Electricity regulator to create ‘level playing’ field for power retailers

Tuesday, 26 May 2026

The country’s big four gentailers will no longer be able to advantage their own retail arms when selling power they generate into the retail market, the Electricity Authority says.

The regulator said it would amend its rules from the beginning of July to introduce “non-discrimination obligations” to help level the playing field.

The way the reform will be implemented is that Contact Energy, Genesis Energy, Mercury and Meridian will need to supply risk management contracts, so-called hedge contracts, on an even-handed basis to buyers.

Former energy minister Simon Watts first announced the intention to bring in the reform in February last year.

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However, the authority subsequently indicated it would water down the proposal by only requiring the gentailers to sell power that they did not need to serve their own retail arms on an even-handed basis.

That prompted a backlash from smaller power retailers and a partial re-think from the authority.

Electricity Authority acting chair Erik Westergaard said the reform it had settled on would “strengthen competition, increase transparency, and provide information the authority can use for monitoring and enforcement”.

“The combined effect of these initiatives is to encourage market confidence, which is a key enabler of the investment and innovation that improves consumer choice and puts downward pressure on prices,” he said.

The four gentailers would also need to submit six-monthly “Retail Price Consistency Assessments” to the authority to demonstrate that their retail price offers were justifiable in relation to their expected cost of electricity supply, and that an equally efficient retailer could compete with them on price, he said.

“We should see downward pressure on prices and more options for consumers over time as a result of increased confidence and competition.”

The Electricity Retailers’ and Generators’ Association, whose members include the big four power firms, argued in March that the reforms risked increasing costs to consumers by creating incentives for the gentailers to “price conservatively”, and said they would take the best part of a year to implement.

But chief executive Bridget Abernethy said in a short statement today that its members had “engaged constructively throughout this process and will continue to do so”.

Energy Minister Simeon Brown said small retailers relied on hedge contracts with the big gentailers to offer competitive prices.

“Until now, the gentailers have been able to favour their own retail arms over the competition.

“Today’s announcement will ensure a fairer, more competitive electricity market, so all New Zealanders can benefit from secure, affordable energy when they need it,” he said.

Electricity Authority chief executive Sarah Gillies acknowledged last year, however, that the retail reform would “not be a silver bullet” for competition problems in the power market.

“This is not going to fix everything that everybody has concerns about,” she said.

Commerce Commission chairperson John Small said then that as well as putting power retailers on a level playing field, the reform would make it easier for businesses other than the big four gentailers to stack up new investments in renewable generation and power storage.

But the gentailers make the bulk of their profit margin in the wholesale market, from generating hydro power.

Figures released by Meridian Energy in February showed that in the six months to the end of December, it made $671m of its total energy margin of $708m in its wholesale arm, and only $37m in retail.

The shares of the major gentailers barely moved when Watts originally announced the intention to introduce the level playing field reforms last year and also showed no obvious reaction on the confirmation of the details this morning.

Shares in Meridian, the largest of the power firms, were trading up 3 cents at $5.90 shortly before 10.30am, valuing the company at nearly $16 billion.

Contact, Genesis and Mercury were also trading higher, reflecting a generally positive start to the day across the NZX’s listed stocks.

NZ First has proposed going a step further than the retail market reforms, by campaigning to force Contact Energy, Genesis Energy, Mercury and Meridian to split into separate generation and retail arms.

Margaret Cooney, chief executive of Octopus Energy, which has championed the need for a level playing field in the retail market, said the Electricity Authority’s decision was “a step forward”.

It was consistent with its most recent consultation document, after it toughened up its approach by ditching the idea that the rules might not apply to power that gentailers sold to their own retail arms, she said.

But she said it was too soon to give marks to the reforms, and she still had concerns about how they would be applied and monitored.

The big four companies had too much discretion over how they allocated costs between their retail and generation arms, which could lead to them claiming costs within their generation businesses that should really sit within their retail arms, she said.

Cooney said she was also troubled by a more general get-out clause that allowed the gentailers to avoid providing hedge contracts to competing retailers on equal terms if there was “an objective reason not to”.

Brown would not comment directly on whether the Government had a hand in influencing the authority to toughen its stance, after its initial policy wobble, but said he was “very pleased” with the outcome.

“They make those decisions as the authority, but I’ve been very clear in my expectation I want a more competitive market,” he said.