Energy and Resources Minister Judith Collins told Q+A there’s a 1-4% chance that people will be asked to make some voluntary reductions in electricity usage.
Judith Collins was speaking to Corin Dann about low lake levels and the impact this might have on power bills.
‘And if that happens, retailers have to pay their customers over $10 a week as a compensation for that. So I can tell you this is not something that they rush into, because it costs them money.’
Minister Collins also signalled an inquiry into petrol pricing will be released by the end of the month. This follows concerns about the differences in fuel prices between regions.
When asked whether she would ‘take on’ global multi-nationals who arguably aren’t paying their fair share of tax, Minister Collins said, ‘some of these companies now are like company states. They’re so big. They’re bigger than us in terms of our country. Their revenue is bigger than us. Their reach is great. So that’s why we’ve signed up to the multi-national instrument that I did in Paris the other day. And also we now have a bilateral with the United States so that they will share information with us. So we are moving on this.’
CORIN Minister, good morning, and welcome to Q+A this morning.
JUDITH Good morning.
CORIN If we could start first in the energy portfolio. The lake levels, they are low, and looking at those graphs, they’ve really dropped off quite sharply. How concerned are you about a dry winter and, I guess, higher power bills?
JUDITH Well, the higher power bills will, for those people who have spot prices, which is about 2% of the population, so 98% of our electricity or households’ electricity, they are on fixed prices.
CORIN So how much could they be paying?
JUDITH The fixed-price ones would be pretty much the same as what they’re doing. In terms of those who are on spot prices, they’re with people like Flick or Paua To The People, Power People, they call themselves, they will have, no doubt, increases. But then again, they’ve also had much lower prices earlier in the year.
CORIN And is this just an unfortunate event? That surely isn’t what you want in terms of competition in that industry, though, is it?
JUDITH No, but it’s a reality if you go to the spot prices. There’s ups and there’s downs. And they’ve had a lot of downs when it’s come to prices recently, so now there’s time for an up.
CORIN Bigger picture, though, if this continues right into winter and we get into more of an urgent situation – it’s currently on a watch list, isn’t it, on a watch situation? I mean, how worried are you? What have you got in place to ensure we don’t have a bigger problem?
JUDITH Well, we’re very fortunate, because we have 57% of our electricity is from hydro, so we actually have natural gas is about 17%. We also have geothermal, which is about the same. We have around 4% is coal.
CORIN So you can ramp up those ones?
JUDITH We can do other things with it. So we’re very fortunate, cos we have a lot of resilience. And, you know, we have wind at about 5%, so we can ramp up certain things. But what it also means is that we always have to be aware of these dry years. It happens for farmers; it also happens for us. It certainly hasn’t happened in the North Island, where it seems to have rained from Christmas on, but in the South Island, where the big hydro power is.
CORIN So what you’re saying is we can burn more coal, burn more gas, and we can get through?
JUDITH And also geothermal, which is basically steam. And we have extra capacity there – about 17% we’re currently using. We could do some more there too.
CORIN Longer term, is the system in the right shape?
JUDITH I think it is actually a very good system. We are very self-sufficient when it comes to electricity, cos we don’t have the ability to stick a cable across to another country and grab some, like they do in Europe. So we are very fortunate, because we have so many different and diverse parts of our electricity supply. But certainly, when it comes to hydro, there’s more that could be done there.
CORIN What could be done there? Because you’ve obviously got a lot of private interest involved now.
JUDITH Yeah, well, you can also have more hydro, particularly in the North Island, where there obviously are some hydro stations. But the trouble is, to try and get big hydro now would be very difficult.
CORIN You’re saying you’d like to see some dams built in the North Island?
JUDITH No, there are already some small hydro stations around, some very small stations, particularly down the West Coast of the South Island. And people can’t even tell that they’re there, because they’re tiny. So the technology’s changed, but also, particularly around geothermal. We have a lot of ability with geothermal, which is what we see at Wairakei and Kawerau, places like that.
CORIN Is the legal framework and, I guess, the environmental rules right to enable that encouraging of more hydro, for example, in the North Island? Would you like to see changes?
JUDITH Well, you’d only want to have it around small hydro, because there’s just no way you’d get big hydro through these days. It could be done in the ‘60s, but it’s not going to ever be done now. But we have other options. And I think one of the things people forget is that we also have solar, which is only about 0.2% of our electricity supply. But we have more people moving into that, so we’ve got a lot more things, very exciting things happening in the electricity sector around peer-to-peer trading, people who are installing solar. They’ve also their own wind turbines, so it’s an interesting area. But I think we’ll be fine. And the information I’ve got is that it’s anything from about 1% to 4% possibility that we may have to ask for some voluntary reductions in people’s electricity. That’s not a huge amount. It’s not the risk that people might think it is, primarily because we have a real resilience.
CORIN And what are, sort of, the markers that would get you particularly worried? I mean, we’ve got a long winter to go.
JUDITH I would be a bit more worried if we found that the lake levels continued to drop and we didn’t get the rains. But I’m told that by the experts and the electricity authority and others is that the lower lakes are actually later in the season than one might expect. We will have, obviously, there will be a summer thaw, there will be a spring thaw – there’s all those things happening.
CORIN So we have – just to clarify before we move on – 1% to 4% chance that people might have to ration power?
JUDITH They may be asked to have voluntary. And if that happens, retailers have to pay their customers over $10 a week as a compensation for that. So I can tell you this is not something that they rush into, because it costs them money.
CORIN All right. If we move on into the energy portfolio, exploration, oil, trying to find oil and gas, this government put a lot of stock in oil and gas as a way of growing the economy, a big pillar of its economic growth platform. But it’s been pretty disappointing, hasn’t it? I mean, in the last year, I think the sector shrunk by 13%.
JUDITH Yeah, that’s primarily around the price of oil. And certainly, if we look at a province like Taranaki, that has been a standout province in terms of economic growth, jobs, the fact that the average wage is twice everyone else’s.
CORIN But everyone knows what a cyclical industry this is. So we shouldn’t be saying, ‘Oh, just because the price is down now, we shrink.’ Because it’s going to presumably come up.
JUDITH You are so right.
CORIN So, what’s gone wrong? Your government hasn’t been able to get that sector cranking and deliver that growth.
JUDITH Well, I beg to differ, Corin. Actually, I’ve just been in the States and in France and Norway. I can tell you there is a lot of work going on in exploration, particularly around seismic testing.
CORIN And not in New Zealand?
JUDITH Oh, yes, it is, seismic testing going on.
CORIN How many of your block offers, for example, have got people actually drilling for oil off the coast of New Zealand?
JUDITH Well, you wouldn’t want to be doing too much drilling right at the moment because of the cost. But you would, however, want to be getting to see exactly what is there, and that’s what is going on. So there has been a huge increase in the work going on to make sure that people know exactly when the time is right to start work in that area.
CORIN Because I guess the question is – why bother with all this effort? If no one’s really coming down here to do it, why make it part of our economic strategy? Why not look to the green energy?
JUDITH But they are. That’s the point – is that they are. People like Schlumberger, Total, big companies who are now working in New Zealand – Statoil, people like that – who are working here to find out just what we’ve got on that east coast. And what I’ve seen so far of the seismic testing, which is like an ultrasound – it’s not blasting or anything like that; it’s just ultrasound, basically – is that we have some pretty enormous gas reserves.
CORIN Sure. And are you worried, though, again that the legal framework in New Zealand is inhibiting that exploration? If we look at, say, Bathurst’s troubles in the courts; you’ve also got Trans Tasman with the EPA. If you were re-elected, would you change the rules to make it easier for some of these companies to actually do the drilling?
JUDITH You and I think it’s quite hard for them to do it, but what they say to me is that we actually have a very good regulatory environment. So they’re not the ones complaining to me. They’re actually saying they understand our rules, they trust our rules. One of the issues they’ve got is that a lot of New Zealanders just do not know quite what resources we’ve got. We are an incredibly wealthy country. And if I look a country like Norway, which has actually used its petroleum and gas, they’re twice as rich as us.
CORIN But you’re saying that we don’t realise how good we are, therefore we’re what? We’re too focused on the environment, we’re not prepared to take the risks and take some of those gains? Is that what you’re saying?
JUDITH You shouldn’t have to compromise the environment for the economic growth. What you should be able to do is have the economic growth without compromising the environment, and that is actually what we are doing. So when we look at 40 years of exploration in the Taranaki province, onshore and offshore, we have just not had an issue at all, and that’s because of really good, strict rules around the environment, but also around our health and safety.
CORIN All right. If we can move on to the tax issue – I guess as a minister, you’ve earned a bit of a reputation as ‘Crusher Collins’.
JUDITH Oh, I don’t- I never call myself that, Corin.
CORIN Are you taking on the global tax giants, the global multi-nationals who arguably aren’t paying their fair share of tax? The Googles, the Facebooks, the Apples – are you going to take them on?
JUDITH You are just being provocative now, Corin.
CORIN Why not?
JUDITH Well, yes, let’s put it this way – a whole lot of countries are joining us to actually try and get our fair share of tax. To be frank, some of these companies now are like company states. They’re so big. They’re bigger than us in terms of our country. Their revenue is bigger than us. Their reach is great. So that’s why we’ve signed up to the multi-national instrument that I did in Paris the other day. And also we now have a bilateral with the United States so that they will share information with us. So we are moving on this.
CORIN Do you have any advice that, say, if you implemented a tough tax on Apple, for example, and made it pay arguably its fair share of tax –$300 million instead of $30 million or something like that – any advice that they would just up sticks and leave and we wouldn’t be able to use our iPhones?
JUDITH No. I don’t have any advice like that. In fact, my concern is–
CORIN Then what’s stopping you?
JUDITH Well, because you’ve actually got to collect these things. But you’ve also got to be fair. What we do have is we have a lot of people very concerned, particularly the tax professionals, that we don’t actually destroy our economic viability and the growth that we’ve had by being the toughest of all. There’s no point us saying to a large company – and I’m not getting into names – ‘I tell you what – we’re going to tax you on this.’ And the answer will be, ‘On what?’ The fact is we have already brought in some measures around basic international service across the border, the so-called Netflix tax. We are doing that, and we’ve actually had some really big gains.
CORIN But your changes around the multinationals, it does require companies to have a staff presence here, doesn’t it? And that’s going to be problematic, isn’t it? Because a lot of these big companies don’t need to have staff here, do they?
JUDITH Well, a lot of them don’t already, and they’re already-
CORIN So how are your changes going to catch them?
JUDITH Because it’s around the importation of products. We’re certainly looking at the importation of products across the border. At the moment, there’s a de minimis of $400, which basically means a lot of product doesn’t get a GST on it, for instance, and that’s going to be looked at. But also there’s some other measures around transfer pricing, interest payments and all those sorts of things that are often used as a way of actually shifting profit offshore. So there’s no point us being this tiny, little country, having a big go at a great, big multinational unless we’ve got other countries working with us. That’s what we’re doing.
CORIN So it’s not going to happen in a hurry?
JUDITH Yeah, but it is happening. That’s the point. And we’re doing it together.
CORIN All right. On another issue of multinationals, you came in with a hiss and a roar about petrol taxes.
CORIN When do we get some answers on that?
JUDITH This month.
CORIN This month?
JUDITH This month.
CORIN Are we being ripped off by the petrol companies?
JUDITH Oh, wait and see. But I can tell you this – I am very pleased we’ve done the study.
CORIN So it’s worthwhile?
JUDITH It’s worthwhile. It’s a worthwhile study, and I think you’ll find it very interesting.
CORIN All right. You’ve had your feet under the desk for a few months now in these new roles. Are these roles you want to continue with if your party is to be re-elected? Or do you want more?
JUDITH Well, I really love these roles, and I don’t mind. I’ve always taken on any role that I’ve been asked to take on. But I must say it’s lovely to be back in the commercial sphere and tax sphere, because I am primarily a–
CORIN Because some might see this as a bit of a demotion for you after you put your hand up and took on Bill for the leadership.
JUDITH I would’ve thought not. I long asked John Key for the Revenue portfolio, because I have a master’s degree in Tax, which is not highly unusual. And Bill gave this me, so I’m really excited. And the Energy and Resources is such an incredibly interesting area.
CORIN If National was to lose, would you go back into the mix for leadership? Is that something you aspire to?
JUDITH It’s not something I aspire to. What I really want to do is to help us to win, and I’m right behind the leader, and we’re doing really well.
CORIN Well, we know you obviously were keen, because you went into the race last time. So would you be back in the mix?
JUDITH (LAUGHS) I’m not even interested in it. What I’m interested in is doing the best job I can, and that’s what I’m doing.
CORIN Judith Collins, thank you very much.
JUDITH Thank you very much, Corin.