Without extensive monitoring resources – which the Electricity Authority does not have – it’s unlikely the regulator will know whether the country’s largest four energy companies are following its proposed new rules, the chief operations officer of energy supplier Octopus Energy NZ says.
This comes as the Electricity Authority (EA) announced “three targeted interventions” which aim to boost competition and build confidence in the wholesale market by levelling the playing field between Mercury, Genesis, Contact and Meridian, and independent power companies.
On Tuesday, the Electricity Authority announced “three targeted interventions” which were developed by the Energy Competition Task Force:
Options for requiring gentailers to trade minimum volumes of the new wholesale electricity hedge product introduced in January to help independent participants manage their risk. Regulation would only apply if voluntary trading volumes do not grow
Code changes necessary to introduce mandatory non-discrimination obligations for the four large gentailers, with draft Code amendments published for feedback in October. This will provide greater confidence that the gentailers’ wholesale businesses are not treating independent retailers differently to their own retail businesses
A review of ‘market making’ in the electricity futures market to ensure it promotes healthy competition and transparency. This will be published for feedback in November
The Electricity Authority hopes these can be in place by mid-2026.
‘Unlikely to be workable’
“The proposals announced by the EA are unlikely to be workable – principles are effectively a statement of what should be happening, but on their own they will not stop bad behaviour,” Octopus Energy NZ chief operations officer Margaret Cooney says.
“The risk management practices of large electricity generators are complex and opaque, which the EA acknowledges makes it hard to determine when market power is being exercised.”
Cooney says the timeline is also disappointing as any possible action on discriminatory behaviour won’t be likely till 2027.
While the EA does have powers it can use urgently, Cooney says: “This is a peacetime approach appropriate when conditions are benign, not at a time when supply shortages are leading to deindustrialisation of the economy and households facing ongoing cost of living pressures from rising energy costs.”
Cooney says a transparent solution is needed such as “requiring arms-length operation of the retail and generation businesses, with separate management teams required to operate the businesses as if they were individual companies”.
“This would make conduct transparent and easier for the EA to monitor, while providing the basis for genuine confidence in the functioning of the wholesale market.”
Promoting increased competition
The Energy Competition Task Force was initially set up by the Electricity Authority and the Commerce Commission to boost competition and encourage more investment in new generation.
Electricity Authority Chair Anna Kominik says confidence in the market underpins healthy retail competition and affordable power prices.
“We are concerned that aspects of the wholesale market may be eroding the confidence required for independent players to compete, and we are acting to address these concerns.
“Targeted and timely interventions are needed to encourage new generators and independent retailers to enter, grow and compete in the market,” Kominik says.
“These initiatives will promote healthy competition, retail innovation and investment in the sector – all of which are essential to deliver a reliable and affordable electricity supply.”
Kominik says she has spoken to people who feel regulatory change is not happening fast or hard enough.
“The proposals being announced today target measures that can be rolled out in months, not years, driving timely progress while ensuring all parties can participate in and contribute to the process.”
Commerce Commission Chair and task force member John Small says these initiatives are designed to work together to promote increased competition in the sector.
“Combined they increase transparency for market participants transacting with the gentailers and improve access to the wholesale electricity contracts they need.
“They would also give new players and investors confidence to enter the market and encourage the development of innovative new products and services.”
Small says the task force doesn’t expect the proposed changes to materially increase gentailers’ costs, but does expect they will lead to more choices and lower power prices over the long term.
Energy Minister Simon Watts says the large power companies can currently cross-subsidise themselves because they both produce energy and sell it.
“The new rule will mean they have to offer their generation at the same rate to everyone and can’t offer themselves discounts. This will level the playing field by giving smaller companies a better chance to compete and will mean Kiwi consumers have more choices.
“Healthy competition is essential to give us the reliable and affordable electricity we need to power our homes and businesses,” Watts says.
“The changes announced today will encourage investment in new generation and allow all players to compete on a level playing field. This will lead to better economic outcomes, including for our large-scale industries.”
Watts says the Government still remains deeply concerned about the lack of affordability and competitiveness in the electricity market.
“Looking ahead, I have also received the final report of the electricity markets performance review, which looked at how we can improve the market to support economic growth and ensure access to reliable and affordable electricity for consumers.
“I will have more to say on the review’s outcomes in due course, once Cabinet has given careful consideration to its findings and recommendations.”