Source: Electricity Authority
The Electricity Authority Te Mana Hiko (the Authority) is moving to level the playing field between the four large gentailers (Genesis, Contact, Meridian and Mercury) and independent participants in the electricity market.
The level playing field options were developed by the Authority, the Commerce Commission Te Komihana Tauhokohoko (Commerce Commission) and the Ministry of Business, Innovation and Employment under the Energy Competition Task Force.
The Authority has today confirmed three targeted interventions to boost competition, build confidence in the wholesale market, and ultimately give New Zealanders better access to affordable electricity.
“Confidence in the market underpins healthy retail competition and affordable power prices,” says Electricity Authority Chair Anna Kominik. “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.”
The Authority is progressing these pro-competition interventions at pace, so changes could be in place by mid-2026:
1. 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. The issues and options paper is now available for feedback.
2. 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.
3. 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 Authority is also ready to intervene with urgent regulation if there is a sudden material reduction in the supply of shaped hedges, to maintain the market while an enduring solution is considered. By fixing costs when energy demand is highest, shaped hedges help retailers manage risk and keep prices stable and affordable, even in tight market conditions.
“Targeted and timely interventions are needed to encourage new generators and independent retailers to enter, grow and compete in the market. 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 said.
In February, the Authority sought feedback on options to level the playing field between the gentailers and independent generators and retailers, receiving over 40 written submissions and meeting with more than 20 submitters. The Authority is continuing to consider the broad range of views shared as it develops draft Code amendments for consultation and will respond to those views in the consultation paper.
“We know from the conversations we’re having that some feel that 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,” says Kominik.
“New Zealand’s electricity market is undergoing significant change, and the Authority has a clearly signposted programme of proposed reforms and adjustments underway that keep the focus on security of supply and affordability. The Authority is prioritising practical measures with clear benefits and time for input to ensure policy changes are robust and in New Zealand consumers’ long-term interests,” says Kominik.
Commerce Commission Chair and Task Force member Dr 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. We don’t expect these proposed changes would materially increase gentailers’ costs but do expect they would lead to more choices and lower power prices over the long term.”
About our proposed approach to regulating the wholesale electricity (super-peak) product
The Authority is now seeking feedback on options for regulating the super-peak product, including market making on the over the counter (OTC) market as its preferred approach, should voluntary trading fail to deliver sufficient competition.
These ‘shaped’ hedge contracts enable retailers to offer stable prices to consumers while managing their exposure to volatile morning and evening peak wholesale prices. This increases competition in the market, brings more power into the system, provides more choice for consumers, and puts downward pressure on retail prices. This type of product is becoming increasingly important as the electricity system becomes more reliant on renewable generation and spot market pricing becomes more volatile.
Voluntary trading in the super-peak product began in January this year and while it has already improved availability and pricing, the market remains shallow, with limited seller diversity and low trading volumes. To address this, the Authority is proposing to set clear expectations for robust participation in voluntary trading by the gentailers, who own over 95% of flexible generation (which backs shaped hedge contracts), and signals that regulation may follow if trading does not improve. The Authority is also ready to intervene with urgent regulation if there is a sudden material reduction in the supply of shaped hedges.
About our review of market making
Market making is a service where a participant will quote prices for two sides of a market (ie both buys/bids and sells/offers) in a particular derivative, with a specified amount of volume and a specified bid-ask price spread. This service provides liquidity by ensuring there is always volume available to be bought or sold.
In 2022, the Electricity Authority introduced mandatory market making in the electricity futures market, with the following objectives:
- To support a robust and reliable forward price curve.
- To increase the availability of risk management contracts for market participants.
This framework was implemented through a combination of four regulated market makers (the gentailers) and one commercial market maker, who are required to provide certain volume of buy and sell offers for specific electricity futures products.
The Authority is now undertaking a policy review of market making arrangements to ensure that current settings remain appropriate and aligned with our market making policy objective.
As part of this review, we will also explore potential changes to strengthen market making services and ensure they continue to support a resilient and efficient electricity market. The Authority will consult on these proposals in November 2025.
About the Energy Competition Task Force
The Energy Competition Task Force was established by the Commerce Commission Te Komihana Tauhokohoko and Electricity Authority Te Mana Hiko, with the Ministry of Business, Innovation and Employment, in August 2024 to investigate ways to improve the performance of the electricity market.
The Task Force has been considering eight initiatives that will encourage more and faster investment in new electricity generation, boost competition, enable homes, businesses and industrials to better manage their own electricity use and costs, and put downward pressure on prices.
