New Zealanders will benefit from new rules announced by the Electricity Authority to create a level playing field in the electricity market, preventing the country's four biggest electricity generators from using their market power to squeeze out smaller competitors, Energy Minister Simeon Brown says.
"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," Mr 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."
Around the morning and dinner-time peak, when households increase their power consumption, wholesale electricity prices spike. Small retailers rely on hedge contracts with the big gentailers to manage that risk so they can offer competitive prices to their customers. Until now, the gentailers have been able to favour their own retail arms over the competition.
The new rules will require gentailers to:
- Treat competing retailers the same way they treat their own retail arms when supplying hedge contracts, unless there is an objective reason not to
- Submit annual plans to the Electricity Authority showing how they will comply, and certify they are doing so
- Demonstrate every six months that their retail prices reflect the actual expected cost of electricity, so an equally efficient competitor can compete with them.
Subject to legislation passing, penalties for serious breaches will rise from a maximum of $2 million to up to $10 million, three times the commercial gain, or 10 per cent of a company's turnover, whichever is greatest. The higher penalties are due to be in place 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.
"This Government wants every home and business in New Zealand to have access to secure, affordable energy."
Today's announcement builds on a wide range of Government actions to fix the basics and build a more secure, affordable energy future for Kiwis, including:
- Fast-track consenting rules to encourage energy infrastructure construction, with four renewable energy projects already fast-tracked
- Supporting commercially rational capital funding requests by Genesis, Mercury and Meridian to improve energy security
- Undertaking a procurement process for an LNG facility to keep the power on when hydro lakes are low, and there is insufficient solar and wind power to meet demand
- Winter Energy Payments to superannuitants and recipients of main benefits
- Short and medium-term actions by the Energy Competition Task Force, including strengthening hedge contract trading designed to address super peak demand periods
- Actively seeking to improve the performance of electricity distribution - which comprises around a quarter of Kiwis' power bills
- Removing the need for building consents to install rooftop solar on existing homes and buildings, with solar connections up 16 per cent in the past year
- Developing new rules to ensure fairer rates for consumers putting power back into the grid from their solar generation at peak times.
"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."
