Who Benefits is a year-long Newsroom project examining lobbying and influence.
Our current investigation – Power Play – into the electricity industry’s influence will show over the next five days:
- The electricity industry helped formulate the National Party’s Electrify NZ policy
- Lobbying of government officials through a gentailer-heavy industry group, began just days after the National-led coalition Government was formed
- The industry worked on policy proposals with officials for months before other parties, including Māori/iwi, were invited to targeted consultation
- Initially, ministers ordered officials to work specifically with the energy sector
- Central and local government officials pushed back
- Under direction from ministers, policy changes made were strongly directive and enabling of renewable power stations, including re-consenting, but the industry didn’t get everything it asked for
- And Who Benefits? Faster, easier consents for power stations give greater certainty to generator-retailer companies but they’re under no compulsion to build them until demand increases and they stack up financially
- A steep drop-off in investments by majority government-owned electricity companies led to huge dividend payouts being dished out to the state and private shareholders
- Those high dividend levels have continued as power prices rise to levels not seen since before the Bradford reforms in the 1990s
Ahead of what some are calling the electricity election, in Part 1 we explain the market’s structure and why promises of greater competition and lower prices are coming back to bite:
On March 22, Winston Peters did what he did best – announce a big idea to grab headlines.
In front of the party faithful at Tauranga’s Atrium Conference Centre, the pin-striped New Zealand First leader launched an election policy to break up the big power companies into generators and retailers.
“You’ve been paying far too much for power,” Peters said. “The current system is designed to make maximum profits for power companies, and everyday Kiwi families and businesses are the ones paying the price.”
Government intervention in the power industry isn’t a new idea.
Back in 2013, opposition parties Labour and the Greens announced an election policy (for the following year) to establish a disruptive new agency called New Zealand Power to become the single buyer of wholesale electricity. Regulating prices would cut household bills, the parties said, but the National government dismissed it as a Soviet-style intervention.
About the same time, former prime minister John Key’s government was partially privatising three Government-owned power behemoths – Genesis, Mercury (then Mighty River Power) and Meridian – by listing them on the stock exchange, NZX.
Peters’ criticism of the electricity system this year is echoed by others: that a profit motive has prevented spending on new generation, and, soon after the trio’s NZX-listing, the companies were more interested in paying dividends to shareholders (including the Government) than building new, renewable power stations.
Asked about New Zealand First’s power plan, Act’s energy spokesperson Simon Court tells Newsroom the policy “is effectively lifted from a Green Party member’s bill”.
Green MP Scott Willis, who submitted the bill, says: “The Green Party has long called for a move to clean, affordable, home-grown renewable energy and I’m pleased to see New Zealand First joining our call.”
Peters’ pledge has helped shine a political light on an industry in the news and on people’s lips. A poll conducted in April for watchdog organisation Consumer showed energy issues will affect how 55 percent of people vote. A high-powered discussion in Queenstown in May continued that momentum.
The latest inflation figures, for the year to July, show household electricity costs increased 12 percent – on top of an 8.4 percent increase the previous year.
Political parties are responding, with National and Labour announcing loan schemes for solar installations (Labour is also offering subsidies), while Opportunity has also jumped aboard.
The Green Party’s energy policy package includes loans but goes further, suggesting a new publicly-owned entity “invest in new renewable generation and contract firming capacity”.
At the party’s pre-election AGM in Auckland, at which a one-year moratorium on new AI data centres was announced, leader Chlöe Swarbrick said: “Only once we have secured an affordable power supply for New Zealanders and the workers building things in towns all across this beautiful country, maybe then we could consider entertaining the expansion of Silicon Valley.”
Away from politics, increasing power prices are having very real consequences.
Agnes Magele, the coordinator for Auckland Action Against Poverty, says struggling whānau are having to make difficult trade-offs because of high power prices – choosing between spending money on their children’s schooling, paying rent, or paying for power.
“Kids are sleeping in cold houses,” she says, before taking a swipe at the healthy profits being made by publicly listed power companies. “The hardships that the people in the community are going through, that’s why they’re able to make profit.”
Households aren’t the only ones suffering.
The country’s manufacturing base is being squeezed, costing hundreds of jobs, and high electricity prices are being blamed, at least in part.
Think about recent factory closures announced by Heinz Wattie’s and McCain. Or the closure of the Oji pulp mill in Penrose, or Winstone Pulp International’s two central North Island mills, or Oji’s paper mill in Kinleith.
Labour Party candidate Craig Renney, policy director and economist for the Council of Trade Unions, says: “In the absence of action we’re going to see more people lose good, well-paid jobs, and in provincial towns around the country, because we don’t have a plan to deliver the energy that we need.”
Paul Fuge is the manager of the Powerswitch website for Consumer, a non-profit advocacy group established in 1959. He laments that some people can’t afford what is an essential service, and that high prices are becoming a drag on the economy.
“For any country as energy-rich as New Zealand, it doesn’t seem right.”
To understand how we got here – and to weigh up if Winston Peters’ break-up of the electricity sector is necessary – we need to go back to the genesis of the modern electricity market.
That’s the reforms of the 1990s, when energy minister Max Bradford continued the break-up of state company Electricity Corporation of New Zealand (ECNZ).
The political arguments for the reforms are captured in a 1998 pamphlet headed ‘Electricity reform: a better deal for consumers’, in which Bradford promised “lower electricity prices and a real choice of who supplies your electricity”.
Accompanying Bradford at the bottom of the front page is a familiar face – Winston Peters, then the deputy prime minister and treasurer. (Until August of that year, that is, when he was sacked by prime minister Jenny Shipley for “unacceptable” comments over the sale of the Crown’s shareholding in Wellington Airport.)
The ministers’ blurb, set on a blue background, says electricity generators and power companies had made “great strides” in recent years.
Transpower, the national grid operator, was separated from ECNZ in 1994, and, two years later, Contact Energy was spun off as a competitor company.
But the ministers complained there was still no “effective” competition – “and competition is essential”.
Key to the government’s plan was a break-up – separating power businesses into those selling electricity (retail companies) and those maintaining poles and wires (lines companies).
Then, ECNZ would be split into three competing state-owned enterprises – Meridian, Genesis, and Mighty River Power – each owning and operating their own power stations.
“Just as we saw real choice arrived in the petrol industry, only competition will deliver lower prices for electricity consumers,” said the quote attributed to Bradford and Peters.
“The 1998 electricity reform package will provide New Zealanders with lower prices, more choice, and the certainty that their lights will come on at the flick of a switch.”
The 1998 book ‘People, Politics and Power Stations, a history of electric power generation’, produced by ECNZ and the Department of Internal Affairs’ historical branch, said electricity’s contribution to the country’s infrastructure and economy was vital.
In a rather rosy explanation, it was explained the break-up of ECNZ meant wholesale electricity prices would move from the “political context” to be determined by supply and demand, with increased competition.
“But the objective of providing electricity to New Zealanders at the lowest possible cost remains: it is the means of doing so that has changed so radically. Market mechanisms have replaced state monopoly.”
Debate about the efficacy of the wholesale electricity market shakeup began immediately.
Lewis T Evans wrote in his 2006 book, ‘Alternating Currents or Counter-revolution?’: “Concerns persist that the price-setting process is dominated by a handful of generators who are argued to possess considerable ability to manipulate power prices, if only under certain circumstances such as when hydrological reserves are low and/or when transmission constraints arise.”
Foremost among those generators were the incumbents that both produced electricity and sold it to retail customers; the so-called gentailers.
As mentioned, today that’s the Big Four – NZX-listed Contact, Genesis, Meridian and Mercury – the latter three still 51 percent Government-owned. Together, the companies are valued (or market capitalisation in business parlance) at $38 billion.
Almost 30 years on, have the promises made by Bradford and Peters been realised?
Not according to Winston Peters in 2026.
He told the Tauranga crowd in March that the current system – a system of which the New Zealand First leader was an architect, arguably – was dominated by the big companies that generate most of the electricity and then sell it back to themselves.
“That makes it very difficult for innovative and low-cost retailers to enter the market – which means prices stay high.”
Peters is right. The four NZX-listed gentailers – the three energy giants part-owned by the Government and entirely NZX-listed Contact – overwhelmingly dominate the market, for both generation and supply.
An OECD report released in May says our electricity system is increasingly exposed to security and affordability problems because of a declining gas supply and the variability of hydro-electricity.
Who Benefits is a project tracking and disclosing lobbying and influence. If you know where influence is being brought to bear, email us in confidence at: trublenzOIA@protonmail.com
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Sector competition “remains constrained by gentailer dominance”, the report says. “Planning and gentailer governance reforms are essential to accelerate investment and ensure a secure, affordable, and sustainable electricity system.”
Critics also take aim at the electricity market’s structure.
The wholesale electricity price is set by the most expensive form of generation. What this means is even if a company is generating power from relatively cheap hydro dams, if, say, the coal and gas-fired Huntly Power Station is running, it sets the market price much, much higher. So there’s a financial incentive – across the industry – to keep the most expensive form of electricity generation going.
(The wholesale market, comprised of spot and hedge markets, is where electricity is bought and sold. Electricity prices on the spot market are calculated every half-hour, while retailers can enter hedge contracts to smooth out price volatility.)
Let’s recall the promise of the Bradford reforms: an electricity market with lower prices and increased competition, accompanied by certainty of supply – a big concern for a country relying on rain and snow-melt to replenish large hydro-electricity lakes.
Today, the large gentailers control more than 90 percent of the country’s power stations, or “installed electricity generation capacity”, and, at the end of last year, they had nearly 90 percent of retail customers on their books.
There are obvious problems – with controversial solutions.
Certainty of electricity supply for our hydro-dominated system is so important that, last year, Meridian, Mercury, Genesis and Contact announced a strategic coal stockpile for the Huntly Power Station. Now, the Government is pursuing a controversial and costly plan for a liquified fossil gas import terminal.
Geoff Bertram, a visiting scholar at Victoria University of Wellington’s School of History, Philosophy, Political Science and International Relations, has been observing and commenting on the electricity industry for decades.
He describes the market as “almost completely locked up by a cartel that’s totally anti-competitive”. “Entry is virtually impossible on the basis of a good remuneration.”
According to market watchdog Consumer, a non-profit advocacy group established in 1959, residential electricity prices are, when adjusted for inflation, 65 percent higher than they were when the retail market was created in 1999 – which is problematic when, for many households, pay rises haven’t kept pace.
‘Fierce’ competition
The industry mounts a staunch defence of the status quo.
Mike Roan, Meridian Energy’s chief executive, says his company competes “fiercely” against other gentailers, and more than 30 other electricity retailers and about 80 other generators.
“We’re a highly competitive sector, with more retailers relative to our population size than the UK and Australia. The new generation and products we’re developing will deliver more affordable electricity for customers over time.”
(The picture painted by Roan doesn’t allow the reader to fully appreciate the dominance of the Big Four, however. In February last year, the gentailers and their subsidiary retailers, like Meridian’s Powershop, supplied 89 percent of retail customers. The Flick Electric and Frank Energy brands have been retired by Meridian and Genesis, respectively.)
What will bring electricity costs down, Roan says, is new generation and a changing mix of supply – “removing more expensive thermal fuels and increasing hydro storage so it can play a greater role as a firming solution”.
Roan points to a Government-commissioned review of the electricity market published last year, undertaken by Australian-headquartered Frontier Economics.
The authors said they didn’t have any material concerns about competition. There were a large number of market participants, low barriers to entry and exit, and “evidence of positive outcomes for customers, with retail costs steady or falling and extensive innovation in market offers”.
The Frontier report said: “Rather than misusing market power, we believe the gentailers are likely acting to protect residential customers at the expense of their own margins.”
Roan says there’s a “clear incentive” for Meridian, and all market participants, to ensure the country has the electricity it needs, and it’s “as affordable as possible”.
“However, any developer also needs to achieve a return on investment, and that is difficult when demand is flat, as it was from 2010 until only a few years ago.”
Electricity Retailers’ & Generators Association chief executive Bridget Abernethy says the country’s electricity market has been subject to extensive independent scrutiny. She also refers to the Frontier report and its associated peer reviews.
“The (Frontier) review concluded that the current market design provides incentives for renewable investment, that the market structure supports effective competition, and that there is a strong pipeline of new investment being connected to the system.
“This is reinforced in the National Policy Statement for Electricity, where the Government has endorsed an ongoing market-based approach.
“The Electricity Authority and Commerce Commission continue to actively monitor competition, and have the tools to act where issues arise.”
The Frontier Economics report wasn’t just a bland endorsement.
The authors recommended the Crown intervene in the industry by establishing a new agency to secure and sell thermal generation, guaranteeing back-up generation when hydro is low, and filling expected shortfalls.
Another suggestion was removing electricity from the Emissions Trading Scheme because it’s “imposing additional costs to customers without delivering a corresponding environmental benefit”.
Both recommendations were rejected by the Government – a Government that, the Frontier report said, “prioritises stable and higher dividend payments [from power companies] to fund public budgets or social programmes”.
(The report also suggested divesting its entire shareholding in the listed gentailer companies which, the authors argued, would give the companies greater flexibility to raise capital, make larger investments and respond “more dynamically” to market demands. When the report was released in October last year, Finance Minister Nicola Willis revealed she’d written to Genesis, Mercury and Meridian to confirm “the Crown is prepared to support capital funding requests for strategic and commercially rational investments that support energy security”.)
Let’s revisit a quirk of New Zealand’s wholesale electricity market: that thermal generation (think gas and coal) sets the price. As previously mentioned, even if a tiny bit of gas is used to generate electricity, all the renewable suppliers, like hydro stations and wind farms, get paid the higher gas price.
Therefore, there’s a financial incentive to store your water until thermal energy, generated from the likes of Genesis’s Huntly Power Station, enters the system and the price increases. That can lead to higher margins and profits.
A Boston Consulting Group report – commissioned by Contact, Genesis, Mercury and Meridian – published last year said even though gas generation was less than 10 percent of total supply, it influences prices 70 percent to 90 percent of the time.
Renney, the Labour candidate for Wellington Bays and economist, says: “We seem to have built a market mechanism around just keeping Huntly online because it generates the most expensive electricity in the country.”
If a huge amount of new electricity generation was built, he says, the demand for Huntly would reduce, and with it electricity prices.
Consumer, the market watchdog, says about 80 percent of the generation assets relied on today were built before the market was existed – “and prices were lower”.
“The system clearly isn’t working in terms of bringing new electricity generation on board,” Renney says, leading to something he calls a “market equilibrium around scarcity”.
In 2024, Newsroom reported the sharemarket floats of Meridian, Genesis and Mercury in 2013 and 2014 coincided with a steep drop-off in spending on new renewable generation.
Edward Miller, a researcher at the Centre for International Corporate Tax Accountability and Research, says total dividends paid by the partially Government-owned trio, and NZX-listed Contact Energy, crossed the billion-dollar mark in 2015 “and haven’t fallen below that ever since”.
But, Miller says, “that’s money that should have gone into new renewable energy”.
“If we had such massive investment going into renewables over the past couple of decades, as we’ve seen in other countries, then it’s highly likely we wouldn’t need to be talking about an LNG terminal at all.”
Meridian’s Roan responds: “The suggestion that New Zealand hasn’t been building enough generation is simply wrong. Over the last 15 years more than $10 billion has been invested in mostly renewable generation which lifted the renewable generation share of national supply from around 65 percent to 88 percent (in normal hydrology).”
There is a recent surge in new renewable projects.
The Electricity Authority’s generation investment pipeline webpage highlights 292 projects on the go, involving 111 developers, with a total capacity of 45.78 gigawatts.
Roan, of Meridian, says: “For context, New Zealand’s total existing generation capacity in New Zealand is around 11 gigawatts.”
The investment boom was brought on because of increasing electrification of homes and businesses, he says, and the certainty brought about by the 20‑year deal for the Rio Tinto-owned aluminium smelter at Tiwai Point in mid-2024.
“At around 13 percent of national electricity demand, uncertainty over whether the smelter would stay or close created significant uncertainty around market demand,” Roan says.
He maintains dividends paid to investors haven’t had any impact on the “level of or timing of” investments in renewable electricity generation.
Another big power story of 2024 occurred in August, as wholesale electricity prices soared, bringing pulp mills grinding to a halt.
The Electricity Authority and Commerce Commission quickly established the Energy Competition Task Force – something referred to by Abernethy, of the Electricity Retailers’ & Generators Association.
In a letter to the taskforce in February this year, Consumer chief executive Jon Duffy noted residential retail power prices had increased by 12 percent since it was established, and three retail brands had left the market.
The reforms proposed by the taskforce were “deeply disappointing”, Duffy said, and don’t constitute “the substantive, consequential reform required”.
“The regulators appear overly committed to maintaining the status quo and insufficiently willing to challenge entrenched interests.”
There has been progress.
From July 1, the gentailers must comply with non-discrimination obligations imposed by the Electricity Authority, which state the big companies can’t favour their own business units when providing other electricity retailers with hedge contracts for spot prices.
Fuge, of Consumer, welcomes the move but says more reform is required. “This in itself won’t solve things but it’s a step in the right direction.”
Luke Blincoe is chief executive of Supa Energy, a solar and battery start-up, who used to head independent power retailer Electric Kiwi.
He says it’s logical Meridian’s Roan would defend the status quo “given the size of the profits that the incumbents are making”.
“If the market was working the Government wouldn’t have to intervene to build a natural gas terminal. To me that’s a massive example of the market not delivering what the market is supposed to deliver.”
Market structures and settings haven’t really evolved since the Bradford reforms, Blincoe says.
“Really there’s been a level of inertia in the market and draw your own conclusions about who the beneficiaries are for that and who that might be.”
So, to the key question: who benefits from this situation?
Dividends from Meridian, Genesis and Mercury have flowed into the state’s coffers. That’s helpful, says Miller, the researcher at the Centre for International Corporate Tax Accountability and Research. “But overall, the primary beneficiaries are the private shareholders that control the way those companies operate.”
Paul Fuge, of Consumer’s Powerswitch website, still has the 1998 press release put out by Bradford about the reforms.
“Consumers, our members, are really pissed off because they remember that, and they were promised something,” Fuge says.
“So consumers are saying, well, how’s this market helped me? How has this helped my business? Who’s this market for?”
His organisation believes in markets, he says, and it understands the long lag time involved in these “risky” investments, and the duty for companies, and directors, to be careful with shareholders’ money.
But in a well-functioning electricity market, high prices should spur construction of more renewable power stations. “The flaw is the people who are most likely to build those power stations – who have the capital and ability to do it – are the same people who benefit from the high price.”
The inflation figures reveal the electricity sector’s increases have been the highest since the late 1980s. That was before the Bradford reforms.
Is this how competition was meant to look? In a word: No.
In May, an OECD report on New Zealand said: “Despite high shares of renewable energy and a strong pipeline of new renewables generation, electricity prices are structurally too high due to falling gas supply and under-investment in firming capacity.”
The same week, the Commerce Commission released a report on the state of competition. It named “electricity, gas, water and waste services” as an industry with the least competition.
Fuge, of Consumer, says: “There’s lots of analysis and advice but no one seems to be prepared to make consequential change.”
Which brings us back to Winston Peters, who’s suggesting “structural separation” – splitting the big companies into generation and retail arms.
Newsroom asks Peters to resolve some apparent contradictions.
In his Tauranga speech he railed against economic privatisation “madness”, and, from parliamentary debates in 2012 and 2013, it’s clear he was bitterly opposed to the “mixed ownership model” under which the big power companies were partly floated on the stock exchange.
But he has been criticised for overseeing, in a past government, the sale of Auckland International Airport shares, calling it “popular capitalism in action”, and Contact Energy. (Peters responded, in Parliament, by pointing out New Zealand First walked out of Cabinet over the proposed Wellington Airport sale.)
Isn’t he being inconsistent or contradictory? Does he expect people to overlook the decisions of previous governments he’s been a senior member of?
“There are no contradictions,” Peters says. “I have been clear in all of my speeches about energy reform where New Zealand First’s stance was and where the reforms went wrong.”
Referring to his speech in March, the New Zealand First leader says: “We have made it quite clear that the neoliberal approach to these issues whereby the government flogs off national assets is one of the root causes of the utter failure in our industries, in this case our power companies.”
Ever the politician, Peters doesn’t answer all of our questions.
One he neglects is: Given his opposition to the mixed ownership model, wouldn’t re-nationalising the power companies be a more consistent position?
Also, he doesn’t say if splitting up the generator-retailer companies would be a bottom line in coalition negotiations.
Now we’ve set the scene, our next Who Benefits piece delves into the electricity industry’s influence on those in power through its connections to politicians, having an involvement in formulating at least one party’s election policy, and having a direct line to government officials.
