppers who purchase large amounts of pharmacy-only pseudoephedrine medication to pass on to illicit manufacturers (pill shoppers).” The enhancement of police powers to search and seize is an action that New Zealand First and I believe is a positive move.

I want to make one point as far as that issue is concerned. I remember that a while back now—probably 3, 4, or 5 months ago—the former spokesperson on health for the National Party, Dr Lynda Scott, made an interesting point about pseudoephedrine being a product contained in a lot of cold and flu medications in pharmacies. I remember very clearly her saying that when she was studying medicine that ingredient was not considered very necessary in medications, in respect of its not being the miracle ingredient. There were other ingredients that could be used to make cold and flu drugs, etc.

I remember falling sick a little while ago. I normally use a cold and flu medicine that does not contain pseudoephedrine, but one of the pharmacy assistants recommended I use Codral—

Darren Hughes: Day and Night!

CRAIG McNAIR: Day and Night. I was told it was great stuff. I tried it, and the pharmacy obviously had to take my driver’s licence number, and so on. That is the common practice, which is a good thing considering the fact that we have so many problems with pharmacies being broken into, and with the problems that come along with that. Anyway, I took it, and it did not help me at all compared with the help I had when I went back to the old remedies. They were just as good, if not better.

The point I am trying to make is to ask whether there is still a necessity to stock those drugs within our pharmacies. The previous speaker said that a lot of pharmacies in Rotorua and other places do not even stock those kinds of drugs, so I think that that is something we should look at in the select committee.

As I said, New Zealand First will vote for this bill because it is a step in the right direction. We have to take incredibly positive action in this area straight away, because drugs are ruining young people, families, and children in our nation of New Zealand.

I want to address one other thing—the Minister touched on it in his opening speech—with regard to the offence relating to the possession of needles or syringes. I am concerned about that issue, and it is one thing that I—or if I am not on the select committee, one of my other colleagues—will look forward to getting stuck into. The explanatory note again states: “The aim of the Ministry of Health funded Needle and Syringe Exchange Programme (NSEP) is to reduce the spread of HIV, Hepatitis C, and other blood-borne viruses among injecting drug users (IDUs). The aim is achieved through the distribution of sterile injecting equipment. The NSEP also encourages safe disposal of used needles and syringes and provides information about safer drug use techniques. It is operated through pharmacies and dedicated needle exchanges throughout New Zealand (NSEP outlets).”

Further on, the explanatory note continues: “The 1987 regulations also created a legal defence to the charge of possession of a needle or syringe (which is currently an offence under section 13(1)(aa) of the principal Act).”, as the Minister said. “The defence provided that a person did not commit an offence under section 13(1)(aa) of the principal Act if he or she could show that the needle or syringe was purchased through the NSEP.” Again, as the Minister said, currently: “The onus of proof in the defence lies with the defendant. The current regulations, the Health (Needles and Syringes) Regulations 1998 retain the defence created in the 1987 regulations.” As the Minister has just talked about, the explanatory note goes on to state: “The Government has agreed to amend the principal Act to move the defence to the offence of possession of a needle or syringe from the Health (Needles and Syringes) Regulations 1998 into the principal Act, and to reverse the onus of proof.”

I am looking forward to the referral of the bill to the select committee so that we can talk about that issue. But on the face of it I would prefer that a user has to prove to a court that he or she obtained the needle or syringe from the approved source.

Hon Tony Ryall: Absolutely. This provision is political correctness by a liberal Government.

CRAIG McNAIR: I have agreement from another member of the House. He knows exactly where I am coming from. Hopefully the Police Association will make a submission, and I will be very interested to see what it thinks.

I personally think that the whole Needle and Syringe Exchange Programme is controversial in itself, and it creates a lot of loopholes and problems in some areas. People might argue that it fixes problems in other areas. But that issue aside, I still think the bill is soft on crime in that respect. It is a major concern of mine, and in the select committee we must try to address the issue of offences relating to the possession of needles or syringes.

There are a lot of positive aspects of the bill, and I want to touch on them. The first relates to the controlled delivery provisions in the Misuse of Drugs Amendment Act. The bill extends those provisions to include precursor substances, and gives the power to customs officers and the police to be able to conduct personal searches without a warrant during any controlled delivery.

In another positive move, I believe, they will have the power to personally search persons held under the internal concealment provisions of that Act. One of the major problems that we as politicians read about in newspapers, and read in letters from many organisations written to us as members of Parliament, is that the police do not have adequate powers and resources to do the job. We have a competent police force, but we need to be fair, and to give them the powers and resources to fight this crime.

NANDOR TANCZOS (Green) : The Greens will be supporting this bill to the select committee. We think it will be an interesting examination, and we look forward to the evidence on the pros and cons of the various aspects of the bill, because it does contain a number of very different provisions. Some we support very strongly, others we oppose, and still others we feel neutral about.

I shall indicate why we support the bill and why we thank Mr Anderton for introducing it. Firstly, there is a provision to add a Ministry of Justice representative to the membership of the Expert Advisory Committee on Drugs. Some members may think that is insignificant, but we think it is very important. It is well needed. If we think back to the scheduling of Fantasy, it demonstrated clearly that there has been a glaring gap in the expertise available to the advisory committee, in looking at these things.

Let us be clear: at that time the Greens supported the scheduling of Fantasy. It was becoming increasingly obvious that there were very real dangers associated with its use. But we did have real concerns about making Fantasy a class B1 drug, rather than a class B2, or some other, because it included search without warrant provisions. The Greens have a very real concern about the extension of search without warrant provisions to the police. We think it is a very dangerous power and should be used very, very carefully. There are a number of examples of case law where judges are criticising the way that police use powers of search without warrant—in fact, they have acquitted people because of the way those powers have been used and abused in ways that breach people’s rights, as guaranteed under the New Zealand Bill of Rights Act. Of course, that does not mean all police officers, but some front-line officers have used those powers in ways that the law did not intend.

I think it is questionable whether the Misuse of Drugs Act would have contained search without warrant provisions at all, if that 1975 legislation had been subject to the vetting of the New Zealand Bill of Rights Act in the way that legislation is today.

We questioned the inclusion of those powers, at the time. The answers we were given by the Expert Advisory Committee on Drugs were unsatisfactory. We asked why those search without warrant powers should be applied to Fantasy. We got no real justification at all. There was no evidential basis for that decision. We think that including a Ministry of Justice official as a member of the advisory committee will help to make sure that those considerations are discussed by the committee. If there are substances that will attract search without warrant powers, then there will have to be an evidential reason why such draconian powers should attach to that substance.

We strongly support the changes relating to the possession of needles. The Needle and Syringe Exchange Programme is an extremely important regime for reducing the incidence of HIV and hepatitis C among intravenous drug users. The places where the needles are available are also very important for providing information to those communities, and getting information. Those are among the few areas where the intravenous drug-using community interacts with the State. It is important that we protect the integrity of that, in order that we can understand what is happening within that community, and the community can get better access to health information and harm reduction information. It is extremely important, and we support the changes in the application of the defence provisions to expand the provision of those needle exchange services.

However, there are things that we oppose—in particular, as I have foreshadowed, the extension of search without warrant powers to precursors by amending schedule 4. Let us be clear: the Greens supported increased restrictions around precursors, which have already been passed by the House. We supported those provisions, because we recognise that P is an extremely dangerous drug. It has very, very real risks. But we do not believe the search without warrant provisions attaching to those precursors are necessary or warranted. I have already spoken about the significant implications of search without warrant powers, generally. There is no real constraint over how the police use those powers.

I will be very interested to have a look at the advice of the Attorney-General on the New Zealand Bill of Rights Act implications of the extension of this to precursor drugs. It seems a totally unnecessary expansion of the arbitrary power of the police to search and seize. Freedom from unreasonable search and seizure is one of the basic guarantees in human rights conventions and bill of rights legislation.

We have to remember that precursors are, by definition, drugs about to be used in the manufacture of methamphetamine or other serious drugs. So, if these precursors are being used in the manufacture of those drugs, one does not need a search without warrant provision. There is ample time for the police to go to a JP, or a judge, and to get themselves a search warrant. We are talking about precursors that are involved in a lengthy manufacturing process; we are not talking about people on the street with a small amount of something. So it is just not necessary to have those search without warrant powers, with the dangers that go along with increasing its use.

The Green Party also has concerns about some of the provisions in relation to customs officers. The explanatory note talks about two new offences. The first one enables customs officers “to seize and detain precursor substances imported into New Zealand or exported from New Zealand with the knowledge that they would be used to commit an offence”. That is quite sensible, and I can totally understand that. There is concern about the other offence, which enables customs officers “to seize and detain precursor substances imported into New Zealand or exported from New Zealand without reasonable excuse, with a maximum penalty of 1 year’s imprisonment.” We have a bit of a concern around that because what it once again seems to be doing, as with other drug legislation, is reversing the onus of proof and saying that one has to prove one’s intention, rather than the prosecution proving it. We think that that is something this House should be very careful about doing.

The other thing is this email that has just come around with a background explanation from the Government about the bill. One of the things I wanted to draw the attention of the House to is controlled deliveries in relation to search without warrant powers. We can see the point of allowing a controlled delivery to take place; it makes sense as that is a basic police sting operation. But the justification for adding search without warrant powers in this regard is, it says, that the police rely on section 18(3) of the Misuse of Drugs Act to detain and search without a warrant; however, it is confined only to class A, B1, and C1 controlled drugs. This precludes some current drugs of abuse that are being imported, and the bill talks about precursors.

Of course the thing is that if the bill is going to make precursors subject to search without warrant provisions, then that no longer applies. So the very reasoning in the Government’s explanation actually no longer applies when the legislation comes into force. The second one it mentions is that the police powers under section 18(3) cannot be used in situations where the drugs have been substituted with placebos, because there are no controlled drugs in the packet. But once again, let us be clear that a search without warrant power is not needed. If the Customs Service knows there is a delivery, if it is tracking it, and if it is going to bust that house, there is plenty of time for the police to go to a JP and get themselves a warrant. Look, if they are tracking the package, then they know where it is and they know where it is going. It takes just half an hour to go down to a JP and get a search warrant. I have seen them do it, and that is how it works. The other point I am going to make—

Craig McNair: It’s not quite as simple as that.

NANDOR TANCZOS: It actually is as simple as that—I have seen them do it. The other point I would like to make is that the Supplementary Order Paper that the Government has said it will introduce to bring in a new schedule to allow R18 restrictions is something that we support. This is something that we recommended when the expert advisory committee was looking at benzylpiperazine, and we think it is a very sensible thing. I would like to be assured that that will be introduced in a way that means the select committee will be able to call for submissions and examine them; that it will be introduced early enough so that it goes to select committee and the public gets to have a say.

Our concern is also that it does not go far enough. The Misuse of Drugs Act is very complex, confusing legislation and this is adding piecemeal new bits and pieces, which makes it even more complex. We in the Green Party think we have an opportunity here to simplify and expand the Misuse of Drugs Act, to tidy it up so that it is straightforward, streamlined legislation, and to expand it so it can deal with a wide range of recreational drugs. We support R18 provisions. Let us put tobacco and alcohol into the Misuse of Drugs Act, as well. Let us put in the legal highs as well as those that are R18 restricted. We could put in a class that has no age-limit but includes things like warnings on vessels, and advertising restrictions. We could put caffeinated drinks, like V and Red Bull, in there as well. We could have a single piece of legislation that deals in a consistent, integrated, and sensible way with a full range of recreational drugs. That would be a much more sensible way than the hodgepodge legislation we have now.

Dr MURIEL NEWMAN (Deputy Leader—ACT) : I rise on behalf of the ACT party to say that our party intends to support this legislation to a select committee, but like other parties we do have reservations and I would like to use this opportunity to put some of those concerns on the record. The Labour Party measure in front of us right now does sound like it is getting tough on drugs, crime, and so on, but the reality is that the Government’s progress in this area has essentially been pretty much a disaster. Too little, too late, is probably the best way to describe it.

I would like to start by outlining some information I received under the Official Information Act in May of 2003. It stated that that was the sixth briefing paper that had been given to Ministers of this Government since 2001, all warning about the problems the country faced with the methamphetamine crisis that was developing. The Official Information Act papers were using as primary indicators the national drug use survey and customs and drugs seizure data. That is what the information was based on, and the papers essentially stated that the Government was facing a huge problem. By 2001 the rate of amphetamine and methamphetamine use in New Zealand, at 5 percent, was higher than in almost every other country except Thailand, where the figure was 5.9 percent. The authorities in Thailand had already said that they had an epidemic that was affecting all levels of society. New Zealand was almost at that level.

The official information briefing paper warned the Government that New Zealand was facing a major problem across the board, relating to the criminal area, the social area, law enforcement, and the environmental area, unless the Government got on top of the problem. Did the Government get on top of this problem? The answer is no. What we are seeing now is something that should have been happening years ago. This is simply a small, hotchpotch measure that makes this Government think that it looks tough, but essentially it is not enough to deal with this problem.

The National Drug Intelligence Bureau, back in 2003, said that it did not know of any other Western country experiencing the same explosion in the manufacturing of methamphetamine. Just to put it on record, in 1997 the police discovered one clandestine laboratory; in 1998 the figure was two; in 1999 it was five; in 2000 it was nine; in 2001 it was 41; in 2002 it was 147; and in 2003 it was 164. This year the figure is expected to be more than 300, and the police are not getting to many. They know that the number of laboratories out there is growing like Topsy. The amount of P available in this society is such that it is everywhere. We even have corner dairies now selling the pipes that allow people to smoke P.

What is this Government doing? It is taking police off the beat to guard prisoners and to go out and collect traffic tickets so that it can boost its revenue. It is taking detectives away from the job of fighting the drug barons and it is putting them on traffic duty. It has the drug team enforcing the seizure of drugs as they come in at airports, instead of trying to track down the people who are at the heart of this problem of manufacturing and distribution in New Zealand. We have a police force that cannot even do its job because this Government is soft on crime. The official information report that I received in 2003 stated: “The current methamphetamine situation in this country is critical. The escalation of international and domestic organised crime involvement in the importation, manufacture, and distribution of amphetamine-type substances poses a serious threat to this country. The situation is far more significant and far-reaching than the impact on New Zealand of the Mr Asia syndicate in the late 1970s and early 1980s.”

That was in 2003. Now the problem is far worse. This Government is trying to pass a half-baked bill that will go nowhere near the steps that are needed to get on top of the problem. I think it is an absolute disgrace. It is an indication that this Government does not care about crime in New Zealand.

The Official Information Act goes on to warn of something else. It states that it is only a matter of time before those laboratories that manufacture methamphetamines turn to manufacturing ice—crystal methamphetamine. It talks about its powerful form, and the effect it will have. It states that the effects of ice are very similar to crack cocaine, with one significant exception: the effect of crack cocaine lasts for 10 to 20 minutes; the effect of ice is more prolonged, at between 8 and16 hours. We already know the effect of P on citizens and how much more violence there is against the police. The police, by the way, are not even allowed to get the protective vests that would make them safe from the knife assaults that they face every day out there because of P-crazed offenders.

We also have violence in hospitals. We have people at risk at all levels of society—even those who deal with children these days who are high on P. Yet this Government is not doing enough to get on top of the methamphetamine problem, let alone to get on top of the ice problem, which the officials warned over 18 months ago was going to be a real epidemic in New Zealand.

We then look at the poor old Institute of Environmental Science and Research—the agency that goes out and tests these drugs in the methamphetamine laboratories. We ask ourselves: “Are they on top of their job?”. The answer is no, because they are not given the funding or the resources to be able to do the job properly. I say that if this Government is not prepared to allow them to do the job properly, then it should be contracted out to the private sector. That is what they did in Britain, and that is how they brought down 2-year waits for samples that the police had collected to be analysed, so they can put those criminals behind bars instead of having them on the streets. We cannot put someone on remand for 2 years, which is how long it is taking to get these samples analysed.

When the British Home Office contracted it out, the time taken reduced from 2 years down to 1 month. That is what we should have in New Zealand, so that when the police go out and bust a lab, then 1 month later they have their samples analysed and they can bring the case to court. We then need to have some tough sentences. It is absolutely no good that somebody gets busted for methamphetamines, gets put behind bars, and serves only one-third of the sentence. He or she is then back out on the streets, manufacturing again. It is a revolving door situation that this Government is not getting on top of at all.

Ron Mark: What about the people who go on home detention?

Dr MURIEL NEWMAN: My colleague makes a good point. They probably have methamphetamine laboratories in their homes, and we are paying for them to stay at home and manufacture. It is just appalling. I know that the Government says that it is a matter of resources, and we do not have the money to crack down on methamphetamines. That is rubbish.

Ron Mark: A record surplus.

Dr MURIEL NEWMAN: There is a record surplus, but worse than that, the Government is going to spend $21 million in election year, selling its Budget. There is a big election campaign fund. Why does the Government not put some of that money into getting on top of this problem?

Everybody, at every level of society, is concerned about this issue. The police will tell us that the place is awash with it. This Government has sat on its hands and seen a crisis develop in New Zealand. Unfortunately I do not think the public understands quite how bad it is. We know in this House that it is time the Government got on top of it.

JUDY TURNER (United Future) : I rise on behalf of United Future in support of the first reading of the Misuse of Drugs Amendment Bill (No 3). The Hon Rick Barker acknowledged in August this year that “methamphetamine abuse is the single biggest illicit drug problem facing New Zealand.” We acknowledge that the impact of drugs is absolutely enormous. The police crime statistics released recently pointed to a 30 percent increase in non-cannabis offences, which the police have explained is driven by an increase in the manufacture of illicit drugs, and of course the policing initiatives that they have been running. I also want to endorse the comments of the previous speaker, who talked about the burgeoning number of clandestine laboratories. My understanding is that to date in this financial year, 190 laboratories have been closed down. That is really the tip of the iceberg. I think most of us have heard anecdotally that, because of the under-resourcing of the police, the local police in many areas know where laboratories are, but because they are not permitted to go in on their own initiative and search the premises in view of the danger factors, they have to wait until the special police unit mandated to do that work is able to come into their area and investigate the situation. Because of that resourcing issue, we have an absolutely rampant and out-of-control methamphetamine problem.

We support the two main directions of this bill: firstly, the amending of the presumption of supply provisions, so we can crack down on the dealers, and secondly, the preventing of the importing and exporting of precursor substances. At present section 6(6) of the principal Act creates a presumption whereby a person who is found in possession of 56 grams of a controlled drug is deemed to have it for the purposes of supply. If the police can prove the person had the drug, then the onus is on the defendant to prove that he or she had it for another reason. The problem that has been created is that if the measurement is set at the wrong level, the legislation has to be changed. If we are to address with appropriate speed the rather outrageous measurement of 56 grams, we need to have the ability to do that through an Order in Council. I want to pick up on that figure, because at the select committee United Future will be very interested to hear some scientific evidence about the limit for personal use. We suspect that this proposal does not go far enough. Let me give this fact, which shows how ridiculous it is that at present someone is allowed to be in possession of 56 grams of methamphetamine before he or she is deemed to be supplying it. Apparently P is bought in what is generally called points. A point is 0.1 of a gram. If someone purchases 1 gram of P, for approximately $1,000, it then has to be broken down into points in order to use it. This change recommends that someone would be allowed 5 grams before it would be considered not to be for personal use but for supply. I think that does raise some very interesting questions as to whether even a figure of 5 grams is too high. We will be watching that issue very closely and asking some very serious questions at the select committee, to determine how we arrived at 5 grams as being an acceptable level. It is, of course, certainly a big improvement on 56 grams.

We understand the importance of being able to move quickly to adjust the amounts by Order in Council, and we are supportive of that. However, we do have some questions about how that will be managed, with regard to what would happen if a proposal came forward on a given substance to relax through Order in Council the amount that would be considered acceptable before one was considered to be in possession for supply. We have all assumed that this legislation is about the opportunity to tighten down on the amounts that people are allowed to have in their possession before they can be charged with supplying. I guess we need to be careful that we do not set in place a very quick and fast-track method that does not require revisiting an issue back in Parliament if the intention is to relax that provision. We believe it is important and essential to crack down on drugs quickly. The process should not be drawn out, and the amending of legislation should be able to be done in a speedy manner.

Many of the dealers who are pushing drugs on our teenagers, for instance, are enticing them with the opportunity to go shopping for the tablets needed in the manufacture of P, and they are being supplied with some of their own needs in terms of their addictions. The other supply is from “tinny houses”, where young people buying cannabis are introduced to even more dangerous substances.

We support the second main provision of the bill, which is to prevent the importing and exporting of precursor substances. It is extremely well known that overseas drug syndicates are targeting New Zealand, both with methamphetamines and the precursor substances, and that it is a growing problem. In 2004, for instance, 12,685 grams of methamphetamine was seized by the Customs Service at the border, which was 10 times more than in the year before. In 2004 over a million tablets of pseudoephedrine and ephedrine were seized by Customs—a sizable increase from the amount that had been seized the year before. Those dealers are coming into our country with the full intention of supplying P laboratories up and down this country.

The other controversial provision that other members have referred to is the amending of the provisions for the needle and syringe exchange programme. That is another area where we will be very interested to see what comes up at the select committee. Our understanding is that what motivated the inclusion of the provision is that many of the staff working on the needle and syringe exchange programme have had huge amounts of their time tied up in appearing in court to defend people who are on charges of having needles, where the onus of proof is upon them to say where they acquired those needles. It has become a bit of an administrative nightmare, and the staff feel they could be using their time a lot better. However, we have some concerns about what this bill proposes, and we will be very interested to see whether there are any other suggestions out there. One of my colleagues said that maybe a certifying certificate of some kind could be given at the needle and syringe exchange. That is used in other jurisdictions, and it may have an application here—that is, some sort of certificate of proof that could be given to users of the programme.

We would also like a little more information on the Supplementary Order Paper that the Hon Jim Anderton indicated today would be introduced as part of this legislation. We have not had a chance to see any of those provisions, and we would like to see some of the detail of them and get our heads around it, in order to understand whether we could support the provisions. We think the intention is great. I agree with Mrs Newman that there are lots of other issues surrounding this flood in our nation that is causing so much damage that needs to be addressed, and not just through this change in the law. It is a good start and we are keen to support it, but we are also keen to make sure that it is sound legislation.

Hon JOHN TAMIHERE (Minister of Youth Affairs) : It is pleasing to note that all parties in this House will support the first reading of this bill and commend it being referred to the select committee. The purpose of the bill is to ensure that the Misuse of Drugs Act does exactly what its objective is—that is, to prevent the misuse of drugs. Whilst we can have a debate around the detail of that, it is pleasing that all parties will support this bill.

I regret the stance taken by a number of members in some of their observations. Whenever Muriel Newman stands up in this House I feel like running for the Prozac bottle—although I have never taken it. She is the most depressing person to listen to in this House. In Māori terms there is a thing called aahua, and when people have aahua they bubble, there is an effervescence about them, and there is a spirit in them. But every time Muriel Newman walks down to this House, one really wonders why she gets out of bed in the morning. She can always see the most ugly, evil, venal, and vile things in the world. That is all that particular party can talk about. No wonder it is tracking at around 2 percent!

Also, I disagree absolutely with the comments made by the Green member Nandor Tanczos. The reality is that it does not matter whether it is P today; it will be something in another 2, 3, 4, or 5 years, whether it is called L, Z, or Y. Our police force, as one part of combating drug abuse in our country, needs to be empowered to do the job properly. This Government has acted accordingly, not just in regard to this legislation but on a whole matrix of issues with regard to the misuse of drugs. It voted $19.6 million for a hunt-and-kill unit in the New Zealand Police. As that unit starts to bite in, it must start to attack gang networks, gang distribution lines, and gang production lines. Long may the Black Power and the Mongrel Mob be members of the new Māori Party!

We must toughen up our ability to hunt down the people who visit the type of mayhem, hurt, and carnage on our streets that our health and social services always end up having to pick up. We can no longer continue to tolerate the flower of New Zealand youth being burnt and blasphemed in this particular way, and this legislation goes a long way to ensure that the police have the authority and power to move very quickly against those who are storing the precursors and using them in a production capacity. It also allows them to hunt and trace very quickly those who run the distribution networks, and so on. So I commend it.

I would like to acknowledge and thank the Hon Jim Anderton for championing issues relevant to alcohol and drug abuse and alcohol and drug suicide amongst our youth population. In conclusion, I would like to invite “Tony Vile” not to conduct himself in his normal naughty, venal little way, and not to just be a wonderful consort and support to Madam Newman. I commend the bill to the select committee. I know that it will give this legislation careful and considered thought and report back a bill that we should all be proud of supporting.

Dr PAUL HUTCHISON (National—Port Waikato) : Thank you, Madam Speaker, for the opportunity to speak on this very important Misuse of Drugs Amendment Bill (No 2). I note it is the third amendment. The last one was just some time ago. That very much highlights the fact that the P epidemic in New Zealand is becoming increasingly serious, and the criminals involved in it are becoming increasingly cunning, devious, and manipulative. It is vital that the legislation is appropriate in that it enables them to be tracked down.

There are some concerns about civil liberties in terms of this bill, and the National Party shares those concerns. However, it is important, because of the incredibly increasingly serious situation in New Zealand, that the police and the Customs Service are able to show very tough action towards the criminals involved in the escalating P epidemic in New Zealand. It is important to remember exactly how fast this epidemic has occurred and how tardy the Labour Government has been in terms of responding. Back in 1996 we saw the first clandestine P laboratory busted by the police. In 2000 there were nine laboratories, in 2001 there were 147, and in the first 10 months of 2003 something like 146 clandestine laboratories were closed down. One wonders what the Government has been doing—

Hon Tony Ryall: Sleeping!

Dr PAUL HUTCHISON: That is absolutely right. The evidence was there back in 1999.

The point that Muriel Newman made with regard to the under-resourcing of the Institute of Environmental Science and Research is absolutely right. One of the major problems we have is that it is overwhelmed with work, and under-resourced in terms of both money and the ability to have forensic scientists. The point she made about putting this sort of thing out to private contract, as is done in Britain, and bringing down the huge backlog in our courts, is absolutely relevant. I am very concerned when I hear the Hon John Tamihere say such inappropriate things about a very good member who has taken the trouble to go to the Institute of Environmental Science and Research and actually look at the background problems that are holding up the process in New Zealand. It seems to me that the Government has failed to go into the details. With these things, it is always the details that are so important.

I also note that some years ago, I think it was 2002, it was pointed out that methamphetamine was selling on New Zealand streets for about $100 to $180 per gram, and P was selling for $1,000 per gram. That was in 2002 when, in comparison, a tablet of LSD could be purchased for approximately $30 to $40, and 1.5 grams of cannabis could be bought for $20. That just demonstrates how hugely important this drug has become to the gangs that are dependent upon it for their feeding frenzy on the vulnerable throughout New Zealand.

I think what Judy Turner mentioned about presumption of supply going from 56 grams with a street value of $56,000, down to 5 grams with a street value, when converted to pure methamphetamine, of $5,000, is right. I think it is very important that the select committee looks at that very carefully. It is a huge amount, and is still enough to ensure that the gangs are intimately interested; I do not think that amount is little enough to stop their commercial interest.

I think it is also very important to point out just how addictive this drug and its precursors are. We heard Nandor Tanczos earlier on scoffing at the importance of the precursors, ephedrine and pseudoephedrine, being included in this bill. They are hugely important. It is so easy to convert them into pure P. The points that he made really make me wonder, once again, about the relevance of the Greens in this Parliament. There is a hugely important chain going from the precursors to the final manufactured article, pure P.

P is highly addictive. It affects all sectors of the social strata, and associated with it, unfortunately, are bizarre psychological reactions that are completely unpredictable and that, at times, have been demonstrated to be utterly devastating. I think Judith Collins made the point we have a huge problem with alcohol in this country; yes, we do, but what has been so scary about the P epidemic is that it has been rapidly escalating over the last 3 to 4 years.

Only 3 years ago we were going through the debate on marijuana. I remember one of the submitters from Northland telling us: “Please don’t change the law, because if marijuana is legalised, then the gangs will be getting on to the hard drugs.” The hugely worrying thing is that in those 3 short years the gangs have gone on to the hard drugs, and now they are not only endemic but epidemic in New Zealand.

I think my colleague Judith Collins also mentioned the point about the pharmacies throughout New Zealand, which, indeed, have done a very good job in trying to make domestic availability and accessibility to criminals much more difficult. Indeed, they should be praised throughout the country for the efforts they have made in that respect.

Clearly, there are two major areas that this bill is concentrating on. The first is the presumption of supply. A variety of policy objectives are made, and presumption of supply matters are added to the Order in Council regime. Again, I remember only 2 years ago, or even less, the Regulations Review Committee being very concerned about this mechanism. However, the point is that because the formulae of these drugs are so easy to change marginally, and because the criminals have got on to that, it is vital to have a ready-response mechanism available to Parliament—to the legislation—so that there can be a quick response. Amending the presumption of supply for methamphetamine is, obviously, absolutely appropriate, as is adding a Ministry of Justice official to the expert advisory committee on drugs. The second main amendment relates to concerns about the increasing prevalence of methamphetamine use and importations of ephedrine and pseudoephedrine, which are believed to be destined for the manufacture of methamphetamine.

Certainly, some pretty strong changes are made in this bill relating to searches of persons involved in delivery. Clearly, in terms of the civil liberty protections, it is very important to have protocols that do indeed safeguard the police, the customs officers, and the people who are perpetrating the crimes. For searches associated with detention warrants, there are carefully spelt out protocols relating to the definition of rub-down searches and the definition of strip searches. Yes, they are tough measures, but, yes, it is absolutely relevant that they be carried out. We saw just a few weeks ago a huge quantity of P brought in through a lava lamp. We are pretty sure that large quantities are brought through on persons these days. It is vital to have extremely reactive measures to combat this problem, and I certainly support this amendment bill being referred to the select committee.

STEVE CHADWICK (Labour—Rotorua) : I am pleased to take a call on the Misuse of Drugs Amendment Bill (No 3), and to follow that sensible member in Opposition, because this bill is one of the strategies that, as members of Parliament, we feel we can get our heads round to prevent the misuse of drugs. It is a responsibility of every leader, as a member of Parliament, to show leadership on this issue, particularly given the extent of the use of methamphetamine in this country. It is baked in labs in neighbourhoods that one would not believe, and is endangering the lives of mothers and children in kitchens around the country. Leaders in this House must act of one accord to help the police and the Customs Service in their endeavours constantly to minimise the impact of these precursors on our society.

It was interesting today to hear the Hon Rick Barker’s response. I would just like to repeat that we have this year seized 10 kilos of crystal methamphetamine, compared with 0.9 kilos the year before, and have also seized 1.3 million ephedrine and pseudoephedrine tablets, which is more than double the amount seized the year before. I think the Misuse of Drugs Act scheduling process is starting to kick in, when we see that sort of yield through customs. I remember working with the Hon Wyatt Creech when we first considered the Misuse of Drugs Bill and put in this unique scheduling through Order in Council. We all talked about expeditious scheduling, and we all did not quite realise just how often we would be revisiting the Misuse of Drugs Act in terms of giving a very flexible and fast-action response to the recommendations of the expert advisory committee on drugs about rescheduling, about dealing with issues of importation, and about cutting off supply at the borders of this country.

I am pleased to see that now a Ministry of Justice official will go on to the expert advisory committee. At the time we introduced the legislation, we did not consider that was necessary. It is great to see that we always have a flexible response to the way in which we deal with those issues.

The one other thing I want to do today—because I have heard about the presumption of supply that will be dealt with through this legislation—is congratulate the Associate Minister of Health Jim Anderton on his Community Action on Youth and Drugs initiatives around the country. There were five when we got into Government, and this year we put $2.55 million more into building up 15 more of those programmes around the country. I assure the House that wherever I go—places such as Thames and the Coromandel, where I was just last week—people ask how they could get one of the Community Action on Youth and Drugs programmes. Murupara wanted a Community Action on Youth and Drug programme, so did Rotorua, and many other communities are saying that the programme is having an effect.

I am sure that, along with introducing this legislation, we will keep up our war on the misuse of drugs in this country. I look forward to this bill coming to our committee.

Hon TONY RYALL (National—Bay Of Plenty) : It is most interesting to hear members’ contributions on legislation like this—particularly that from the member for Rotorua, in light of her support for the decriminalisation of cannabis. I draw the House’s attention to how long it has taken this Government to deal with this issue, which was identified way back at the end of 1999. It has taken this Government ages and ages to deal with an issue. It cannot help but convey the impression that it is half-hearted about it. It took this Government 4 years to reclassify methamphetamine as a class A drug. Does that portray any sense of urgency in this Parliament?

This is another case of Mr Anderton introducing a bill and not understanding the consequences of what he is doing. He brought in a bill that is now known as the “Sherry Tax Bill”, claiming that it would curb under-age drinking. I am sure we have all seen children under bridges with bottles of Madeira! That turned out to be a lot of nonsense.

What I want to alert that Minister to is that this bill effectively decriminalises the use of needles for injecting illegal drugs. If this legislation is passed, effectively it will no longer be an offence to have needles for injecting illegal drugs. It will no longer be an offence, because the police will find it nigh on impossible to prosecute any intravenous drug user who possesses a needle. This bill is part of this Government’s politically correct approach to drugs. I suspect that this Government has us on a path to legalised injecting rooms. That is where this decision takes us.

The Government says it wants to protect the police and to encourage intravenous drug users to be more responsible. It claims that the police are arresting hundreds of people for carrying legal needles, but that is nonsense. This afternoon I spoke to a senior drug investigator in this country, who said that people are arrested, not because they have one of these needles, but because they are housing the needle in an unsafe way. There is a requirement that people house needles in a safe place, and often those people are prosecuted because the needles are not being housed safely. They are also prosecuted in association with other drug-related crimes—generally, the possession of illegal substances. In fact, the numbers that the Government quotes in its own documents, which we have been able to get from the Ministry of Health website, are a load of nonsense. That senior drug investigator told me that under these changes it will be nigh on impossible for the police to prosecute people for possessing needles for the purpose of injecting illegal drugs.

So what is the Government doing here? Right now, section 13 of the Misuse of Drugs Act states that every person commits an offence who has a needle or syringe for the purpose of committing an offence under that Act—that is, for injecting drugs. The exception is if a person possesses that needle because he or she got it from a needle exchange programme. That latter part is in the health regulations. Instead of taking those regulations and putting them in the Act, what has the Government done? The Government has done this: instead of requiring the drug user to prove that the needles came from a needle exchange, it will now be up to the police to prove that the needles did not come from a needle exchange, and that the person who illegally has those needles obtained them believing that the person he or she got them from was not entitled to them.

Let us go through what the hoops are. Instead of the drug user having to prove that he or she is part of the needle exchange, and providing a certificate or something like that, it will now be up to the police to prove that the needles did not come from the needle exchange, and that the person who has those needles knew that they did not come from the needle exchange. That just makes it so much harder for the police to obtain prosecutions against users of drugs who have this paraphernalia. Effectively, this measure decriminalises the possession of needles for injecting illegal drugs.

I will tell members something: I bet that Jim Anderton does not even realise that. I think he has been misled by his officials, just as he was with the sherry tax. Members might remember that he said in Parliament that that legislation was about targeting teenage drinking, then was absolutely humiliated when the Opposition National Party said that it was about putting up the tax on Madeira, sherry, and fortified wines, which are not the drinks of choice of teenage drinkers. With this bill, he has not asked the questions. He is reversing the onus, and that will make it harder for the New Zealand Police to obtain prosecutions against people who are illegally in possession of needles. There is no argument for that.

I pulled from the Ministry of Health website the review of the needle exchange programme, and it is the recommendation of that programme that the New Zealand Parliament approve the proposed amendment that would remove the offence of possession of needles and syringes legally obtained through the needle exchange programme. Well, the Government has gone further than that. Effectively, it is decriminalising the possession of needles for illegal drug use. This Government just does not get it. Corner dairies and shops in Auckland sell pipes for methamphetamine. They say they are ornaments and are not used in the performance of an illegal activity. This Government should be moving to make those items illegal. This Government should be moving to make P pipes illegal, but, instead, it is moving to decriminalise the use of needles for injecting illegal drugs.

It is all part of a politically correct, liberal agenda being pushed by this Government and the health authorities under the name of harm minimisation, when what is required is leadership that says this stuff is wrong and should be stopped. This afternoon I spoke to one of the leading drug educators in this country—

Simon Power: It’s true; the member did.

Hon TONY RYALL: I did. I asked her why she thought the Government was doing this, and her clear answer was that it was all part of the politically correct, soft-on-drugs agenda that we are seeing from the Government time and time again. I want to tell the House that the National Party in Opposition will oppose these changes to the needle exchange. Why would we make it harder for the police to secure a prosecution against an intravenous drug user who has those needles and is using them in an illegal way? I cannot believe that Mr Anderton would agree with that. I think that, as with the sherry tax, he has been fooled. Let me remind the House again of what is happening. Instead of the drug user having to prove that the needles came from the needle exchange, then getting off the charge, the police now have to prove that the needles did not come from the drug exchange, and that the person who has the needles knew they did not come from the needle exchange. Well, how hard will that be for the police to prove? The advice I have received from a senior police drug investigator this afternoon is that it will be nigh on impossible.

The Government is absolutely wrong on this. It is late to the party on dealing with the methamphetamine crisis, and it will cause another problem—which it does not need to cause—with its plan to decriminalise the possession of needles for the purpose of illegal drug use.

• Bill read a first time, and referred to theHealth Committee.referred to Health Committee

Hon HARRY DUYNHOVEN (Minister for Transport Safety), on behalf of the Minister of Fisheries: I move, That the Committee divide the bill into the Maori Fisheries Bill and the Te Ture Whenua Maori Amendment Bill (No 2) / Maori Land Amendment Bill (No 2), pursuant to Supplementary Order Paper 254.

Hon ROGER SOWRY (National) : I raise a point of order, Mr Chairperson. This bill has been quite fiercely debated over the last 2 weeks, in two different bites, and each time the Māori Party has voted, and has made it known in the House and through the media that the Greens have been carrying its proxy. I am aware that the Green whip at the moment is different from the whip who was acting on the rest of the bill, and I would hate to see a member who has been opposing the bill throughout the process then find that her proxy was not being utilised. I draw that to the Committee’s attention, and wonder whether the whip might have missed the call.

The CHAIRPERSON (H V Ross Robertson): I thank the honourable member for his contribution. All I can say to that is that it is up to the Māori Party as to what it does.

• Bill reported with amendment.

Hon ROGER SOWRY (National) : I raise a point of order, Mr Chairperson. Usually it is appropriate at this time that you announce who had the call when the bill was last being debated and how much time that member has. This debate does go back a couple of weeks—the Government’s programme is a bit shambolic—and I myself am struggling to remember, but I understand that I was on my feet, and I want to know exactly how much time I have left.

The CHAIRPERSON (H V Ross Robertson): The member is quite correct. He has 30 seconds remaining.

Hon ROGER SOWRY: It will be 30 seconds that the Committee will not want to miss. I start by reminding members that this is a bill that National is totally opposing. It is a bill that every single electricity company—be it a lines companies or a generator, be it Government owned or private sector—opposes. It is a bill that some of the brightest New Zealanders who have been involved in the structure of Government issues around State sector issues oppose. It is a bill that only Labour members seem to favour. It is a bill that sets up a structure that the Government has ignored.

PHIL HEATLEY (National—Whangarei) : Only the Labour Party supports this bill. It wants to see the Electricity Commission instated, because it sees the commission’s prime role as being a taxation agent. The most important job of the Electricity Commission, which is given rise to in this bill, is to raise levies.

Interestingly enough, it does have a series of other roles, and I would like to go through them, because there are no fewer than 10—but its primary role is to impose levies. First of all, it is to be a policy adviser. It is then to be a proposer of regulations and rules—so it will follow its own advice. It is to be a purchaser or provider of market operations. It is to be a purchaser of reserve power. It is already involved in the Whirinaki scheme. That generator is supposed to sit there and not be used. The levy payer somehow has to fund that particular generator to sit there and do nothing for month upon month and year upon year, so that in a dry year, when there is a shortage of electricity, we can call upon it. Interestingly enough, it has been wound up a number of times already. I have heard that it has been wound up almost fortnightly.

• Sitting suspended from 6 p.m. to 7.30 p.m.

PHIL HEATLEY: I thank the member for Banks Peninsula for returning to the Chamber, in all her enthusiasm, to hear the completion of my speech. I was talking about the roles of the Electricity Commission, which seem not only numerous but in conflict with one another. I mentioned that the commission would be a policy adviser as well as a proposer of regulations and rules. Therefore, following its own policy, it will set regulations and rules. I do not know where the checks are there. It will be a purchaser or provider of market operations, and a purchaser of reserve power.

I was dwelling on the fact that the Minister of Energy and the future Electricity Commission seem quite delighted at the idea of money being spent on the Whirinaki station, which is supposed to sit there in the dry years and not be used. In other words, the taxpayer or levy payer funds that beast—that white elephant—which does nothing because its generation is excess, in case there is a dry year. I wonder at the absurdity of that. To prove the point, we find that that particular power source has been generating regularly over the course of the winter, which is quite amazing given that it is supposed to be there to provide reserve power in times of particular shortage.

The Electricity Commission has a fifth role as a seller of electricity in dry years—clearly, from that reserve power—a sixth as an adjudicator of fines and penalties, and a seventh as an industry facilitator.

John Key: What does that mean?

PHIL HEATLEY: That means it sits in the middle, loving all sides, not making the hard decisions, engaging in a bit of hand-wringing, and being indecisive—sending recommendations up the chain but not taking any responsibility. It has an eighth role as a promoter of energy conservation, and a ninth as a decision maker over the investment, services, and prices of State-owned enterprises. Certainly, in the electricity industry there are plenty of State-owned enterprises. In fact, I do not think the New Zealand public knows that this Government is up to its eyeballs in electricity generation. There is a belief out there that electricity generation is in the hands of private enterprise, yet we know that by far the largest generators—both in size and number—are Government owned, and are filling Dr Cullen’s pockets. The tenth role under the Commerce Act is as a regulator of the prices and services of distribution.

Hon RICHARD PREBBLE (ACT) : The ACT party, if anything, is even more strongly against this proposal.

Phil Heatley: That’s impossible.

Hon RICHARD PREBBLE: Well, we are very strongly opposed. The Committee should know that the submissions received were also hostile. There was a very good submission from Mr Scott, who used to be the Secretary to the Treasury, pointing out the inconsistencies in the bill, and pointing out that the ways in which it will work will not actually achieve the purpose. I think that the Minister, when he is looking at these particular clauses, should think about the fact that they will meet the worst type of lawmaking: “there ought to be a law”. That comes from a drought, from a possibility of electricity shortage, and from great public pressure for something to be done. The Government has reacted to the notion that for every problem there ought to be a law. So here we have a law saying that there ought to be electricity. When we look at it, we see that that is what it really is. The commissioners are really being told that somehow or other they have to create electricity.

What the Government has not looked at are the underlying reasons that there is a shortage of generation. The Government knows the reasons—the Minister does. He can take a call, because he knows. The Resource Management Act makes it virtually impossible to build generation, as does the ideology of this Government—the fact that it has signed up to the Kyoto agreement. Interestingly enough if Government members read the latest issue of The Economist magazine they will see that it is predicting that within a decade there will be the ability to build coal-fired stations that do not emit. But this bill is set up because the Government has a shortage of gas.

The impossibility of building a decently sized hydro scheme, and the Government’s ideological opposition to coal, mean that we are now being told we have to have this stand-by station. But does anyone actually think that that is a good use of taxpayers’ money? Even the Minister does not. Of course, Government members then try to pretend that it is not taxpayers’ money—because it is a levy. Well, does anyone think the generators will pay that? Of course not! The public of New Zealand will pay that.

This is a bill to put up electricity prices. Here we are, a country on the edge of the world, looking for every competitive advantage we can get, and one competitive advantage this country has had all through our lifetimes has been low electricity prices. But this Government is actually legislating against low electricity prices. I tell the Minister that that is what these clauses really mean, and he is bright enough to know that what I am saying is completely correct. This Government does not believe in this bill. We can tell that because no one has taken a call to support it. If they had, and if they believed that this bill would do some good, there would be Government members going for the call. But they have not, because they know that the bill seemed like a good idea a year ago when they had a blaze of headlines, when people were worried about electricity shortages, and when they felt there ought to be a law. Here is the “ought to be a law”—namely, an Electricity Commission. I ask the Minister how on earth that will help. Does anyone seriously believe that it will?

When we actually look at the projected energy needs in this country, we see that this reserve station, even after it is built, will not in any way be able to compensate for the sort of weather cycles we will get. We know that we will have occasions—and that is absolutely predictable—when there will be a shortage of rain. When we have a shortage of rain we then have a shortage of water in those dams, and that situation will come. It might be next winter, it might be in five winters’ time, but it will come. Will this legislation cover that situation? No, it will not. What the Government should be doing is looking at the electricity market. It should have some faith in the market to enable the market to work. For a proper price, the private sector is most willing to invest in electricity generation. We have only to look at the share price of the registered electricity generators to know that electricity generation is something that entrepreneurs are prepared to invest in. But they cannot get around the real problems that exist or around the Resource Management Act.

PANSY WONG (National) : It is interesting to look at Part 1 of the Electricity and Gas Industries Bill, because that part states the purpose of the bill. The purpose, firstly, under clause 4(a) is: “to improve security of supply of electricity:”. I think the minority Labour Government is living absolutely in a fantasy world if it thinks that by forcing through legislation it can command the security of supply of electricity.

The Minister of Energy came into this Government 5 years ago, and had spent about 10 years in Opposition as spokesperson on energy. One would have thought that he came to his position with a vision and a blueprint for the energy portfolio, but the first thing he did was set up an energy governance board. It would get the whole industry together with consumers, and it was supposed to work out a solution, but what it meant was the Minister never really had any solution or vision for the energy future of New Zealand. The Hon David Caygill was the chairman of that particular phase. Well, millions of dollars later, the energy governance board disbanded and then the Minister once again displayed to the public that he actually had no solution or vision for the future of the electricity sector of New Zealand.

So, as I pointed out yesterday during the Committee stage of the Maori Fisheries Bill, whenever the minority Labour Government does not have a solution, the answer is quite simple. It sets up either a committee or a commission. Now, without really specifying the parameters or giving good guidance and directions, it has kicked this difficult issue to a commission to resolve, and to establish means and methods to secure the supply of electricity.

When we look through Part 1, we see pages and pages of details, reporting mechanisms, disclosure requirements, and dispute resolutions—exactly what the Hon Richard Prebble said—without examining the underlying problem of the shortage of generation, or the unnecessary restrictions on the usage of various means to generate electricity. The Government resorts to disclosure requirements, bureaucracy, and appointing the commission to perform a task that the Minister has no solution for. So I think the Minister in the chair, the Hon Harry Duynhoven, should take a call to explain to the New Zealand public how Part 1 of the Electricity and Gas Industries Bill, by setting up those disclosure requirements and the pages of code of conduct, would secure the supply of electricity to the public.

This bill is one of many that we have witnessed in 5 years under this Minister of Energy, but we are yet to really know or appreciate what the vision or the way forward is for securing electricity supply for New Zealand. Today the Government announced some tinkering to the Resource Management Act, and that will not be helpful, either.

Hon HARRY DUYNHOVEN (Associate Minister of Energy) : It is a pleasure to stand on behalf of the Minister of Energy, the Hon Pete Hodgson, and reply to one or two of the issues that have been raised. Ms Wong talked about the Minister’s effort to encourage the generation industry to take a responsible, long-term approach to generation for the good of the country. Well, encouragement is a very useful thing, but it has proven to be not quite as easy to encourage the industry. That is the reason for now taking a stronger approach. The Minister signalled right at the beginning of the process that he would take that approach if the industry failed to respond in the way that he wanted.

What we have now is a situation where, basically, it is very difficult to unscramble a scrambled egg. I say to Mr Prebble, who conveniently forgot the basic rules of the market, this is about market failure. The reason that we do not have scads of unused generating capacity is very simple. It is that the maximum productivity from the investment in generating capacity is at 99 percent, and close to 99.99 percent of full load as we can get for as much of the time as possible, and that is where the maximum profits are to be made. Therefore, no generator will be voluntarily building unused capacity, and it is as simple as that.

Opposition Member: That’s nonsense.

Hon HARRY DUYNHOVEN: It is not nonsense; it is a basic rule of economics. If we go over to Victoria University, Economics 101 will tell us that.

Another reason, which Mr Prebble conveniently forgets, is that we have a large number of thermal stations in New Zealand and, very simply, thermal stations cannot be very quickly turned on and off. I have one in my electorate, which I am very familiar with. It is an older station, and takes some time to bring it up to load. Therefore, having reserve capacity able to be switched in relatively quickly is a very good solution in the interim. Mr Heatley talked about the absurdity of doing that. Well, I do not think it is absurd, and I do not think the people of New Zealand do either—particularly if it is a choice between having some higher-priced, unused capacity available for peak times or having various areas of the country with the power out, because that is the choice.

Phil Heatley: How much of that did you use in the last little while?

Hon HARRY DUYNHOVEN: As I explained to the member, that, in turn, is to avoid having to turn thermal stations on and off at a time when we want to be using as much of our water—and we have an excess of water at the moment—as possible. Our big problem has been with the storms we have had. The high voltage direct current link across from the South Island to the North Island has had a lot of salt contamination, and it cannot run at very high load factors when the dielectric is reduced by the fact that salt is on the insulators. That is a fundamental physics issue.

With regard to the private generators, which Mr Heatley said were numerous, there are actually four main generators in New Zealand, and three of those are State-owned. As I said, they are in a competitive environment, which was set up by Mr Bradford. The member could dial back through the Hansard record, if he wishes, and look at my speeches as associate energy spokesman at the time, and he will see that not only I but even very dedicated and active members of the National Party opposed that move. If he looks at my speeches in , I have quoted from one of those members, who was very well respected in the electricity industry. He said that what was being done then would be a disaster for New Zealand. He has been proven right, and that is the reason this bill is required now.

I think it is probably true to say that once we have scrambled an egg, it is very difficult to unscramble it. This bill is an attempt to make the market work in a way that provides that, even though some of the main generators are State-owned, those generators will operate in a competitive market. That is what the power pricing model is, and we should not ignore economic reality. Perhaps the National Party is suggesting that we should somehow nationalise Contact Energy; I do not think those members would want to suggest that for a moment. So this bill is a means of getting a positive result out of what was a pretty resounding mess that was left and, over the last 4 years, the Minister has tried very hard to make the electricity industry act responsibly in the interests of the country. I believe that through this mechanism, we will get to see it.

GERRY BROWNLEE (Deputy Leader—National) : That was a speech from a Minister who does not have a clue what he is doing. That was a speech on behalf of a Minister who does not have a clue what he is doing, either. Apparently, we cannot unscramble an egg. Well, that might be true, but let us be very clear that in the 4 years the current arrangements have been in place, Labour has been in Government. Right through the whole change process, Labour has been there. Right now, whether or not those members want to admit it, more of the electricity industry is in direct Government control than was ever the case throughout the years of the 1990s.

Government Member: Not true.

GERRY BROWNLEE: That is absolutely the truth, because what has happened is the big generators have become the big retailers. The Government has stood by and let them swallow up all the small organisations around the country that were there to represent the best interests of their consumers and to participate very directly in the market. We have to ask ourselves—I would have asked myself this if I were the Minister—how we can have competition when generation capacity is balanced with retail demand. How can we get competition in that sort of environment?

There is no incentive for any of the State generators to provide low-cost electricity, because they have captive consumers. They just quietly sit there and jack up the price as much as they possibly can, and the Minister says that he cannot do much about it. He will form a committee and call it a commission, and he will see what happens. I tell the Minister that nothing will happen as a result of this bill passing. The situation with regard to the security of supply of electricity in New Zealand will continue to worsen as long as the Labour Government chooses to put its head in the sand.

This country has not had the investment in electricity infrastructure that it should have had during these years of a growing economy. The reason is simple: nobody will stick up his or her hand on a very big project worth hundreds of millions of dollars while the Resource Management Act is acting as a block to that happening. We know that, right now, if one of the Ministers was prepared to do what is sensible and give the go-ahead for the Dobson project, security of supply in the top half of the North Island could be assured. No, the Government has no interest in that. So now we have the situation whereby South Island residents have been told by Transpower that it can no longer guarantee security of supply, even if enough electricity is being generated, because there is too much demand for the end product.

This Electricity Commission will comprise a group of interested people who will sit around writing reports and making recommendations to the Government. It cannot possibly do anything to hasten the development of greater electricity infrastructure in this country. All the talk about the work it might do to try to reduce demand simply ignores the fact that this country wants to live well, wants a growing economy, and wants people to have the benefit of living in, supposedly, the First World. I cannot see how we will achieve any of that if a group of Ministers are simply going to abdicate their responsibility to some bureaucracy.

The Minister is sitting there shaking his head and saying that they will not do that. I ask the Minister why we are passing the bill. Why are we setting up this thing? Worse, how much will it cost consumers? The purpose, apparently, is to improve the security of supply of electricity. The only thing this Government has done is to preside over racing electricity prices, and that will continue.

PETER BROWN (Deputy Leader—NZ First) : Firstly, I want to acknowledge that the Minister made some very good points in his contribution, as did Gerry Brownlee. When it comes to electricity, this country is in an absolute mess. National knew that just before the 1999 election. I received panicked phone calls from Max Bradford. When he put through the 1998 reforms, he did not listen to the advice of New Zealand First about putting through the appropriate amount of regulation. He did not regulate the lines for a start, but he wanted to do so in 1999. New Zealand First, though, could not reach an agreement with National just before that election to tidy up the electricity industry.

When Labour came to power, it made an attempt to rectify the situation with the 2000 bill, or whatever it was, but I say, with due respect to the Minister, that it put the focus on making the market work as against getting the right outcomes. Right now, electricity, as it relates to the general public, is in a mess. Prices are escalating weekly.

Stephen Franks: You voted for it.

PETER BROWN: We have not voted for this bill, nor did we vote for the bill before it.

Stephen Franks: You voted for the bill before.

PETER BROWN: I tell Mr Franks that we did not vote for the bill before. He should check Hansard. We voted for this bill to go to the select—

Stephen Franks: In 1998.

PETER BROWN: In 1998 we did.

Hon Richard Prebble: That’s when the egg was broken.

PETER BROWN: Can I take questions from these guys?

Hon Ruth Dyson: Why did you vote for Max Bradford’s bill?

PETER BROWN: There was a clause in Max Bradford’s bill that allowed for regulation, but when it came to it, he did not implement that. There was quite a discussion behind the scenes about why he did not. But in 1999 he wanted to do exactly that; that is the fact of the matter.

From the public’s point of view, electricity prices are escalating weekly, if not daily. The supply is threatened—or appears to be threatened; is perceived to be threatened. Cheap gas is running low, and that will affect the price even more.

New Zealand First members asked themselves three very simple questions: firstly, will this bill help to guarantee security of supply? It goes a little way to doing that, by giving the regulators some power and some teeth.

Gerry Brownlee: How does it do that?

PETER BROWN: It gives the Electricity Commission enough power to monitor the whole thing with a degree of independence. We have to be fair—the commission has an independent look about it. The bill goes some way to giving that independence. The second question we asked ourselves was whether the bill would provide fair and reasonable prices. It goes a teeny-weeny little way towards doing that, because it brings in the 30c per day maximum lines rate. That is a reasonable little thing for low consumers of electricity. I say to Mr Brownlee that maybe he should read the bill—he will see that in it.

But does the bill encourage investment into the industry—

Gerry Brownlee: You don’t need a bill to do that. They could do that tomorrow if they wanted.

PETER BROWN: I am not denying that to the member, but that provision is in the bill, and it does assist. The third question—

Hon Ruth Dyson: Could you repeat that? I didn’t hear because he was talking.

PETER BROWN: I said that the bill does provide for the 30c per day maximum lines rate for low users of electricity. That goes some way to reducing prices, and New Zealand First is quite encouraged by that.

The third question we asked ourselves was whether this bill would encourage investment into the industry to ensure ever-increasing capacity. I do not know how it will do that, because I do not think it does. It makes a token gesture by allowing lines companies to increase generation capacity from 25 megawatts to 50 megawatts, and makes a good argument for opening the door again so that lines companies can come in and become generators. I know the National Party wants to allow that. New Zealand First is not necessarily convinced that that is the way to go, but we believe the token provided for in this bill is not good enough.

In New Zealand we provide electricity to the amount, on average, of around 8,000 megawatts per year, and we use every megawatt. We use everything. In 1998 we had a surplus that we could sell. If we can produce something and sell it all, effectively we have a very limited market—if a market at all.

Gerry Brownlee: You can’t store the stuff.

PETER BROWN: We cannot store it, no. We sell it all. If anybody who produces electricity sells it all, there is no market to put pressure on prices.

STEPHEN FRANKS (ACT) : I can see the enthusiasm among Government members for my speech. It is very interesting to go to a bill and see what is basically a 1950s sort of Stalinist regulatory prescription. This is the Minister who is going to make electricity by making rules. This Minister says that reserve energy is created by specifying the conditions of securing and using that energy, and by specifying the circumstances and terms, including volume and price, by which that energy must or may be offered on the wholesale market.

I ask the Minister why the Government lost its nerve to use the sort of mechanism that would have rewarded every consumer. Why does nothing in the bill enable householders, who can save when we are short, to get the benefit of their saving? If they will not save, why does the bill not ensure that the price will give them a signal that power is suddenly more valuable when the rain is short, the wind has stopped blowing, and we cannot use coal because the Government has signed up to the Kyoto Protocol so that all the coal will be burned in China and India instead?

What is it about the market that has failed? We heard the words “market failure” tossed around, but what we have is the absolutely predictable outcome of a Government looking as if it is about to panic.

What investor is going to build any new capacity, when the Government is holding a big stick out and saying: “If we don’t like the price you charge, and it’s awkward and politically embarrassing, we will regulate.”? Why would new capacity go in, in those circumstances?

So what we had last year was a bluff being called. When the market said: “We won’t build new capacity in these circumstances.”, the Minister could then turn round and say that he had to go ahead and pay someone to build it. Of course the market is not going to agree, when it has a Government that came in, in 1999, saying: “We believe in looking active.”—“We as politicians will go out there and earn votes by looking as if we will thump people around who have lots of money.”; “We will thump them first with an increased tax rate, and then we will thump them with regulations that tell them what price they can buy at, what price they sell at, how much, and who they supply to.”—together with all the conditions that are now set out in clause 10, and the pages and pages of rules that the Minister can now make. Because it is patently obvious, to anyone who reads those rules, that it will be politically imperative to respond the next time there is any kind of crisis.

The Minister will not be able to resist when the major electricity users group, the telecommunications users association equivalent, comes and says: “We don’t want to pay the real cost of reserve generation for our industries. We would much rather that you took that from the taxpayer, or disguised it in a levy, or seized it from consumers, because you’ve got the power to do it. So please do it, Minister.” How will the Minister withstand that kind of pressure? Putting that kind of regime into legislation is an absolute recipe for being able to say—for the next 25 years—that the market does not work, because there will not be volunteers in a market whose building is unconstrained and when it is quite plain the Minister can stipulate its rate of return, at will.

This is that self-fulfilling prophecy: the Minister will get up and say: “I fear market failure, so I’ll give myself powers to deal with market failure.”, and of course there will be market failure. But it is not failure; it is simple market prudence. It is exactly what any investor would do. It is exactly what the Electricity Commissioner said when the Government came in and guaranteed the Meridian investment. The commissioner asked why people would go ahead without the benefit of a guarantee. Who will want to compete, when the Government can be panicked into stepping in every time there is a complaint?

In Part 1 we now have pages and pages of powers—or what look like powers—given to a Minister that in fact will end up as fetters. They will end up as irresistible demands on the Minister, because the Minister will not be able to stand there in front of us on the Holmes show saying: “Yes, I did have the power. No, I chose not to use it because I thought that using it would frighten people from investing in generation.” No, this Minister will not say that. The Minister will instead pull the levers and try to look as if he is generating electricity by his rules, and what we will have instead is a return to the New Zealand of the Muldoon days—the New Zealand where Mr Muldoon managed to fend it off for quite a long while.

Hon ROGER SOWRY (National) : This is a major part of the bill, and one we are very, very opposed to. I start by saying to the Minister in the chair, the Hon Harry Duynhoven, that his help on Part 1 in the Commerce Committee does need to be acknowledged, and I thank him for that help. If I can give a bit of history, it was during the latter stage of the bill—in fact, after all the submissions had been heard—that Transpower toddled around the back of the bike shed and went to see the Minister Pete Hodgson. Transpower said that it must be excluded from any legal action being able to be taken by a lines company or a generator that thought Transpower was at fault—if there had been a breakdown in supply, or something like that, and someone wanted to take legal action, Transpower wanted immunity from legal action. That was not in the bill, so I thank the Hon Harry Duynhoven for agreeing with me that interested parties should at least be consulted on this. And they were. A number of parties came to the select committee, and they were outraged by this. Meridian Energy, as a generator, and Orion as a lines company, are two that stick out in my mind. They were just outraged that they would have no legal remedy against Transpower if there was a fault that was due to Transpower’s negligence.

There are very few times that I am disappointed in the advice from officials, but this was one of them. The officials sat in front of the select committee and, to paraphrase it, basically said that this is what is done around the rest of the world, there are precedents for this; so be it. When we looked at those precedents, we saw that it was not done. In fact, other State-owned transmission companies do have the right to be sued—albeit it in a narrow range. We now have those clauses back in the bill, with a much narrower range around them.

So I start this speech by being positive and saying to Harry Duynhoven: “Thanks for your help in getting that part of the bill right.”, because I think we have got those clauses right in this part. What worries me about this part, though, is the levy on industry participants. I say to the Minister that we are tabling an amendment to this, and I am looking forward to other parties’ support on the amendment. We are not being radical. United Future members do not need to die in a ditch, just worrying about whether they will or will not support the Government—again. All we are saying is that before the levy is set, we believe that the Electricity Commission should have to consult all affected parties. That is fair enough.

At the moment, if one goes to the Electricity Commission’s website right now—and Mr Copeland can shake his hand; he does not think it is fair—one will see the levy that it is putting on lines companies. There are now lines companies planning legal action against the commission. They were not consulted. No one asked them. They were levied. “Bang. This is what you pay. That’s it. End of story. There’s your cost. Pay up.” That is a cost that goes straight through to consumers. I was with my lines company, Electra, this morning and they are furious about this. They are involved in legal action, using consumers’ money to fight this proposal. It will be interesting to see how the Labour members vote; whether they think that the lines companies should be consulted. That is all! We are not asking that they have to agree, because I do not think I could get people to agree to that. So it is a soft amendment, saying that at least the commission should have to consult.

I hope that the Committee will see fit to put this amendment into the bill, so we do not end up with the commission having the power to tax, with no accountability, at all. The Minister in the chair, the Hon Harry Duynhoven, is checking to see whether the amendment is soft, and I am pleased he is. I hope he takes a call. In fact, I hope the Government supports the amendment, because I do not think it is onerous on a Government, at all, to ask for consultation. For members who are following the debate, it is an amendment to add new paragraph (d) to subsection (1A) of section 172ZC, inserted by clause 16, which talks about the way the levy is prescribed. I am saying that we should add that any levy must be determined by the commission after full consultation with all the relevant industry groups, including consumers.

The reason I put in “including consumers”, and I do not expect them to go out there and consult every household, is that I have had Grey Power members in my office. They are very worried about the cost of the commission being levied on the lines companies, and the lines companies saying: “Oh, well, that’s a tax.”, and then whacking it straight through to elderly consumers. They are saying there is no consultation in the bill. All I am saying, by adding new subclause (d), is that any levy must be determined by the commission after full consultation with all the relevant industry groups, including consumers.

I have to say that I do not think we could get a softer amendment than that. It has no financial implications. I do not think the Government can go out there and veto it, because it is only consultation. Once it has consulted it can still see it, but at least it can give people a chance to have a say. The Minister must acknowledge this. Consumers are really wound up. They do not get a chance to have a say any more. They get a letter from Contact Energy, from their lines company, saying: “Your prices are going up.” Contact blames the lines companies. They end up having to go to the Commerce Commission to get it sorted out and they find out it was actually Contact that put the prices up all along. Genesis Energy whacked its prices up the other day.

Consumers just get this continual barrage of price increases. We can blame all sorts of previous structures, but we have a structure that the Minister is trying to make better. I do not think this bill does it, but I think that by putting in this amendment, at least we are giving people a say. We will be moving some further amendments as Grey Power in particular is concerned to have a say on some of the industry committees, and I think one appointment does not actually matter a big deal. I think that is a good point to have. We will be looking to do that. We will be looking to increase the lines companies’ ability to generate.

But I particularly want to make this point to Harry Duynhoven, given that he helped the committee dig the Government out of a hole on the issue of Transpower not being able to be sued when the fault was there. Given that he was reasonable about that, when the Minister clearly was captured by Transpower officials—the Minister did not even bother to come to the committee to explain it to us, but Mr Duynhoven was very generous in his willingness to work with the committee to get some better clauses in this part of the bill—my appeal to Mr Duynhoven is to support the addition of new paragraph (d) to subsection (1A) of section 172ZC, inserted by clause 16. This is a small change to enable us to go back to our lines companies and say that before the levy is placed on them, they will at least be consulted so that they do not find out about it, as lines companies did on this one, by logging on to the web and finding out that this is what their levy will be, so pass it on. We are not talking about a small amount of money. It is millions of dollars, is it not, Minister?

Hon Harry Duynhoven: Yes, it is.

Hon ROGER SOWRY: It is, and he nods; generously so. It is. It is millions of dollars. So I think that amendment will go a long way and I hope the Minister can see fit to support this. I hope that others in the Committee will support it, too. I know the Greens will because they are always worried about low-income earners and Grey Power. I do not think they will want to say to Grey Power: “Actually we just did not favour any consultation.”

I think this is a small move. It will not solve the Act. It does not alter my view of the bill at all in terms of supporting it, but it is a small move that says to the Government that if it is going to ram this through, as it is, at least put a bit of consultation in there for people who are most at risk. And those who are most at risk in electricity terms are consumers, who end up bearing all of the cost. Lines companies do not bear any of this, as none of the fees and none of the levies stay with them. They do not take it off their bottom line; it all gets passed through.

That is why Electra and two other lines companies are looking at legal action. What a waste of money! What a waste of the money that those lines companies will spend. Judy Keall, who was a member of this House, is on the Electra trust board, and she is looking at legal action to fight her Government because of the levy and the way it has been put on. What sort of nonsense is that? So when the Labour members who have gone on to the trust board are fighting their own Government, that tells us that all is not right in the state of Rome, or the state of Levin, or wherever one happens to be at the present time.

So I am saying to the Minister that I hope he can say a few words on this and explain to the Committee that he is happy to support it, because that will go a long way to facilitating this debate.

Hon HARRY DUYNHOVEN (Associate Minister of Energy) : I accept the member’s point that there should be some consultation involved in this. Although he says it is millions of dollars, he should remember that that is a small fraction of a percent on power bills and it is to provide the reserve capacity needed that is not provided because of the way the market works. I say to the member that his amendment would be a good one if it were not already covered. If he checks section 172ZCA in clause 16A, he will find that the budget set-up includes consultation with the parties involved.

I will make a quick comment in relation to Mr Brownlee’s earlier comments about the Dobson project. The Dobson project just happens to be in the South Island. Mr Brownlee said that it could cure the supply problem in the northern part of the North Island.

Gerry Brownlee: I raise a point of order, Madam Chairperson. I appreciate the Minister’s response, but, so that we be clear, I said it was about security of supply in the northern part of the South Island.

Hon HARRY DUYNHOVEN: I thank Mr Brownlee. I misheard him, and I apologise for that. Mr Brownlee also said there was a responsibility on the part of the Labour Government for generators gobbling up retailers. In fact, all purchases of retail businesses by generators, and that includes the State-owned enterprises, took place in 1998 and 1999. All of them were completed by 1 April 1999, except in one instance. That was On energy in 2001, which was taken over by Genesis and Meridian because On energy had failed to take out hedge contracts before the 2001 winter. One of the reasons that this legislation is being put in place now is, of course, as a result of the shortages that occurred at that time, and the way in which the market did not cope and did not provide for security of supply. The electricity market is a technical, complex, and dynamic being, to the extent that we could never include in primary legislation everything needed to ensure that it operates in response to every situation, and, when we get into regulation and rules, Ministers have to be involved. This cannot be totally delegated independently.

I thought Mr Franks’ simple and dogmatic arguments that the Government was in panic and we should have a hands-off approach were interesting. That failed us years ago. Intervention is necessary at times, and that is what this is about. It is to ensure that, where necessary, the right amount of signal is given. The Electricity Commission has a large number of features. It does not simply regulate. It does not simply make decisions. It is not only about recommendations but also about regulations and rules, and three or four recommendations, regulations, and rules have already been promoted. It is about initiatives. It is about new legal initiatives that might be required. It gives effect to the Government’s policies on electricity. It is a much broader mandate than a simple regulatory body, as has been portrayed. It makes contracts for reserve energy to ensure security of supply. It will regulate and coordinate to ensure security of supply, to ensure not only that we have the capability in the system but also that fuel stocks are available, that we have coal stockpiles where needed, etc. It is very simple to write it off and say that it is a panic reaction. By the way, it is very hard to argue that this is a panic reaction on the one hand, then say on the other hand that for 5 years the Government sat on its hands. Clearly, that is not the case.

Hon Roger Sowry: Are you coming back to the amendment?

Hon HARRY DUYNHOVEN: Mr Roger Sowry says that the amendment does not cover consumer groups.

Hon Roger Sowry: No, it doesn’t cover consumer groups.

Hon HARRY DUYNHOVEN: I am not sure that the member is correct in that, because the advice I have had from the officials is that in the setting of budgets groups have to be consulted. The suppliers and participants—and, presumably, therefore, their voice from the consumer groups—have to be consulted. After all, as the member has just pointed out, many of them have trusts that are involved. Surely they represent the consumers in the area. I know that in my area they certainly do, until events that are happening right now that are quite separate from this bill.

Hon Roger Sowry: So will Grey Power be consulted?

Hon HARRY DUYNHOVEN: I am not sure of the answer to that, but I imagine that it will have very strong representation, particularly in Electra. As the member said, I am sure that with Judy Keall there, Grey Power will have very strong representation. But one of the features of the system we have now—

Darren Hughes: She’s a former member who got elected to that trust. There’s a former member from our area who will never get elected to it.

Hon HARRY DUYNHOVEN: Can I say in response to the interjection that Judy Keall was a very good and assiduous member of Parliament, and I am sure that the views of Grey Power will be strongly represented in that particular electricity trust.

Hon RICHARD PREBBLE (ACT) : Let me turn first to the amendment moved by Mr Sowry, and the response from the Minister in the chair, Harry Duynhoven. I say to the Minister that in the way I am following it, I am not sure he is correct. The clause that requires consultation—and there is such a clause—states: “The Commission must, before submitting a request to the Minister seeking an appropriation of public money for the following year, or any change in the appropriation in the current year, consult with those industry participants who are liable to pay a levy …”. So that provision certainly is there. But when we look at the levy, is there a requirement to consult? No, there is not. It appears to me that Mr Sowry’s amendment may be needed. I am reluctantly willing to support Mr Sowry’s amendment, because I would not want anyone to think that the ACT party thinks that once consultation has occurred this levy is a good thing. No, it is not. Also, to say it is only a few cents on the power bill is to avoid the reality of what this levy is for.

One reason the levy is there is for “endeavouring to ensure the security of supply”. That could be a bill of hundreds of millions of dollars. Indeed, I think the levy will go up and up, because this bill makes it very difficult for private sector generators to enter the market. It makes it less likely that they will do so. It will mean that the commission will have to build more and more of our generation. How do we know that? Genesis has already said that it will not build without a Government guarantee. If a State-owned enterprise, backed by the deep pockets of Treasury, is not prepared to build generation, then why on earth would a private sector investor? I believe we will see the Government finding more and more requests to build new generation coming either from its own State-owned enterprises, meeting by a guarantee, or from the commission.

The Minister has not responded to the points made by Mr Franks. I need to make this point to him: the market failure he is referring to, and that has occurred in electricity, is the result not of failures of the market but of failures of regulation. One of them is quite simple. We all know that if a large amount of electricity in New Zealand is consumed by households, and if they are all exempt every time we have a power shortage and it all falls on the private sector, then we do not have a market. If it were possible for consumers to participate in the market—and we participate by deciding to switch off and have cold showers for a while—and benefit financially from that, or if those who wish to spend and have electricity at a time of shortage pay more, then we have a true market. Would that work? Of course it would work.

The reason we have not had it is that successive Governments in New Zealand have not been prepared to allow consumers and electricity suppliers to enter into agreements like that. If we want to have an agreement with our electricity supplier that guarantees one’s electricity supply even in times of shortage, then we ought to pay more for it—of course we should. That requires some sort of reserve being put aside. But if people are prepared to go through an electricity shortage with less electricity—and I believe there are large numbers of New Zealanders who would—then they ought to be able to opt for a contract that allows that. In New Zealand only the commercial sector has been allowed to have those sorts of markets. The market failure the Minister refers to is a failure by the Government to believe in the market.

I draw to the attention of the Committee, to those members who may not have read this, the number of regulations the Government is proposing here. I think we are unfair to describe this as “Muldoonist”. I cannot recall a bill that had these sorts of regulations. As far as I can see, the Minister will be able to regulate virtually anything. This is Stalinist. I draw the Minister’s attention to clause 9, which contains the provisions relating to regulations. In the wholesale market we are able to have electricity, including pricing—I guess Muldoon went in for pricing—clearing, settling, and reconciling market transactions; scheduling and dispatching electricity; disclosure of market information; disclosure of information on hedge and contract volumes and prices; the promotion of hedge, including futures, markets; minimum prudential standards for market participation; and minimum standards of market conduct. That is just for wholesaling.

In generating there will be electricity generators to hold and provide for reserve fuels, including water—we are going to regulate that; electricity generators to offer by tender a minimum volume of contracts; electricity generators to post buy and sell prices for hedge. We are to have disclosure of information on hydro lake levels and inflows, thermal fuel stockpiles, supply contracts for thermal fuels, capacity to generate, disclosure of offers into the spot market, and disclosure of information on spill. Then on transmission there will be quality and security standards for transmission systems, and reasonable terms and conditions on which Transpower must enable distribution lines. It goes on to expansions, replacements, or upgrades, and so on, for pages and pages.

This industry has not been nationalised; it has been regulated. It will be totally regulated. Will new participants want to enter into this industry? I say to the Minister that the market risk of entering into generation now will be enormous. That is why the question of the levy is important. In effect, we are nationalising the building of new generation. That will be produced by levies. I realise there is consultation in some areas, but I do not think it covers the levy. If we do not accept Mr Sowry’s amendment, we will have a situation whereby a substantial amount of tax in New Zealand will come through our power bills. It may be the result of a commission that goes power mad and decides to start building more generation than we need. Of course, that was the situation in the 1950s, 1960s, and 1970s in New Zealand, and I think it could well occur again. We could end up with a gold-plated electricity system, where there is no proper debate or discussion as to whether the reserve generation is needed.

A consultation clause, of course, is no substitute for the disciplines of a market, but if we are not going to have a market, then we should at least enable consultation. There ought to be consultation by those who will be affected, which will be the lines companies. I am not sure whether Grey Power could make a great contribution to this matter, but I most certainly believe we ought to ensure that a consultation clause is included. For that reason, even though I do not want to have this interpreted as the ACT party supporting a levy, I recommend that we vote for it. I ask the Minister to consult his officials. It does appear to me that consultation is only about a request for public money. Is he saying, when we look at the definitions, that a levy meets that? In looking at the definitions clauses of the bill, I cannot see that. It may be that he can direct me to some other clause, but I think that his officials are being disingenuous when they say that, yes, there is some consultation. Yes, there is, but is the consultation over the levy each year; if so, where is it? I cannot see it in the bill. If I cannot see it, then I bet members that, when this bill has gone through, the commission will not be able to see it, either.

The commission will not want to consult over the levy. As the bill states, the commission can think up any figure it likes, which could be hundreds of millions of dollars. Personally I think that is a tax, one that if it went through this House we would debate. We would call for consultation, and we would have a great deal of discussion on the matter. We are taking a power of taxation and giving it to this quango, and then the quango, I believe, when it comes to the levy itself, will not have to consult.

DAVE HEREORA (Labour) : I move, That the question be now put.

PHIL HEATLEY (National—Whangarei) : I would like to continue this debate, particularly along the lines on the issue of consultation. Members may be interested to know that although we have been debating one particular levy, this Electricity Commission being set up under this bill has the potential to put in place seven different levies that will ultimately hit consumers, and whether those consumers are the levy payers or the taxpayers, the reality is that they are the mums, dads, and businesses in this country.

The Electricity Commission can have a systems operation levy, a market operation levy, a supply security levy, if it wishes—and I am sure it will—an electricity efficiency levy, and if that is not enough, it can have a consumer protection levy. One has to ask how a levy protects the consumer. I would have thought it should have a levy protection levy with all those coming down. The sixth type of levy is an electricity transmission levy. There are six different levies that this Electricity Commission can put in place in order to tax consumers, because, ultimately, they will pay. But, last of all, the commission can levy what is known as “other activities”, and that can be as broad as the imagination will allow.

I have an amendment put forward by Roger Sowry in relation to the Whirinaki issue, which I would like to raise with members. The amendment adds to clause 19 new subclause (5), which states: “The Minister must consult with all other generators before determining the terms of the Whirinaki contract.” Here we have the absurdity. Clause 19 informs us that the Minister may direct the commission to enter a contract relating to the Whirinaki power station. Here is a power station—a diesel generator, by the way—in the Hawke’s Bay, commissioned last year, operating on diesel, and not as a State-owned enterprise, but in all senses basically subject to the Electricity Commission, which is supposed to provide security of supply.

What is happening is that the Electricity Commission is purchasing reserve power. Whirinaki will be sitting there on a retainer, which will cost the consumer, and it will kick in when there is a high electricity demand where supply does not meet demand. The Minister is prepared to legislate a reserve generator to meet the demand when supply is low, yet he is not prepared to legislate for, or on any policy platform support for those in the private sector, or even for State-owned enterprises to go into the construction of generation plants themselves.

The Minister will not promote, in any way, coal generators, because he is against coal. He will not promote, in any way, geothermal generators. We saw this in recent times when the extension of the geothermal generation at Ngawha in the far north was literally put on the back-burner by this Government. The Minister will not promote, in any way, other generators around the country. In fact, as the Hon Richard Prebble mentioned, the E3P project in Huntly was not going to get off the ground at all unless it was underwritten, because that generator had no confidence whatsoever that it would be a runner with current Government policy and legislation.

GEORGINA BEYER (Labour—Wairarapa) : I move, That the question be now put.

PETER BROWN (Deputy Leader—NZ First) : I welcome the opportunity to comment on Roger Sowry’s two amendments. I think he has put his finger right on the button. I am surprised—actually, I am a bit embarrassed—that we did not pick these things up at the select committee. They are very obvious things, and I compliment the member on bringing them up.

With due respect to the Minister, the clause that he referred to does not cover the issue, and these two amendments should be given serious consideration by the Government. They are fairly innocuous, really, and simply state that there is an obligation to consult, and we will support them wholeheartedly. The Hon Richard Prebble, either wittingly or unwittingly, illustrated quite clearly how badly the market is failing in this country in terms of electricity. I say to members of the Committee that it is not acceptable to the average New Zealander living in the 21st century to have to pay extra to have access to their power all the time.

Hon Richard Prebble: They do it elsewhere.

PETER BROWN: They might do it elsewhere, but that is moving back to the 19th century. That member should get into the 21st century. We want power at the flick of a switch at reasonable prices, and that is the problem that MPs must face up to. The question that New Zealand First has asked is whether this bill does that. The answer, unfortunately, is no, it will not do it.

Hon Richard Prebble: Well, you’re right about that.

PETER BROWN: I am right about that, and I am right about the other one. That member should ask any members of the public whether they want electricity any time of day at a reasonable price.

Hon Richard Prebble: Win Lotto!

PETER BROWN: He is comparing wanting electricity with winning Lotto. I would suggest to Mr Prebble that average New Zealanders see the winning of Lotto as something that is extraordinary, but when they go home at night on a cold day they want to be able to put the fire on and the lights on. I know that the average New Zealander is accommodating and would say: “Well, I don’t want all the lights on. I’ll turn them off in this room if I’m only using that room.” People do not want all their lights all at the same time, but they do want access to electricity 24 hours a day, 7 days a week, 365 days a year.

I believe that people want that electricity delivered at reasonable prices, and that is the challenge that we in Parliament must face up to. That is the issue that the public wants us to address. Will this bill do it? New Zealand First says that it will not. Will a competitive market deliver reasonable prices to the average consumer, to the business consumer, and to all consumers? The answer is that if there is a working market, then it will, but we do not have a market that is working to the fullest extent. Can we get there? This bill will not help us get there. In the view of New Zealand First it will not encourage investment in sufficient quantity to develop capacity, supply, and generation.

We need to face up to the fact that we have billions of tons of coal in this country, and use it at a reasonable price to generate electricity. The amount of carbon dioxide that would go into the air or wherever is negligible on a worldwide scale. We sell it to India and to China. They burn it with impunity, and we restrict it here. I say to the Minister in the chair, Mr Duynhoven, that he should think again about the use of coal. Wind will go so far—we can get so much wind power relatively cheaply—but to get the full amount of electricity we need will be very, very costly. Cheap gas is running out. We know we have to find an alternative, and it is sitting there. We have enough coal to supply electricity to this country for hundreds of years, but we prohibit its use for ideological reasons. I say that is daft. New Zealand is a relatively small country with a very small population on a world scale. We should be using coal to generate electricity at reasonable prices.

Hon Richard Prebble: The member is right again.

PETER BROWN: I am right on about five things.

Gordon Copeland: I think so, too.

PETER BROWN: United Future agrees. I think I might have a re-think now! I say seriously to the Minister that this is not a joke. We are using electricity on an ever-increasing basis.

DARREN HUGHES (Junior Whip—Labour) : I move, That the question be now put.

Hon ROGER SOWRY (National) : We are now into Part 2 of the bill, and I guess the pattern of the debate has been set where we will see the Greens voting with the Government on this bill, which will put up the price of electricity substantially. They are doing it, I guess, for conservation reasons. They think that if people have to pay more, they are more likely to conserve. We see United Future voting with the Government to put the price of electricity up. I am not quite sure what their reasons are. United Future seems to take an increasing approach of voting against the business sector and the business community, and this is probably part of that approach. It is also their little game that goes on with the Greens as to who will be in bed with the Labour Party on any particular day.

That aside, we are now into Part 2. In this part we have an amendment to delete paragraph (a) of clause 22. Part 2 is a very important part, because the constraint in the electricity industry at the moment is one of availability of power. We do not have the fuel or the generation that we need in this country. We have five major generators, of which three are State-owned and two are privately owned. It is a pretty cosy little club, to be honest.

A whole lot of other potential generators are lines companies. They are sitting out there with an enormous amount of capital, ready to invest back into the industry. This bill increases the amount those companies can generate, up to a maximum of 50 megawatts, or 20 percent, of the total demand for their lines. We say that is just not enough.

The two major lines companies in New Zealand are Vector, which is Auckland-based and supplies Auckland and Wellington, and Powerco, which is headquartered in New Plymouth and supplies the New Plymouth and Tauranga regions right through down to Wairarapa—as the Minister indicated. They are the two largest lines companies in the country. They came to the Commerce Committee and said: “We want to get into generation. We want to build some generation facility, but we won’t do it if you put these artificial limits on.”

That is what New Zealand First members were talking about when they said that we needed some more generation. We might differ with them on how much generation is needed, but National’s view is that given that the Commerce Commission now controls the pricing of the lines business through its consumer price index minus X formula, lines companies are highly regulated and, given that they cannot cross-subsidise—which is the purpose of the Commerce Commission regulations—then why would one restrict them?

The Government has fallen between a couple of stools. Pete Hodgson says: “Well, I don’t want them to generate, but I’ll let them do so much. They can do a little bit of generation, so that ideologically I’m not being totally opposed to them generating.” Then the Greens toddled into Mr Hodgson’s office and said: “We think that the lines companies should be able to generate as much as they like from renewables.”, and the Minister said that was OK.

So a lines company can put up as many windmills as it likes, but it cannot put up a coal-fired unit. The Greens nod and say that that is fine, except if one is cold and the lights go out. I predict that the Greens will feel the political blast of that in the near future.

So there is no principle in this at all. I know that New Zealand First can see there is no principle in it, because its member said so in the House before. He might not go as far as us, but at least he understands the issue. What I would really be interested to see is where United Future members go on this. In effect, they have said that the deal has been done behind closed doors and they will not listen. But I ask whether they will be prepared at least to look at the fundamental principle.

A lines company is either generating or it is not. What we have now is lines companies with abundant amounts of money, and not knowing what to do with it. Powerco is off to Australia with its money. Because we deny the company here, it will invest in Australia. That is smart; really clever. Vector is likely to do the same. That does not seem very smart politics to us.

However, what is even more worrying to me is the small lines companies out there doing all sorts of potty things with their money, because they cannot buy or invest in a local generation scheme. For example, Electra owns a finance company. Well, that is really useful for power consumers. Electra owns Oxford Finance in Levin. I am sure that every power consumer wants to own one of those. Electra also owns an electrician’s business. I suppose one could say that owning an electrician’s business is OK.

The other day Electra’s chairman said to me that it was looking at investing in a winery. I said: “What?”. But there is more. It has just put up its prices. The Government has Electra on a consumer price index minus X formula, which allows it to put up its prices this year, so it has put them up to meet the formula. So, consumers are paying more money, and the lines companies want to invest the money in generation, but they are not allowed to, except if it is wind. Well, it does not blow very much on the Kapiti coast. Electra’s chairman said: “What the hell, we’ll buy a winery.” I hope that he was pulling my leg, but I do not think he was. So that is the worry with the nonsense of this. It is just ludicrous; absolutely ridiculous.

I say to the Minister—and this is genuine—that he has gone out there and staked his reputation on getting new explorers into the country, and good on him. We have two rigs out there at the moment, which is the most we have had for a zillion years, and all of that. God help us if they find anything! If they find something and want to bring it on shore in Canterbury, the major investor to help them would be the lines company, and it will not be allowed to. I bet that if they find something, we will be back in this House changing the rules, because that is what we will have to do.

Hon Harry Duynhoven: It’s a good thing they’re drilling in the Wairarapa.

Hon ROGER SOWRY: I do not know why, and I am not sure how that helps, because Powerco still will not be able to invest in it.

We are locking out major chunks of potential capital for no good reason. Why would the Government vote to say that the power companies cannot build a combined-cycle gas turbine plant, but can build a windmill? Why would it say that? Who built the last combined-cycle gas power plants? A lines company did.

Hon Member: Genesis.

Hon ROGER SOWRY: No, Genesis Power did not build them, and the Minister knows that. Genesis is about to build one, a little jet engine thing. The one the Minister knows I am talking about, which is the Taranaki one—the one he is proud of and beats his chest about, and for good reason—is a good plant, and he knows that it is. He has been there. He told me that when I was there. It was built by the lines company. Why would we lock them out? Why would we allow windmills to be built but not small, coal-fired power stations or combined-cycle turbines? It just does not make sense. So we have an amendment to take out clause 22(a). Let us tell the lines companies to make their business decisions, go out there, and, if it stacks up, build it. If it stacks up and they can get resource consents, they should build it.

If the Greens think that the answer is in wind, I ask them what happened tonight at 6 o’clock. The Genesis wind farm failed to get consent, because it offended Māori values. That is a Resource Management Act issue, and I suspect that members will probably come to that in the House tomorrow. It is an issue in itself. The wind farm met all the other criteria, but offended Māori values. The proposal was turned down by the Environment Court today.

So wind power is not that easy to get. It is easier for a lines company to buy a finance company, a winery, or God knows what next—a Chinese restaurant or something—than to invest in the infrastructure that we really, really need in this country.

GORDON COPELAND (United Future) : I shall take a call on Part 2 and speak to exactly the same clause that Roger Sowry has just spoken to—namely, clause 22. In some ways I agree with a lot of what he said. However, I also thought that at times he wandered off into a mist of hypothetical, unreal situations. So let us get down to a little bit of reality about the clause. Firstly, when the bill went through its first reading and then to the Commerce Committee, the limitations on lines companies for investing in non-renewable generation were amounts of no greater than 25 megawatts or 10 percent of the maximum demand of the lines owned or operated by the person. The bill, of course, has now been amended to provide for a limitation of the greater of 50 megawatts or 20 percent of the maximum demand of the lines owned or operated by the person—namely, a doubling of the situation, which every party in the House should be very happy about. Why has that happened? It happened in a rather unusual way. When Meridian Energy decided to pull the plug on Project Aqua, we had an urgent debate in the House about that matter. In the course of the speech that I gave on that occasion I asked the Minister, the Hon Pete Hodgson why on earth we had those restrictions on lines companies of 25 megawatts or 10 percent. In response he was good enough to say that I had a good point, and that he would go to 50 and 20 percent. So on the spot he basically doubled the amount. That was obviously a very, very worthwhile move.

Therefore, the question now arises—and this is Roger Sowry’s point—of why we have any restrictions at all. I must say that I have some sympathy with that point of view. I think, though, that he completely overstated the case in a couple of areas.

Firstly, there is nothing to stop a lines company from building a small coal-fired plant or a small gas-fired plant, because those companies can go up to 50 megawatts. Roger Sowry’s was a completely erroneous statement. The second and more important point is, as he has just said, that the situation is very, very simple if a lines company at any point in time does discover gas—and let us hope that they do; I certainly hope that they do, because we desperately need more fuel—or, indeed, if it wants to build a large new coal-fired station, which United Future would support 100 percent. Like Peter Brown, we believe also that coal is a resource that we should exploit in this country. Recently I gave my support to Mighty River Power’s proposal, for example, to try to convert the Marsden B power station to coal, and I hope that it is successful in its resource consent for that. However, the reality right now is that we do not need lines companies to buy up existing plants. There is no point in our just simply reshuffling the pack, and swapping the ownership of existing non-renewable generating companies from the present generators to lines companies.

The urgent need this nation has right now is for brand new generation. We need to have brand new generation, and we need it quickly. We need it to utilise any fuel that is available, frankly. If the day comes when a lines company does want to build above the 50 megawatts or 20 percent level in coal or in gas, then I have the assurance of the Hon Pete Hodgson, who has given me his word, which I am recording in Hansard tonight, that in those circumstances the company simply has to come to him and we will very quickly whip a bill through the House to permit that to happen. Obviously, if we do that we will have the support of every party here, so it should not be a problem. I point out to Roger Sowry that the gap between discovering some new gas off the Canterbury Bight, for example, and actually processing it to generate electricity would, in any event, be several years long, and we would have ample time to whip some legislation through the House to permit that to happen.

A straw man is being set up here tonight. The goal is to get new generation going, and to encourage that. The other example that I gave to Pete Hodgson was that I know Solid Energy will probably go out to tender at some time for a 100 to 150 megawatt coal-fired plant near Westport.

Hon RICHARD PREBBLE (ACT) : I deliberately waited until after the United Future party had spoken to this part, because I was interested to learn how a party that claims it is centre-right could support such legislation. Let me say to that party that this is one of the most socialist bills I have seen—and I have been in this House for 26 years. I saw Sir Robert Muldoon’s legislation, and I know this is Stalinist, centralised, command-and-control legislation. Then we found that the United Future party boasted that it had a role in the bill. Yes, it has managed to persuade the Government to lift the generation limitation for lines companies from 25 megawatts of power to 50, or from 10 percent of their load to 20 percent. Somehow, that is a justification for United Future to vote for the bill. Then the member gave us another extraordinary justification: he said that if somebody does find some gas, we will whip a new bill through Parliament.

Gordon Copeland: Why not?

Hon RICHARD PREBBLE: The member asks why not. I ask the member, given that that party says it is principled, where the principle is behind voting for this legislation, and where the principle is—whether economic, religious, or from any ideology of any nature—that states it is evil for a lines company to generate 51 megawatts of electricity, and it is evil for it to generate more than 21 percent of its load.

I could understand a split between lines companies and generation if the limitation was set at zero. Or, if we are to say that lines companies should get into generation, why can it not be set at 100 percent? I say to the United Future party that I realise it likes to suck up to the Government, and its members like to be able to get up in the Chamber and say that they made a tiddly little change, so they are good boys.

Gordon Copeland: More than you can say, isn’t it?

Hon RICHARD PREBBLE: The member says it is more than I can say. I say to Mr Copeland that at least one knows the ACT party has a rational point of view. We have a rational point of view, and we are asking why, if lines companies are to be allowed to get into generation, the limitation is set at 50 megawatts? Is there a law that states that generators that generate less than 50 megawatts are efficient? If one listens to Mr Copeland’s own words—which is more than he does—one can hear that he is arguing for a 150-megawatt station to be built by Solid Energy, but not by a lines company. Now, I ask Mr Copeland, what is wrong with that? He cannot give us an answer to that, because the United Future party is on the far, far left of New Zealand politics. It does believe that the Government and the Minister ought to interfere with the industry in that way. United Future does believe in command and regulation. It is on the left in terms of its views, and it ought to be upfront and admit that. United Future ought to be upfront and say that the Government would not be able to introduce this socialist legislation without the support of the United Future party.

It is no good for the United Future members to come along to the Chamber and say that they made a minor variation to the bill and, therefore, this socialism is OK. Either one is in favour of the free market and believes in free enterprise—in which case, one would vote against the bill—or one does not and is a socialist. I say to Mr Copeland that he is a socialist. He is on that side of the paddock, and he ought to be proud of it. He should go out there and tell small-business people that he does not vote in favour of deregulation, but that he gets up in Parliament and supports a Stalinist bill. Yes, the United Future party does belong with the Labour Party. Mr Dunne has not changed his stripes; he is a socialist. He does believe he knows better than other people, and that he can tell investors what they should do. That party believes it knows better than other people, and it is telling the lines companies that it is evil for a lines company to generate more than 20 percent of the generation in its area. I do not know what that evil is, because Mr Copeland has not got around to telling us what it is. Apparently, it is terribly inefficient to generate 51 megawatts, but we are told that if gas is found, then all Mr Copeland’s principles will go out the window and he will come down to the Chamber and rush new legislation through.

PETER BROWN (Deputy Leader—NZ First) : I want to follow on from where Richard Prebble left off, although not, perhaps, in such a fierce mood. I say to Mr Copeland that he has let New Zealand down by taking pride in doubling the megawatts, from 25 to 50, that lines companies are allowed to get involved in generating. He has let New Zealanders down. I wish New Zealand First had known that before today. We did not really know where that figure came from; nobody on the Commerce Committee could tell us that. Now we know there was some sort of little backroom—

Gordon Copeland: I wrote to the select committee and told it about that.

PETER BROWN: I say to him that if he had done nothing but put a representative on the select committee—and I cannot recall a United Future member turning up to the select committee at all, if I am correct—

Gordon Copeland: I raise a point of order, Mr Chairperson. I think that is a breach of Standing Orders. The United Future party does not have representation on that committee, and for the member to announce to the people of the New Zealand that we are not on that committee is against the Standing Orders. That is not fair to—

The CHAIRPERSON (Hon Clem Simich): That is not a point of order.

PETER BROWN: I have to go on along those lines, because I say to Mr Copeland that, frankly, if United Future had even had someone sitting in the audience to listen to the submitters, and especially to the lines companies, he might have thought then, as we thought, that 50 megawatts was not enough.

The debate tonight has certainly convinced me, in my mind, that there is a stronger case for National’s proposal to totally uncap the limitation on lines companies. The honourable member shakes his head, but I can remember that separating lines businesses from generation was a result of the Bradford reforms. The argument was pretty sound. I thought Labour opposed it at the time; as I recall the situation, it opposed it pretty strongly. But the point now, which Roger Sowry made exceedingly well, is that we now have lines companies investing in generation in Australia. I hope they are not investing in wine companies, but they have to do something with their money. There is a strong case for considering allowing lines companies to get back into investing in generation in this country.

New Zealand First debated that matter at length in our caucus. We were concerned that if we removed the cap totally, one of them—or maybe two—would go out and buy Contact Energy, and we would have not a kilowatt more of generation. But there would be some advantages in that, because Contact Energy would be a totally New Zealand - owned company. We decided that the whole matter should really be subjected to a comprehensive review by professionals, by people who know the industry inside out, with a view to determining the best outcome for New Zealanders in terms of security of supply, a reasonable price, and the availability of electricity at the flick of a switch.

But after hearing the debate tonight, and after listening intently to Roger Sowry and then to Gordon Copeland, New Zealand First has decided it will support the National Party’s amendment. We think there is a lot of merit in deleting clause 22(a) and allowing lines companies back into the scene, so to speak. We know that they are now subjected to regulation, that they are controlled by the consumer price index minus x formula, and that they cannot cross-subsidise. Why we did not do that in 1998, I am at a loss to know. It seems to me that the National – New Zealand First coalition Government at that time made a mistake, because it did not think through that change thoroughly enough, in my view. I know that the Minister, the Hon Pete Hodgson, made very strong representations at the select committee—he was on that committee at the time—along the lines that we should not just split it all off, totally.

So New Zealand First is of the view that there could be some significant benefits to New Zealanders, and to this country as a whole, if we get new generation. It seems we can get that more readily by allowing the lines companies in, and it seems that if we allow them in and allow them to build coal-powered generators with some degree of liberalisation, for want of a better term, we will all be better off.

GORDON COPELAND (United Future) : I raise a point of order, Mr Chairperson. I would like to direct your attention to Speaker’s ruling 24/1, which states: “(1) The convention of not referring to the absence of a member is equally valid when applied to the presence or absence of a member from a select committee hearing.” I could not bring the reference to mind when I raised my point of order, but I think that that Speaker’s ruling makes it very clear that members should not refer to the absence of a particular member from a select committee. I would like you to take that into account.

Hon RICHARD PREBBLE (ACT) : Mr Copeland should have read out the whole of that Speaker’s ruling, because it goes on to state: “(2) there is no breach of the convention in referring to the fact that a member was not a member of the committee and so did not attend committee hearings when evidence was being heard.”As I understand it, Mr Copeland’s main argument is that he was not a member of the committee, which is exactly what Mr Brown was pointing out to the Committee. Of course, Mr Brown was perfectly entitled to say that United Future members could have gone to the Business Committee and could have made themselves members of the Commerce Committee, but they did not.

The CHAIRPERSON (Hon Clem Simich): I thank both Mr Prebble and Mr Copeland. I tell Mr Copeland that he has no basis to his argument; Mr Prebble is quite right.

GORDON COPELAND (United Future) : I raise a point of order, Mr Chairperson. I agree entirely with the second part of the Speaker’s ruling, which is why I said that we were not there. But if we go back and check Hansard, we will see that Mr Peter Brown said that no member of United Future decided to go to the select committee. Therefore, the second part of that ruling is not applicable—the part that gives him permission to refer to the fact that we were not there if, in fact, we could not have attended because we were not members. He simply said that we did not bother to turn up, and I think that that is a breach of the first part of Speaker’s ruling 24/1.

Hon RICHARD PREBBLE (ACT) : Well, I was trying to give Mr Copeland the benefit of the doubt, because in fact he interrupted Mr Brown’s speech when Mr Brown had actually made the points he was referring to. I presumed that Mr Copeland would not be relitigating a point of order he had already made, and that he was raising a new matter. Mr Brown, after that point of order, corrected himself and then went on to point out that United Future did not have a member on the committee. In fact, Mr Copeland’s point of order is completely out of order, because it should have been raised at the time, and not afterwards.

The CHAIRPERSON (Hon Clem Simich): I thank members for that. The ruling is that Mr Copeland was out of order, and he should not interrupt a member’s speech when he does not have a proper point of order. That is the way it is. Mr Brown was not referring to any absence from the committee in a way that is covered by Standing Orders or Speakers’ rulings.

PHIL HEATLEY (National—Whangarei) : I would like to bring the Minister of Energy, the Hon Pete Hodgson, up to speed on what we have heard in the Committee this evening regarding the deal he made, we understand, with Gordon Copeland of United Future. United Future has apparently made a deal with the Labour Party in relation to lines companies having the ability to go into generation, over and above the 50 megawatts as proposed in clause 22.

We would like the Minister to comment and confirm that Gordon Copeland had assurances from him that if there were some discovery in terms of gas, or some huge need or opportunity for lines companies to go into significant generation—by definition, I suppose that means above 50 megawatts—the Minister together with United Future would put a bill through the House—

Hon Richard Prebble: Rush it!

PHIL HEATLEY: —and rush it through the House, we presume under urgency, to allow lines companies to go into generation well over and above the 50 megawatts as proposed in the bill, which is the current restriction they have. So we would like to hear from the Minister whether that is in fact the case. Will lines companies, sometime in the future, be able to generate well over and above 50 megawatts? We would like to ask the Minister whether he gave assurances to United Future that legislation would be passed. Did he do that verbally or in writing, and does he stand by it? I invite the Minister to take a call on that matter.

In doing that, I also invite the Minister to tell us why he thinks that in the future—whether in the near term, medium term, or distant future—there might be a sudden need for generation that is over and above the need that exists today. We already know that the No. 1 constraint in the electricity industry today is the availability of power. There is constraint through the lack of generation, and through the fact that the Government in no way encourages generation in this country at this time, and certainly has not for the past 5 years. The Government does not encourage coal generation, with the Kyoto Protocol and through the Resource Management Act. It is starting to dismiss wind generation, and we saw that by the cancellation this evening of a proposal for wind generation, because of constraints under the Resource Management Act. We know that the Minister does not support geothermal generation, because the constraints on that for sustainability go way past 100 years—which is unachievable. So why would this Minister suddenly decide that at the moment, with the lack of generation in this country and with poor growth seen into the future, there may be some need down the track? Can the Minister please take a call on that, and tell us whether he has given some assurance that he will whip legislation through the House to allow lines companies to go into significant generation.

We also ask the Minister: what is magical about 50 megawatts? Why has he chosen in clause 22(a) that lines companies are allowed to generate 50 megawatts of energy? We know that 25 megawatts was the magical answer before that, and that is in the bill, and before this legislation came to the House, 5 megawatts was the magical number that lines companies were allowed to go into generation with. So why was it once 5 megawatts—why was that the magical figure? Why did it become 25 megawatts? How come, through this legislation today, lines companies are suddenly limited to a figure of 50 megawatts? In percentage terms it has gone from 5 percent, to 10 percent, and then to 20 percent.

Hon PETE HODGSON (Minister of Energy) : The preceding speaker has asked a number of questions, which basically boil down to: why did we choose 50 megawatts? I will tell him the history. There was earlier in this Parliament a member by the name of Max Bradford, and he came to the view—supported by all the National Party members—that the way we should run our electricity system in the future was as follows. If someone owned a line, that person could not simultaneously own an electron. That was the view of the National Government at the time.

Hon Roger Sowry: We’ve changed our mind.

Hon PETE HODGSON: Roger Sowry has just chipped in, saying: “We’ve changed our mind.” That is good, is it not, because that is proof that the National Party now realises that that was a most extraordinary error. The disruption around the country was amazing. It was astonishing; so much so that by the time we came to the winter 2001 event—

Phil Heatley: Why 50 megawatts?

Hon PETE HODGSON: I have 5 minutes, and I will get to that question. I did not chip away at the member who has just resumed his seat during the course of his speech, which went on and on, and I expect him to stand by and get an answer to the question that he has put to me. If he does not want an answer, he can continue to chip, and I will resume my seat.

What happened then was we went to winter 2001, and we found some reserve generation on the waterfront of Wellington, but the person who owned the generator also owned the line, and we could not turn it on. That is why we needed to get the electricity amendment legislation of 2001 through the House in a hurry. That is how silly it was. At that stage, we said: “Let’s start moving in such a way that lines companies can generate a certain amount.” At that stage the threshold was set at 5 megawatts.

Then we came to this legislation, 3 years later. In the interim, something else had happened. Lines companies were placed under Commerce Commission regulatory review. They are under watch. They may be subject to a Commerce Commission inquiry, or they may be subject to the CPI-x regime, and on it goes. So now, for the first time, we have decent disclosure as to how lines companies run; whether they are making excess profits; and whether they are doing what they were doing in Britain, which was creaming it and behaving monopsonistically, and the answer is, generally speaking, they are not, although there are some exceptions to that. Those exceptions are detailed by the Commerce Commission, and as the years have gone by, we have a much, much better handle on whether there has been monopoly rent taken by lines companies and an ability to reduce that rent if it is taken.

So I put to the House legislation that said: “Let’s raise the threshold. Five is too low, so let’s go to 25. Let’s just quintuple it.” That legislation then went to a select committee. In the course of the select committee hearings, a number of people came along and said: “That’s still too low.”, and the select committee came to the view that it should be raised to 50 megawatts. Then in the House—in front of the member who has asked a question about a so-called secret deal—Gordon Copeland got up during a question and asked: “What does the Minister think about going to 50 megawatts?”. I said: “Well, if the select committee decides that is the right thing to do, it is fine by me.” And that is the end of the story.

Hon RICHARD PREBBLE (ACT) : I hope Mr Copeland was listening to the Minister, because the Minister basically told us that Mr Copeland’s belief that he is responsible for the 50 megawatts is, as far as the Minister is concerned, nonsense—and Mr Copeland is telling members what a great influence United Future has had. Mind you, the Minister could not actually tell us: “If it’s 50, then why not 100?”. But let us turn our minds to the ridiculous amendment from the Greens.

The Greens have said that line companies can generate any amount they like, providing it is from a new, renewable energy source. I looked at the principal Act to see whether “new, renewable energy source” is defined. The Greens might be interested to know that it is not. I know the Greens do not know anything about physics, but that means that they are in favour of a line company—and there might be one mad enough to do it—generating by nuclear fission, because nuclear fission results in plutonium. The Greens might be interested to know that it is definitely within the definition of a “new, renewable energy source”. So the Green Party is saying it is in favour of nuclear power in New Zealand, and I never thought I would see that day.

Peter Brown: Maybe he’s had a few smokes!

Hon RICHARD PREBBLE: Maybe he had a few. Well, he thinks it is funny, but that is exactly what this clause does. Let me tell him something else. I am a lawyer, and I would be quite willing to go along and argue—as I am sure a line company lawyer will—that a new, renewable energy source does not cover just wind and water but also covers things like coal. Coal is generated over millions of years, and there must be new coal being generated as we speak. It will be being formed, and new gas will be being formed. There is nothing in this bill to say how rapidly the renewal of the energy source has to be, just that it is happening. Well, as a matter of scientific fact, it is happening, so the Green Party is introducing a measure that actually says that line companies can generate any amount of energy, provided that they get a lawyer like me—and I will soon be available—who is quite happy to argue that this clause covers any energy, and it certainly covers nuclear fusion. There is no doubt about it.

Sue Kedgley: Is that renewable?

Hon RICHARD PREBBLE: It is renewable—of course, it is. Nuclear fusion results in plutonium. It is one of those interesting processes where one ends up with more energy at the end. In fact, the Greens ought to love nuclear fusion. Perhaps they do—perhaps I have misinterpreted the Greens. Perhaps the Green Party is really right into nuclear power. I always thought that they were against it, but I see this clause being put in, and I say that this is the sort of clause—like the 50 megawatt clause; if we accept Mr Copeland’s argument—that gives MMP a bad name. Here we have small, little parties trying to prove to their membership that they have some influence, so they put forward this sort of amendment. Even though the clause is nonsense—and both clauses are nonsense; the whole bill is nonsense—in order for the minority Labour Government to have a majority to put through this Stalinist legislation, we have clauses of this sort. It is sheer madness.

The Government ought to realise that the reason it is in this position is not just MMP and its loony, flaky coalition partners like United Future and the Green Party, but that what it is trying to do does not make any sense. There is a Resource Management Act, and it is for that Act, which talks about sustainable New Zealand, to decide those sorts of questions. It is bad lawmaking—and the Minister knows this—to put in a clause that uses the term “new, renewable energy source”—a term that has not been defined by the Greens. The Greens do not know what that means. Nor do the line companies. There will be litigation about this matter. I say to the Green members that the result might be the exact opposite of what they think. We have line companies that are crazy enough to invest in wineries and finance companies, so they are certainly nutty enough to invest in nuclear power, now that they have been told by the Green Party that it is the only form of energy they are allowed to invest in. Why should this Parliament be attempting to make those sorts of guides and rules for the energy companies? It is complete, utter nonsense.

DIANNE YATES (Labour—Hamilton East) : I move, That the question be now put.

Hon ROGER SOWRY (National) : I want to take Minister Pete Hodgson’s attention for a while, because he was not in the Chamber for the debate. I say to him, firstly, that the Commerce Committee did not decide to do this in the way he portrays it. In fact, when we in the select committee asked about going to an unlimited amount of generation—and the Labour members were there when we asked the officials—the officials told us it was a policy decision. The Labour members of the committee voted for the Labour policy. One presumes that that was something the Minister decided. We were told earlier by Gordon Copeland that both he and the Minister decided on that new artificial limit. The debate, really, is about why we should have the limit.

I accept the arguments the Minister made about what National did in the 1990s. As I said, we changed our mind; it is not our policy now.

The Minister has here a “get out of jail free” card. We can have unlimited generation by lines companies and, because of the “CPI minus X” regulations and the regulatory environment the Minister has put around lines companies, we can feel confident that the cross-subsidisation the Minister and his predecessors worried about will not occur—or, if it does occur, will be adequately picked up and monitored. We are confident with that.

I think the Minister is confident with that as well, in his heart of hearts. Otherwise, why would he allow lines companies to have an unlimited number of windmills but not to have anything to do with gas? Before the Minister came to the Chamber tonight, I put to members a situation. I was criticised because it was hypothetical, but let us say it is not. We have two gas rigs currently drilling at sea. The Government should rightfully accept credit for having a couple of rigs out there after a long period without rigs. Some of that credit is to do with the Government, and some is to do with the price of Māui Gas being right, but those rigs are drilling now. I have heard the Minister say that he has been worried about finding gas, and that that has been his biggest concern—rightly so. If a company finds gas, for example, in Canterbury, and wants to bring it on and do a deal with a lines company to build a combined cycle plant—the last major one built in this country, in New Plymouth, was built by a lines company—it will not be able to do it. This bill will prevent it from doing that.

Gordon Copeland, who supports the bill, said in the Chamber that that was OK, and that he had talked to the Minister, who said that amending legislation would be brought in to fix that, should gas be found. I do not know whether Mr Copeland is right or wrong—I have no reason to disbelieve a God-fearing man—but I say to the Minister that that is a bit of a silly way of doing it, so National will vote to remove the restriction. We will help the Minister so that he does not have to be a hostage to the Greens. I suspect that if the Minister were to put his hand up to vote for that, even United Future would vote for it. I think United Future is kind of clinging to the fact that it has a small gain, and it thinks that that is about where the politics are on this issue.

The politics are in letting a lines company unleash some of its capital. The Minister will know, as I know, that lines companies are talking about investing in Australia. That is nutty when we need the investment here. It is crazy! If we can guarantee that those companies will not cross-subsidise the investment, why not let them make it? As the Minister well knows, lines companies are also looking at other investments that are way off beam from electricity. I gave the example before of ElectraLines, which owns a finance company.

Hon Pete Hodgson: Who’s that?

Hon ROGER SOWRY: ElectraLines. It owns the Oxford Finance Corporation in Levin and I do not think the Minister believes that that is a good use of money for a lines company. That is not what it should be doing. It should be investing in some generation, if it wants to invest, or just giving a rebate to consumers—I do not care what. I know the politics of the industry; I know what has gone on before; I am not trying to walk away—[Interruption] The member can go on about that, but I am not trying to walk away from any of it.

National disagrees with the bill. In fact, it might be made more difficult for us if there were no limit in the bill on lines companies. But I say to the Minister that we should remove that limit and let the lines companies live with “CPI minus X”. Let us have faith in the Commerce Commission: I am glad that that is where the Minister has left the regulatory regime, and we will come to that in the next part. Let us do all that. Let us remove this silly clause that allows a lines company to put up as many windmills as it wants, but does not allow it to put a small coal-fired unit or something else in place.

Hon PETE HODGSON (Minister of Energy) : I think the member raised some good points, but I think he has also told an incomplete story, and I would like to finish the other half, if I may. The issue of whether we should allow generation capacity of above 50 megawatts is, of course, something that people have talked about. It is a matter of fact that with new renewables there is no limit—there has not been one for 3 years. It is a matter of fact that new renewables are defined in the 2001 legislation, and that in that legislation reserve generation can be built without limit.

Notwithstanding those changes, and notwithstanding the fact that the without limit provision for new renewables has been in place for nearly 3 years, there has not been a lot built. That raises the question of why. Because that answer is not yet known to me, in the past few weeks I have asked the Ministry of Economic Development to go and find out. In fact, after discussions with Gordon Copeland and other members—and with myself, one might say—I have asked the ministry to go away and consider whether we should remove that threshold altogether. That work is now under way.

If we were to remove the threshold, we would of course allow all retailers to buy lines companies. That means we would have the prospect of some sort of regional concentration. There might be one Auckland power company or one Wellington power company that would have part of its obligations regulated, etc.—OK? So we will take a look at that and see whether it is the right thing to do.

In the course of the Commerce Committee hearings, one lines company decided that it wanted that to happen now, without the public policy analysis—if we did not mind. Well, we do. That company did not want to build new generation; it wanted to buy other people’s. If only its trustees—or the National Party members amongst them—could stop taking one another to court, then maybe we would see that particular lines company get into the gas business. It did not want to build new generation; it wanted to buy existing assets—and that is a very interesting distinction.

The member asked why we did not release capital for new generation. The answer is that we just did, somewhat—not that much has been built. If we removed the threshold entirely, the capital may not go to new generation for, indeed, the largest lines company in the land has decided that it wants to buy other people’s assets.

GERRY BROWNLEE (Deputy Leader—National) : That may seem like a very reasonable contribution from the Minister. People listening to the radio, or sitting in their offices around Parliament, would have thought that was a nice, peaceful, little explanation from the Minister, and I suppose it gives us an indication of a Government that is thinking about these things. But the reason there has been no substantial investment in renewables for generation in the last 3 years is that it is so hard, and what is left to people is so unreliable. The Minister would have to concede that if one wanted to do a hydro project in this country—and hydro power is a renewable form of energy—it is almost impossible. He would also have to concede that if one wanted to build a wind project in this country, the economics make it almost impossible. Big companies like the State-owned generators can carry out the nice little exercise of building wind farms everywhere, but everyone knows that on the best of performances, they will be barely 40 percent efficient. So why would a lines company want to risk its consumers’, or its owners’, capital on such a dodgy venture? When it comes to biomass energy, or something else—when it comes to any form of emission—we know immediately that the Resource Management Act will stand squarely in the way.

The fact that nothing has happened in the last 3 years since the Minister allowed lines companies to look at unlimited amounts of generation from renewables, is that all the other conditions that have to be in place are not in place. It does not matter how many times the Electricity Commission meets, sits, and makes decisions, until those other factors are taken care of it is most unlikely that we will see any sort of substantial investment from those companies in new generation capacity.

The Minister said it is interesting that one of the country’s biggest line companies wants to buy only generating assets that exist. Well, it wants to do that because it knows how hard it is to get new generation established. We have seen in the last 12 months the falling over of the very large project on the Waitaki River, and, although one or two new wind farms have opened up, they are just nice little green adjuncts to the generating capacity of the big companies.

I ask the Minister whether he might comment on corporate separation. What exactly is the purpose of having a statement about corporate separation in this bill, and for that matter, the arm’s-length rules that relate to the preparation of, the contracting of, and the purchasing of reserve generation? We need to understand that this Government is proposing to smooth out any possibility of interruption to electricity supply by creating reserve capacity. Well, how do we create reserve capacity when already there is more demand than capacity to deliver?

Hon David Cunliffe: Read the State-Owned Enterprises Act.

GERRY BROWNLEE: What we will see, over a period of time, is the Government encouraging State generators—and there is good evidence of it happening now—to create that reserve capacity, effectively by rationing through price. It is the consumer who will pay for that. I heard a member on the other side of the Chamber interject: “Read the State-Owned Enterprises Act.” I ask his Minister to explain how one’s reading the Act is relevant or helpful in understanding how this committee of well-meaning people is going to work to get reserve capacity in this country.

Hon David Cunliffe: Would the member like me to take a call?

GERRY BROWNLEE: I would very much like the member to take a call.

JILL PETTIS (Labour—Whanganui) : I move, That the question be now put.

The CHAIRPERSON (Hon Clem Simich): We have had over an hour on this part, but I think the Committee would like to hear some more good sense.

Hon RICHARD PREBBLE (ACT) : I think that the Greens, despite suggesting they would not, would actually be very interested in what I have to say. I am obliged to the Minister for taking a call—it was very parliamentary of him—and pointing out to me that there has been an amendment in a subsequent Act. Following the 1999 Act, in 2001, “new renewable energy source” is defined. I am obliged to the Minister, and I have now read it. It certainly does not rule out nuclear energy, and it states that a new renewable energy source means an energy source that occurs naturally, the use of which will not permanently deplete New Zealand’s energy sources of that kind. What that means is that an imported coal-fired station would meet this definition. Why that is important, for those of us who know about energy, is that in fact the cheapest way to produce energy in New Zealand is to set up a large coal-fired station and import the coal from Queensland. Indeed, that is exactly what one of the State-owned enterprises did. When there was a coal shortage, it was importing coal from Australia.

I find it simply amazing that the Green Party is saying, and this bill is saying, that a line company—and who would want to do this; well it would be the Auckland line company—can build the 150 megawatt station, providing the coal that it burns does not deplete New Zealand’s coal. So here we have the Green Party saying: “We are in favour of coal–fired stations provided it is not New Zealand coal.” That is what it says, I will read it out. It means an energy source that occurs naturally, the use of which will not permanently deplete New Zealand’s energy sources of that kind. It goes on to say that it has to be replenished if it is in New Zealand. I might point out that this definition clearly allows wood-fired stations, because wood would renew within 50 years. So the Greens are in favour of a wood-fired station, which I assure members has all the attributes of a coal-fired station.

Here we have the Green Party saying—actually, it is more than saying. I think this bill is almost a direction. It is going to become an absolute certainty that the line companies want to get into generation. We know that because they came along to the Commerce Committee and said they wanted to build a station bigger than 50 megawatts. We even had the United Future party telling us that Solid Energy wants to build a 150 megawatt coal-fired power station. Well, if it buys a line company, it will be able to do it because then it will come under the exemption, and then it will be allowed to build as big a power station as it likes, provided it does not use New Zealand coal. That is all the renewable energy sources provision does. It says that we cannot burn New Zealand gas, but we can import it from Indonesia, and there are people who have said: “Let us bring in liquid gas and have a gas-fired station from liquefied petroleum gas.” That is perfectly OK by the Greens because no doubt they read this clause.

I have to say to the Committee that I had not appreciated, until the Minister drew it to my attention, that in 2001, and no doubt it was he who did this, he managed to—I will not say con the Greens—persuade the Greens that somehow we are helping the whole planet if we burn Australian coal and not New Zealand coal.

The odd thing is, of course, that New Zealand coal is dug up and sent to Indonesia, and the Indonesians send their coal here, and that is OK! That is all right; it helps the planet! [Interruption] The Green member, Sue Kedgley, is interjecting from her seat. I ask her to explain to us whether that is what she meant. Is that Green Party policy? Could we have the Green physics that will let us know that somehow or other we help the planet if the Indonesians burn our coal and we burn their coal.

Hon Maurice Williamson: What if they sent ours back?

Hon RICHARD PREBBLE: That is a point, but, no, I do not think that would be allowed. I think we would have to test the Indonesian coal to make sure it is not our coal that has been sent there and brought back again, because I think that would be naughty. Under this provision, that is what “renewable energy” means. Interestingly, what it does not mean is “hydro” and “geothermal”, and Lord knows why that is.

Hon DAVID BENSON-POPE (Minister of Fisheries) : I move, That the question be now put.

Hon ROGER SOWRY (National) : Part 3 is a relatively narrow part, which amends the Commerce Act. I want to bring attention to what I think is a very serious issue. I will do it quickly now; I know that we will have to deal with this part again when the Committee resumes sometime next sitting day.

Subsection (3) of new section 57CA, inserted by clause 30B, refers to the Commerce Commission and states: “The Commerce Commission must, if asked by the Energy Commission to do so, reconsider an existing authorisation or undertaking and, to the extent that the Commission considers it necessary or desirable to do so,”. What we have is the Commerce Commission having to dance to the Energy Commission’s tune.

If we look at an earlier part of the bill, we see that that commission is able to be directed by the Minister. So let us go through the food chain. The Minister can direct the commission about something to do with lines company charging, or the regulatory environment, or the environment those companies function under. The commission then toddles off to the Commerce Commission, and the Commerce Commission is required to have a look at it. We have in this country an independent Commerce Commission—or we have had, until this bill is passed. Now we are to have a Commerce Commission that is being brought into political question by its dancing to somebody else’s tune.

Not only that but the Minister is further muddying the waters by proposing to have some commissioners who are joint commerce commissioners and energy commissioners. So they will be answering to the Minister one moment, then sitting on a case, supposedly independently, the next. Imagine if, in the Air New Zealand - Qantas debacle that went through the Commerce Commission, the Minister could have gone to the transport authority and said he wanted it to do A, B, and C, and to make sure the Commerce Commission looked at A, B, and C, and the transport authority could then have toddled off to the Commerce Commission and said it wanted it to have a look at this and this, and the Commerce Commission was obliged to look at this and this because the Minister had directed it to do so, and there was cross-accreditation of commissioners.

• Progress reported.