Businesses and consumer groups appeal to PM for urgent action on electricity

Sunday, 13 July 2025

Energy Minister Simon Watts has signalled he expects the Government to make decisions on the power market by the end of September.

Organisations representing businesses and consumers have urged Prime Minister Christopher Luxon to take urgent action to “reshape the energy market”.

The appeal, in an open letter published in Sunday newspapers, said the sector had failed to serve regular New Zealanders and businesses.

Signatories included the Auckland Business Chamber, headed by former National Party leader Simon Bridges, Consumer NZ, the Major Electricity Users Group and the Employers and Manufacturers Association.

The electricity market was dysfunctional and the status quo could not be allowed to continue as it was holding back the country’s productivity and driving up the cost of living, they said.

“We’re running out of gas, and new electricity generation just isn’t being built at the rate we need,” they said.

Energy Minister Simon Watts also said in April that the status quo in the industry was not good enough.

He is understood to be currently considering advice from British consultant Frontier Economics on a possible shake-up of the industry. He told The Post late last month that he expected decisions would be made by the end of September.

John Harbord, chairperson of the Major Electricity Users Group, said the Frontier report was a key reason why the business and consumer groups had decided to write to the prime minister now.

“The timing is really around the Frontier Economics report now being in front of ministers.”

The last major attempt to reform the power sector was made by former Labour minister David Parker, but fell by the wayside after the 2014 election.

The advice from Frontier appeared to be very tightly-guarded, he said.

Spot market power prices have eased in recent weeks as a result of heavy rain that has helped refill hydro lakes to normal levels for the time of year.

But to avoid getting stung by price spikes, most big businesses and electricity retailers buy power on longer term contracts, which Harbord said were still far too expensive.

Electricity for use in New Zealand during the winter of 2026 is currently trading at about $230 a megawatt-hour on the Australian futures market.

Harbord said the price should be about $100/MWh to reflect the actual long-run cost of generating power.

There is little unity even among critics of the electricity market on what needs to be done to improve it, however.

Harbord noted the Northern Infrastructure Forum, another of the letter’s signatories, had drawn up a “10-point plan” that referenced the structural separation of gentailers into separate generation and retailing businesses.

The Major Electricity Users Group would be putting forward its own 10-point plan soon and it would not be putting structural separation as one of its “top 10 priorities”, he said.

Former Labour minister David Parker drew up a comprehensive plan to overhaul the electricity market in 2013 that would have seen it return to a partly planned market and which he touted as likely to lower prices, but that was shelved after the party lost the election the following year.

Watts said last month it was important the Government dealt with the “underlying root cause problem”, which he described as in recent years being about “dry years” and the fact that “we need thermal energy to keep the lights on”.

Modelling by electricity market operator Transpower suggests power firms could have too little generating capacity to meet demand next winter, considering only their existing capacity and power plant developments that are set in stone.

A further crunch is possible around 2032, it has cautioned.

Proposals to import liquefied national gas to alleviate gas shortages, including for use by power companies that burn gas to generate electricity, have so far not advanced beyond the drawing-board.