Sparks flying over electricity powers

A draconian bill promises "backstop" regulation of the power industry, writes COLIN JAMES from Wellington.

A bill proposing draconian backstop regulation for the electricity industry is due back in Parliament on Monday with a bitter fight looming over it.

Energy Minister Pete Hodgson's Electricity Industry Bill has been severely criticised by the chair of Parliament's regulations review committee, former Speaker Doug Kidd, as a "barefaced attempt to usurp the role of Parliament and our committee," redolent of the regulatory excesses of the Sir Robert Muldoon era.

National and Act MPs on the commerce committee, which has been examining the bill, have also strongly criticised the backstop regulatory regime and are promising stonewall opposition when the bill returns to the House. While the commerce committee's report is secret under parliamentary privilege until reported back, the tone of Opposition MPs' comments suggest they may have taken the same course as with the just-passed Commerce Amendment Bill No 2 and blocked the evenly split committee from reporting the bill.

If they have taken this "nuclear option," as National MPs call it, it would mean the Government would have to use its majority in the whole House to bring the unamended bill back from the committee and then itself initiate and carry any amendments to ameliorate the regulatory regime.

Mr Kidd's regulations review committee role in this is important. Set up in 1985, it examines all bills to identify whether regulation-making power granted to the cabinet covers matters which should be a decision for the whole Parliament.

It also examines all regulations made by the cabinet to judge whether they are within the limits defined by their acts.

Mr Kidd's committee has can make recommendations only, and it is for other select committees - to which it reports on bills - and Parliament as a whole to take action, or not, on its reports. Mr Kidd's strong comments, made at a Centre for Public Law seminar on May 18, suggest that the regulations review committee has condemned Mr Hodgson's power grab. Its report is also secret under parliamentary privilege until the bill is reported back.

Labour backbencher David Cunliffe, who is chairman of Parliament's commerce committee, also sits on the regulations review committee. The committee is traditionally chaired by a senior Opposition MP - now National's Mr Kidd.

The bill in its present form is a sobering warning for business of the lengths to which the Government is prepared to go to "encourage" business do its bidding. The message is heavy regulation if you don't cooperate.

Generally, the Government still prefers relatively light-handed regulation under the generic rules of the Commerce Act, according to a principle Commerce Minister Paul Swain defines as "as much market as possible and as much government as necessary." Mr Cunliffe also frequently recites this mantra.

But Mr Hodgson felt he needed a system which would, if "necessary," give him scope to act fast and flexibly to ensure competitive pricing. Some in the Government have labelled this an "emergency" power, a concept which National MPs say is inappropriate for a general regulatory regime.

So, while the Electricity Industry Bill concentrates primarily on "encouraging" the industry to set up a self-regulatory regime - "good progress" on which was reported by former Labour Finance Minister David Caygill, chair of the establishment committee, on May 21 - Mr Hodgson set out to give himself extensive powers of intervention.

The bill requires the industry to deliver electricity in "an efficient, fair, reliable and environmentally sustainable manner."

If it doesn't, Mr Hodgson's arsenal would come into play.

This is, first, to be through an electricity governance board. But the bill in its present form also gives Mr Hodgson power to direct the board and to replace its members at any time with no reason or compensation - giving him effective control.

To leave no doubt about that, the bill also gives Mr Hodgson (through the Governor-General, but that is a formality) power to make regulations for "all and any of the purposes" of the legislation, including anything the governance board might do. Mr Kidd pointed out in his May 18 speech that that would be to "do anything and almost everything by regulation or rule in connection with controlling and in effect running the electricity industry."

"Day by day and year by year those involved in the industry have continually to divine whether or not they are meeting the minister's and the Government's expectations," Mr Kidd said.

"All the while they know that if they fail the axe might descend in the form of a torrent of rules and regulations which could put the Government effectively in charge of their assets, financial viability and future."

But the bill in its present form goes even further. It gives Mr Hodgson power to make rules that have the effect of regulations. Rules are made with less formality than regulations and the bill purports explicitly to forbid Mr Kidd's committee examining them, as it is required to do with all regulations.

And in case any tiny crack is left through which democracy might seep, Mr Hodgson's bill also explicitly purports to stop the Regulations Review Committee recommend disallowance of regulations made under the bill.

This, Mr Kidd says, is a "barefaced attempt to usurp the role of Parliament and our committee."

It raises the spectre for Mr Kidd of the days when Sir Robert Muldoon could regulate vast areas of the economy, as he did in 1982, through the sweeping powers he had under the Economic Stabilisation Act, repealed in 1987.

* ColinJames@synapsis.co.nz