The Government says new electricity market rules will make it easier for smaller power companies to compete with New Zealand's biggest generators, in a move aimed at lowering prices for consumers.
Energy Minister Simeon Brown said the rules, announced by the Electricity Authority, would target the country's four major "gentailers" — companies that both generate and sell electricity — that operate in the wholesale market.
From July 1 Contact, Genesis, Mercury and Meridian would no longer be able to offer better wholesale pricing arrangements to their own retail businesses than they do to independent power retailers.
Smaller retailers often relied on hedge contracts with big gentailers to protect themselves from sharp increases in wholesale electricity prices during high-demand periods, such as mornings and evenings.
The new rules would require gentailers to treat competing retailers the same way they treat their own retail arms when supplying hedge contracts, unless there was an objective reason not to.
They would also be required to submit annual plans to the Electricity Authority showing how they will comply, as well as demonstrate every six months that their retail prices reflected the actual expected cost of electricity.
Brown said the new rules would create a "level playing field" in the country's electricity market.
"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," he said.
"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," Brown said.
Brown said tougher financial penalties would be put in place for companies that seriously breached the rules.
If legislation passed, maximum fines could increase from $2 million to as much as $10 million, or a percentage of the company’s turnover or financial gain.
Harsher penalties were expected to come into effect in 2027.
"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," Brown said.
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