The government is set to unveil long-awaited reforms to the energy sector, and unions are calling on it to put the gentailers back in public hands, writes Hayden Donnell in today’s extract from The Bulletin.
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A long-awaited announcement
The government is set to announce an energy sector shakeup today, more than a year after commissioning a review of the country’s electricity market, and months after a group of large power users made a call for urgent reform to stem businesses’ economic bleeding. Former energy minister Simeon Brown ordered the market review from Frontier Economics in August last year following a winter power crisis which cost the economy an estimated $300 million and precipitated factory closures. Its results – and the government action in response – will be announced by Brown’s successor Simon Watts, barring any last-minute schedule changes.
What will this actually mean though?
As reported by Stuff’s Tom Pullar-Strecker, the changes are expected to be “surgical” rather than radical. Watts has previously ruled out a full overhaul of the energy sector, telling The Post in August the market is fundamentally “doing what it should do”, and knocking back calls to unwind the 1990s Bradford reforms which set up the country’s big four power gentailers.
Instead of full structural reform, the minister will reportedly announce a suite of moves aimed at reducing the risk of energy crunches like the one that caused the winter 2024 power crisis. According to Pullar-Strecker, those may include support for a Port of Taranaki upgrade enabling it to import LNG to alleviate the country’s gas shortage. The government may also require power providers to hold more generation in reserve to better respond to changes in electricity demand.
Go big or go home, unions say
Other groups say surgical changes to the sector aren’t going to cut it. The Council of Trade Unions has called on the government to put the big four power companies back into public hands, using its dividends to gradually purchase the 49% of shares it doesn’t already own. Its call is being supported by the Green Party, though Labour’s Megan Woods has been noncommittal, saying all options for reducing power prices need to be on the table but she’d “need to be convinced that simply different ownership of the status quo would achieve that”.
An alliance of businesses and consumer advocacy organisations have also called for fundamental changes to the market. In July, the Auckland Chamber of Commerce, the NZ Manufacturing Alliance, Consumer NZ, and the Major Electricity Users Group took out a full-page ad in the Sunday newspapers calling the country’s electricity sector “broken”. They said the gentailer model restricts the type of competition that would deliver fair prices.
Some commentators are suggesting slightly less drastic tweaks. As reported by Shanti Mathias for The Spinoff, Powerswitch’s Paul Fuge thinks the solution for high electricity prices could lie in better incentivising power companies to invest in generation.
Gentailers urge caution
Of course, not everyone thinks the energy market needs a complete overhaul. Contact Energy chief executive Mike Fuge has urged the government not to “fight yesterday’s battles”, telling Stuff the factors that caused the 2024 winter power crisis have been addressed by the sector.
However, the pressure on households and businesses remains. Power prices climbed 11% in the first half of the year as gentailers raked in hundreds of millions in profit. Meanwhile, according to research reported by Newsroom’s Marc Daalder earlier this month, household energy costs were $800 million higher in 2024 than two years earlier. At the time, Watts told Daalder “fundamental” reforms were coming. We’ll see just how fundamental they are soon.
