Level playing field measures

Upcoming Open Closed Decision

Make a submission Due by 23 April 2025

Consultation

We are seeking your feedback on a proposal to introduce a new electricity industry rule called ‘mandatory non-discrimination obligations’ that the gentailers - Genesis, Contact, Meridian and Mercury – would have to follow.

This new rule would prevent the gentailers from giving preferential treatment to their retail arms for hedge contracts. Instead, they would have to make these contracts available to all industry participants on effectively the same terms as they use when trading internally. This would ‘level the playing field’ so independent retailers and generators can better compete with the gentailers.

This would give New Zealanders increased competition and ultimately give electricity customers more choices and lower power prices.

We have also released an update paper, following submissions, on the Authority’s risk management review. The risk management review findings form an important evidence base for our level playing field measures work.

We welcome feedback on our proposal by 5pm, Wednesday 23 April.

How to have your say

Electricity consumers are invited to read our guide and share your feedback by completing the survey on pages 5 and 6 of the guide.

Surveys can be:

digitally completed or scanned and emailed to levelplayingfield@ea.govt.nz
printed and sent to the Electricity Authority, PO Box 10041, Wellington 6143. (Mail must be post-marked on or before the closing date.)

You can also provide verbal feedback. Please email levelplayingfield@ea.govt.nz or call 04 460 8860 to arrange.

Industry participants and anyone wanting to provide more detailed information about our proposal are invited to read the options paper and complete the submission form.

Overview for consumers

Our proposed approach

We propose to introduce a three-step progressive approach. If the first step proves insufficient, the Authority could then impose other more prescriptive ways of levelling the playing field.

The steps are:

Step 1: Principles-based non-discrimination requirements.

Step 2: Non-discrimination requirements set out in detail.

Step 3: All gentailer-supplied hedge contracts must be traded through a regulated market, on equal terms for all buyers.

What is flexible generation?

Flexible generation is electricity generation that can quickly ramp up or down production on demand, enabling it to respond to the need for power at any given time.

Examples include hydroelectricity and thermal (gas and coal fuelled) power. Battery storage systems are also flexible. They provide flexibility to manage fluctuations in electricity supply due to variable renewable sources like wind and solar.

What is an electricity hedge contract?

An electricity hedge contract is a contract between two parties who are both exposed to volatile electricity spot prices. Typically, one buys at spot prices, and one sells at spot prices. The hedge contract between the parties reduces their net exposure to price volatility. For example, an independent retailer or large industrial electricity consumer might hedge with a gentailer.

Why do hedge contracts matter?

Hedge contracts matter because they support the financial viability of new independent retailers and generators in the electricity sector. For retailers, hedges provide insurance against very high spot prices. For new generators, hedges better enable them to enter into power purchase agreements (PPAs) with large users, which secures them a long-term revenue stream, opening up access to construction finance for new electricity generation projects.

Hedges are critical to enabling competition, which will get more power into the system, provide more choice to consumers and put downward pressure on electricity prices. The gentailers control the flexible generation that backs these hedges.

What would the impact on consumers be?

Households and businesses would benefit from increased competition in the retail electricity market, and an increased supply of wholesale electricity. More electricity supply and more competition will lead to consumers having more choices and downward pressure on power prices over the longer term.

How long before we see these benefits?

The first step of the changes we are proposing could be in place this year (subject to feedback). We expect that independent generators and retailers would take immediate confidence from such a change. We expect that confidence to flow through to innovation in the marketplace

Options paper

We want to boost competition in the electricity market by levelling the playing field between the four large generators with retail arms (the gentailers) and independent generators and retailers.

We’re seeking feedback on an options paper that supports the Energy Competition Task Force’s level playing field initiatives.