New Electricity Rule Levels Playing Field for Smaller Retailers, Aims to Cut Prices

The reform, he said, is an important step toward lowering costs for Kiwi households and businesses grappling with rising energy bills.

Energy Minister Simon Watts has welcomed a new rule change approved by the Electricity Authority that is expected to boost competition in the power sector, giving smaller retailers a fairer chance to compete with established industry giants. The reform, he said, is an important step toward lowering costs for Kiwi households and businesses grappling with rising energy bills.

Tackling Rising Energy Costs

With the cost of living continuing to weigh heavily on New Zealand households, energy prices have emerged as a central concern. “We know many Kiwis are struggling with the cost of living, with rising energy prices putting more pressure on their budgets. That’s why this Government is taking competition in the electricity market seriously—because more competition means Kiwis can have access to more affordable electricity,” Watts said.

Ending Self-Subsidisation by Big Power Companies

Currently, New Zealand’s major electricity companies operate across the supply chain, both generating and retailing electricity. This has allowed them to cross-subsidise by offering their own retail arms discounted access to the electricity they generate. Smaller companies, lacking the same vertically integrated structure, have long argued that this practice makes it harder for them to compete fairly.

The new non-discrimination rule will prohibit such practices by requiring large power companies to sell electricity at the same rate to all retailers. In effect, this removes the advantage of self-subsidisation and ensures smaller retailers can access electricity at the same price as their larger rivals.

Watts explained: “The new rule will mean they have to offer their generation at the same rate to everyone and can’t offer themselves discounts. This will level the playing field by giving smaller companies a better chance to compete and will mean Kiwi consumers have more choices.”

Boosting Competition and Investment

The Minister emphasised that healthy competition is critical not just for affordability, but also for long-term energy security and innovation. “Healthy competition is essential to give us the reliable and affordable electricity we need to power our homes and businesses. The changes announced today will encourage investment in new generation and allow all players to compete on a level playing field. This will lead to better economic outcomes, including for our large-scale industries.”

By strengthening the position of smaller retailers, the Government hopes to encourage a more diverse and innovative electricity sector. Increased competition could incentivise investment in renewables, distributed generation, and emerging energy technologies, all of which are vital as New Zealand moves toward a more sustainable energy future.

Origins of the Reform

The new rules stem from the work of the Energy Competition Task Force, which was set up in August 2024 following the winter power crisis that raised concerns about affordability, supply reliability, and market fairness.

The Electricity Authority will undertake a consultation later this year on the final design of the non-discrimination rule, seeking input from industry stakeholders, consumer groups, and the wider public.

Looking Ahead: Wider Market Reform

While welcoming the announcement, Watts stressed that this is only one part of a wider reform programme. “While today’s announcement is a positive step, we remain deeply concerned about the lack of affordability and competitiveness in the electricity market. I expect the Authority to deliver more efficient, competitive, and reliable electricity markets.”

He also confirmed that he has received the final report of the electricity markets performance review, which examines ways to strengthen the sector and ensure it supports economic growth. The findings are currently under Cabinet consideration, and further announcements are expected once recommendations have been reviewed.

Building a Fairer and More Reliable Energy Future

For now, the Government hopes the new rule will give smaller retailers a genuine opportunity to expand their market share, fostering the competition needed to drive down prices and improve service quality for consumers.

“The goal is clear: more competition, lower costs, and a stronger, fairer electricity market for all New Zealanders,” Watts said.