Why splitting gentailers won’t bring power prices down

Thursday, 16 April 2026

OPINION: NZ First leader Winston Peters might have been hoping the announcement that his party would campaign to break up the country’s big four gentailers into separate generation and retail businesses would make a bigger splash.

It ended up being rightly overshadowed by the Middle East conflict and the potentially more significant development that the Government had decided to refer the Lake Onslow pumped hydro scheme for fast-tracking.

The fact deputy leader Shane Jones had announced the policy twice before probably didn’t help, nor the lack of detail on how the split might be implemented or under what legal authority.

Regardless, it’s hard to get super excited about this policy initiative.

Read more:

• Shane Jones says NZ First will campaign on breaking up big power firms

• Country’s largest power firm nearly doubles operating profit, says market ‘working well’

• Electric Kiwi says proposed patch to watered-down power reform still misses the mark

The Electricity Authority, on the instruction of former Energy Minister Simon Watts, is already consulting on “a non-discrimination rule” intended to ensure Meridian, Mercury, Contact and Genesis don’t advantage their own retail arms when selling their power.

If implemented properly that should have a similar effect to a structural separation although admittedly - given the track record of the EA’s cosy relationship with the major generators - that’s a big “if” and the current signs don’t look great.

Or maybe the low-key reaction reflected an appreciation that structural separation would be a bit of a red herring.

The short-cut to understanding the limited impact of the NZ First election policy is to look at page 29 of a presentation that the country’s largest power firm, Meridian Energy, gave to investors in February, when it released its latest set of interim results.

Meridian reported a massive $708 million “energy margin” for the six months to the end of December.

The figure represents the difference between its costs generating electricity, and the price it was able to sell that electricity for.

But the presentation also showed that only $37m of that energy margin was earned within its retail arm, with the other $671m attributable to its wholesale (generation) arm.

The operational separation being explored by the EA, or the structural separation endorsed by NZ First, could make the already relatively low-margin retail electricity market more competitive - and there’s no harm in that.

But it wouldn’t directly impact the massive profits the gentailers are able to make from generating power in the first place under current market arrangements.

In Meridian’s case, it addresses the “$37m issue” - if that is even a problem - not the “$671m issue”.

Writing in The Post, Meridian chief executive Mike Roan said New Zealand’s electricity market was already “very competitive”.

That might sound cheeky or even downright ridiculous given the huge profits the gentailers have consistently reported.

But there is a narrow sense in which Roan is correct.

As he noted, when justifying his comment, we have more electricity retailers per capita than either the UK or Australia.

Peters’ planned power-market break-up would put them on a level playing field, trimming any fat that remained.

But it would not directly impact the ability of the generation arms of big four power firms to earn excessive profits by charging the fossil-fuel price for electricity they are able to generate for next-to-nothing from free water and the hydro dams they inherited from the Crown.

No harm in NZ First’s policy perhaps, but don’t expect it to do much to encourage investment in the energy storage the country needs or to bring prices down.

Real change would involve diving deeper.