New electricity market rules aim to boost competition

The Government says new electricity market rules will create a more “level playing field” for smaller power retailers by preventing the country’s four largest generators from favouring their own retail businesses.

Energy Minister Simeon Brown says the changes, announced by the Electricity Authority, are aimed at improving competition and helping deliver more secure and affordable electricity for households and businesses.

“Creating a level playing field in the electricity market plays an important role in this Government’s focus on delivering secure, affordable energy for every household and business,” Brown says.

“From 1 July this year, the four big gentailers, Contact, Genesis, Mercury, and Meridian, will no longer be allowed to give their own retail arms a better deal than independent retailers when it comes to managing wholesale electricity price risk.

“This means smaller retailers can compete on fair terms, which is good news for every Kiwi household and business looking for a better deal on their power bill.”

The Government says smaller retailers rely on hedge contracts with large generators to manage exposure to wholesale electricity price spikes during periods of peak demand, such as morning and evening usage periods.

Under the new rules, gentailers will be required to:

• Treat competing retailers the same way they treat their own retail businesses when supplying hedge contracts, unless there is an objective reason not to.

• Submit annual compliance plans to the Electricity Authority.

• Demonstrate every six months that retail pricing reflects the expected cost of electricity so an equally efficient competitor could compete with them.

The Government says penalties for serious breaches are also expected to increase, subject to legislation passing.

Maximum penalties would rise from $2 million to as much as $10 million, three times the commercial gain, or 10% of a company’s turnover, whichever is greatest. The higher penalties are expected to come into force in 2027.

“A level playing field will encourage more competition, more investment and more innovation in the electricity sector. That means better prices and more choice for Kiwis,” Brown says.

He says the reforms build on a broader programme of energy sector initiatives, including fast-track consenting for renewable energy projects, support for energy security investments, work on a potential LNG facility, measures to strengthen hedge contract trading during peak demand periods, improvements to electricity distribution performance, and changes to support rooftop solar uptake and fairer solar export pricing.