A new OECD report urges the New Zealand government to reexamine separating “gentailers” suggesting New Zealand families and businesses would be better off if the electricity market functioned more competitively.

The OECD has encouraged the Government to use upcoming reviews to consider more substantive reform: “despite previous reforms to improve competition, electricity futures prices are high and above the threshold considered sustainable for the economy in the long run. These reviews should reexamine separating the generation and retail operations of large electricity companies to boost competition in the futures market and provide industry with more hedging options.”

“There is broad consensus now across international experts, business, and consumer advocates that something needs to be done about the state of our energy sector. Until the rules are changed, we will continue to see issues with supply, business shuttering due to high power prices, and Kiwis struggling to pay their bills when we should have much cheaper electricity,” says Chief Operating Officer Margaret Cooney.

“The key to lower power bills, and a secure energy supply is ensuring that competition spurs more investment in generation and smart retailing. New entrants need to be able to enter the market and invest in growing it if we want to decarbonise and grow our economy affordably.

“The current settings mean gentailers are able to manage their pricing between their generation and retail arms, often selling energy to themselves for less than they sell to independent retailers.

“This creates a barrier to entry for energy retailers to enter the market because they don’t have access to competitive prices. It also provides a barrier to new generators because there are so few independent retailers to sell to. This hurts businesses and households.

“Paul Conway, the Reserve Bank's Director of Economics and Chief Economist has highlighted that non tradable inflation (inflation that is caused by domestic rather than international factors) remains persistently high. A number of economists have emphasised the need for competition reform across the economy.

“We have already seen this happen on our shores with the separation of Telecom into Spark and Chorus. That led to new retailers entering the telecommunications market and offering new products and competitive prices.

“New Zealanders are currently facing another year of significant electricity prices and power shortages. The Government needs to act on the recommendations of international experts and make sure the electricity market delivers for New Zealand,” says Margaret Cooney.

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