Why competition task force move is only a partial fix for the electricity sector

Tuesday, 26 May 2026

Independent electricity retailers and, perhaps, independent generators of solar power, look set to benefit most from competition reform.

This analysis, first published in March 2025, has been republished ahead of the introduction of “non-discrimination obligations” in July

ANALYSIS: The Electricity Authority and the Commerce Commission received a warm response from some of the power sector’s most vocal critics when they suggested a major reform to the industry.

But whether the change will lead to much of a reduction in power prices is not a simple question.

Electricity Authority chief executive Sarah Gillies says there is no silver bullet for the sector’s challenges.

Energy Minister Simon Watts responded “no way” when asked whether it was “job done” in terms of getting the right market settings.

“We’re attacking this on multiple fronts and at multiple levels,” he told The Post.

So what progress has been made?

To recap, a “competition task force” comprised of the two regulators has recommended forcing the big four power firms, Meridian, Contact, Mercury and Genesis, to abide by a new “anti-discrimination” rule.

The proposal — probably the biggest shake-up for the sector since the “Bradford reforms” of the electricity industry in the late 1990s — should remove their built-in competition advantage in the retail market.

The big four gentailers would be barred from favouring their retail arms when entering into “hedge contracts”, which in effect set the price which retailers can buy power from generators under long-term contracts.

There’s no real need to know anything about hedge contracts to gauge the potential significance of the move for power retailers.

The response from independent retailers Octopus and Electric Kiwi, which have been screaming about the state of competition in the industry for years, says all anyone would need to know.

Electric Kiwi chief executive Huia Burt described the proposal as a “game changer” and “potentially a seismic shift in opportunity for our economy and for all energy consumers”.

Margaret Cooney, chief operating officer of British-owned power retailer Octopus Energy, was only a little less cock-a-hoop.

Energy Minister Simon Watts: “We’re attacking this on multiple fronts and at multiple levels.”

She was wary of the detail but described it as the “start of action that is needed to get competition working more effectively and bring investment in generation and smart retailing, driving down the cost of electricity for households and businesses”.

But while a level-playing field in the retail market may be great for small retailers, it doesn’t necessarily follow that consumers will see many gains, in the form of cheaper power for example.

A bit like “unbundling” in the telecommunications market before the days of the ultrafast broadband network, “non-discrimination” could just mean being able to buy the same poor value product from more places.

The question of most interest to consumers may be whether the reform would do anything to reduce excess profits in the market for generating electricity — or rather the “markets” for generating electricity.

And in that distinction lies the trap.

Solar power company Lodestone Energy was upbeat about the task force’s recommendation.

Lodestone, whose early investors included Xero founder Rod Drury and Trade Me founder Sam Morgan, operates three of the largest solar farms in the country, with lots more planned.

“These market improvements will increase availability of electricity contracts during the peak period of the day and enhance competition between independent retailers and gentailers,” it said in a statement on the task force’s plan.

“This move will ensure consumers are getting access to the very best electricity price available and a wider variety of choice.”

It’s enthusiasm for the “non-discrimination” proposal would seem encouraging.

Discussing the proposed reform, Commerce Commission chairperson John Small said “we see it as influencing and stimulating competition at ‘both ends’; retail for sure, but also new generation”.

And it’s true the reform could benefit independent power retailers who are rushing to build solar farms.

Commerce Commission chairperson John Small says the trend of gentailers buying up power from independent generators illustrates the need for change.

The challenge they face is that they can only supply power to the market in daylight hours, not so much in the morning and evening peaks.

But if independent electricity retailers can buy “peak” power from the big thermal and hydro generators on the same terms as Meridian, Contact, Mercury and Genesis’ retail arms, then they should at least be assured a fair price for that power.

The upshot should be that independent generators of solar and wind power are at no disadvantage to the big gentailers in the market for building solar and wind farms.

Small says the fact that the gentailers have been buying-up power from independent generators “goes to exactly why” the task force has proposed the non-discrimination clause.

But even if the retail power market and the markets for building and operating new renewable power plants are competitive, with low-margins prevailing, that doesn’t mean that top-up “peak” power is going to get more plentiful or cheaper.

And it is in the market for that type of generation — the market for on-tap hydro power in particular, “stored power” really, sometimes called “firming” power — that the big four gentailers have been able to earn very high margins, which they merrily pass on to other retailers and all consumers.

None of that seems to be lost on share market investors in the big four power firms, who haven’t been rushing to sell-up since the task force came out with its recommendation, or indeed on the Commerce Commission or, probably, the Government.

Small believes the increased price transparency that should exist in the future era of wholesale “non-discrimination” will also make it easier for businesses other than the big four gentailers to stack up new investments in flexible generation and power storage.

Sarah Gillies, chief executive of the Electricity Authority, says there are investors currently waiting on the sidelines that want to come to New Zealand and build “long duration batteries”.

But battery power is not cheap and the chance of consumers or businesses being able to buy electricity, including hydro electricity, at anything close its blended actual average cost of production appear as far away as ever.

Gillies accepts what the task force has proposed to date is just one piece of the puzzle.

“This is not going to fix everything that everybody has concerns about. Nothing is a silver bullet.”

Nothing that is currently loaded in the regulators’ revolver, that is.