The market was designed to look competitive
Winston Peters used his State of the Nation address to announce NZ First will campaign on structurally separating the electricity gentailers, the four companies that generate power and sell it back to you through their own retail arms. “Under the current system,” Peters said, “the most expensive generator sets the price for all electricity, even electricity that costs peanuts to generate.”
The big four, Genesis, Contact, Meridian, and Mercury, control roughly 90% of generation. The Electricity Authority’s 2022 retail market analysis found five large gentailers held 84% of the retail market, with retail gross margins ranging from $19.50/MWh to $56.57/MWh. Independent retailers buying on the volatile wholesale spot market face a structural disadvantage that no amount of switching campaigns will fix.
The result is predictable. Combined 2024 profits exceeded $1.08 billion: Contact at $235 million (up 85%), Mercury at $290 million (up 159%), Meridian at $429 million (up 300%), and Genesis at $131 million (up 29%). The Spinoff reported combined profits of $1.85 billion across the major players, with the uncomfortable arithmetic that the New Zealand public owns 51% of these companies but comprises 100% of their customers.
Businesses are already paying the price
This is not an abstract competition policy debate. Stewart Group documents energy costs rising 600% since 2021 for some manufacturers, with companies departing as a result. Their analysis calls the current arrangement “an indirect tax disguised as market returns” and describes the government’s 51% ownership stake in three of the four gentailers as “a major conflict of interest where the referee owns most teams in the league.”
That conflict is the part nobody in government wants to talk about. The Crown collects dividends from Meridian, Mercury, and Genesis. It also sets the regulatory framework those companies operate under. Every dollar shaved off electricity bills is a dollar off the government’s balance sheet. Reform is not costless for the reformer.
Regulators tried lighter-touch fixes and got nowhere
Peters is not the first to propose structural separation. In 2024, the Electricity Authority and Commerce Commission established an Energy Competition Task Force. The Authority had initially advised ministers on investigating “level playing field measures, such as operational separation and nondiscrimination rules for gentailers.” That structural reform option was dropped from the final mandate before work even began.
The fallback was non-discrimination rules requiring gentailers to offer independent retailers the same supply terms as their own retail arms. Gentailers pushed back hard, while independent power companies argued the proposals entrenched market power rather than addressing it. The pattern repeats: propose structural reform, face resistance, retreat to lighter-touch intervention, watch concentration persist.
The counterargument is not just lobbying
The honest version of this story requires acknowledging that separation might not work. Richard Meade, Adjunct Associate Professor at Griffith University’s Centre for Applied Energy Economics and Policy Research, argues the conventional diagnosis is wrong. His point is that combining generation with retailing manages the enormous risks standalone generators or retailers face on volatile wholesale markets, helping gentailers finance investment in new generation. Separated generators and retailers each add their own profit margin, which “can accumulate to more than what gentailers charge”.
Meade also warned that non-discrimination rules could backfire: if gentailers must offer independent retailers the same prices as their own retail arms, they may simply raise those internal prices, lifting costs for everyone.
Geoff Bertram from Victoria University of Wellington accepts the market is broken but is clear-eyed about what reform requires: “Bringing down prices and profits will mean writing down the asset values of the gentailers, the national grid, and the lines companies, at the expense of their shareholders.” Before the 1986 reforms, Bertram notes, the electricity system largely achieved reliable supply at the lowest possible price. The current structure is a policy choice, not a law of nature.
Peters has the diagnosis right but the prescription is missing
The policy detail is thin. Peters has said separation would “mean more power stations. More renewable energy. More competition. More resilience” but has not specified whether he means operational separation, ownership separation, or something else entirely. Implementation is contingent on “the majority we get on election night.”
Deputy leader Shane Jones was blunter: “the gentailers know that the game is up.” Peters himself acknowledged the power companies are already preparing to fight, saying they are “no doubt having meetings now as we speak.”
He is probably right about that. These are companies with $1 billion in annual profits and every incentive to litigate any forced restructuring into the ground. The question is whether NZ First, a party that may or may not be in government after the next election, has the political stamina for a fight that every previous government and regulator has walked away from. The diagnosis, that businesses are paying a structural premium to a market designed to look competitive while concentrating power in four hands, is correct. Whether Peters is the one to fix it is another matter entirely.
Sources
- RNZ: Winston Peters announces proposal to overhaul energy sector in State of the Nation speech (2025-09-21)
- RNZ: Winston Peters acknowledges power companies may challenge split plan (2025-09-22)
- Electricity Authority: New Zealand’s electricity retail market – retail gross margins (2022)
- Stewart Group: Our Broken Energy Market – When Bigger isn’t Better (2025)
- The Spinoff: Huge profits for energy gentailers are probably bad, right? (2026-02-27)
- Newsroom: Power market task force drops gentailer separation idea (2024-10-17)
- BusinessDesk: Gentailers push back over Electricity Authority’s level playing field (2025)
- Inkl: To fix broken electricity markets, stop promoting the wrong kind of competition (2025)
- 1News: Power bills could rise if plan to cut them backfires (2025-08-24)