Pattrick Smellie: Will Collins prove an energetic energy minister?

Wednesday, 21 December 2016

OPINION: What do you get you put a deliberately tin-eared regulator together with a legendarily combative new Minister?

It's too early to be sure, but you might very well end up with the Electricity Authority at loggerheads with the new Minister of Energy, Judith Collins.

Much has been made of Collins's alleged demotion from the Police and Corrections portfolios and from 14th to 16th position in the 21-member Cabinet announced by the new Prime Minister, Bill English, last week.

But not being in charge of prisons and police may be something of a godsend, especially for a Minister who is privately sick of the 'Crusher' nickname, gained years ago as Police Minister.

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Her new portfolios, revenue and energy, both require brainpower and judgment about where to draw the line between public policy purity and political pragmatism.

If anything, it's the energy portfolio itself that has suffered a substantial demotion, slipping from the ninth-ranked to the sixteenth- ranked minister.

In part, that's because the government's oil and gas push is dead in the water. Low global oil prices make deep-sea oil deeply unattractive.

On the electricity side, peace has largely broken out. Power companies may not be popular, but regulatory cajoling and weakness wholesale prices have made the sector more competitive than it's ever been.

However, the Electricity Authority has proven adept at making itself a political target, especially on its approach to rooftop solar installations and the proposed new regime for transmission pricing.

On rooftop solar, the Authority may find a friend in Collins. The campaign against the so-called 'solar tax' has gained traction, but is founded on a fundamental misconception: that people who can't afford or don't want solar panels should bear the costs created by people who do.

More difficult, however, is the toxic feud between the deep south of the South Island and the upper part of the North Island over future pricing for the national grid.

The EA, whose chairman Brent Layton is especially dismissive of political sensitivity, is on one level just trying to do its job.

The north of the North Island gains most from $2 billion of grid upgrades so far this decade, so those users should pay more, or so the textbook theory goes.

However, that has proven very unwelcome news to the likes of New Zealand Steel, whose South Auckland steel mill is commercially marginal and depends on continuing cost cuts. The issue has also allowed the newly boisterous Auckland business lobby, the Employers and Manufacturers Association, to sound off. New Zealand First is in on the act.

Southland electricity users – backed by the lobbying grunt of Rio Tinto's aluminium smelter at Tiwai Point – are complaining equally loudly that the Authority's reforms deliver far too little relief to them and don't hit the northerners hard enough.

And that's despite the Electricity Authority developing a cunning plan intended to offset the impacts of its proposals by coinciding with price cuts it expects the Commerce Commission will deliver in a different area of regulation.

Collins's capacity to deal with this directly is limited. However, the Electricity Authority is well aware that this endlessly debated, horribly complex issue has plenty of capacity to play badly when simplified to an argument between job-rich industrial giants.

It also knows it was supposed to keep this issue away from election year, not have dribble untidily into it, as is happening now.

Unless, that is, a Minister known for her willingness to have blunt conversations, can kick the can down the road. Given that electricity transmission pricing reform has proven insoluble for the best part of two decades, would it really matter if it waited till 2018 to sort out? - BusinessDesk