Our Broken Energy Market: When Bigger isn’t Better

There are three things on people's minds currently - rates invoices, insurance premiums, and power prices. They’re essential services where consumers have little choice, and providers face little competitive pressure. (1)

In the game of New Zealand’s energy market, the house always wins – furthermore, the house is government-owned, and participation isn't optional. Our state-controlled gentailers (the companies generating electricity AND selling it to consumers) have created an oligopoly, undermining business certainty and leaving regions vulnerable to catastrophic power failures.

The Centralisation Trap

When Cyclone Gabrielle devastated Hawke's Bay in February 2023, communities were plunged into darkness for weeks. The centralised grid proved helpless against nature's fury while gentailers counted profits from undamaged regions.

This isn't isolated failure - it's the predictable consequence of centralisation designed for corporate convenience rather than resilience.

New Zealand's gentailers - Genesis Energy, Mercury Energy, Meridian Energy, and Contact Energy - control approximately 85% of generation and retail markets (2). The government owns 51% stakes in three companies (3), creating a major conflict of interest where the referee owns most teams in the league.

It’s a state-protected illusion of choice. As power bills rise $10 monthly from April 2025 due to regulated increases (4), customers can supposedly switch providers. But when all major providers coordinate similar increases, what “choice” do we have?

The Hidden Tax

These companies reported record profits in 2024:

• Contact Energy $235 million (up 85%)

• Mercury NZ $290 million (up 159%)

• Meridian Energy $429 million (up 300%)

• Genesis Energy $131.1 million (up 29%)

Combined, they posted over $1.08 billion (5) whilst manufacturers close plants due to unaffordability.

NZ was built on low-cost energy to attract global businesses. Now, with PM Christopher Luxon acknowledging our power prices are "among the highest in the western world" (6), manufacturers are departing. Energy costs rose a widely cited 600% since 2021 (7), the cause sited for major closures.

The gentailer oligopoly represents an indirect tax disguised as market returns. When state-owned enterprises deliver billions to government coffers (8), politicians avoid raising tax rates whilst extracting revenue from every household through inflated electricity prices.

The Single ICP Stranglehold

Here's the regulatory elephant in the room: the "one ICP (Installation Control Point) or provider" rule that locks consumers into single-provider dependency. This artificially prevents households and businesses buying electricity from multiple sources, eliminating true competition at the consumer level.

Kāinga Ora received an exemption from this rule in 2023-24 (9), proving competitive choice is possible when bureaucratic barriers are removed. If state housing can access competitive electricity markets, why can't everyone?

The Distributed Solution

The Electricity Authority recently announced new rules requiring gentailers to offer "non-discrimination" in hedge contracts - fixing the symptom whilst ignoring the disease. Critics warn these measures could backfire, pushing up electricity prices as gentailers raise internal costs rather than lowering external ones (10).

Regulatory tinkering sidesteps the fundamental problem: vertical integration allows gentailers to manipulate both sides of the market.

Real reform requires abandoning the failed "bigger is better" approach. With the stroke of the legislative pen, the current "one ICP or provider" rule could be swept away, allowing consumers to decouple from single-provider dependency.

True energy democracy means communities generating power through local renewable resources and selling excess back to competitive retailers who don't control generation.

Thinking ahead (and learning from the past)

The Commerce Commission's approval for Contact Energy's acquisition of Manawa Energy (formerly Trustpower) represents another step towards market concentration. This feels eerily reminiscent of Progressive Enterprises' acquisition of Woolworths (NZ) Ltd in 2002 - where promised efficiencies never materialised for consumers (11). Instead, we got a duopoly making $430 million per year in excess profits - $1 million per day at consumers' expense (12). This grocery duopoly now ranks among the world's most expensive markets, with prices 3% above the OECD average (13).

Despite the Government's latest announcements about "levelling the playing field" (14), industry critics worry these measures won't crack down hard enough on the big four. The proposed changes preserve the fundamental structure that creates the problem.

New Zealand faces a choice: continue protecting state-owned energy giants that extract maximum profits from captive consumers… or embrace distributed energy systems with clear separation between generation and retail.

When communities control their energy future, the gentailers lose their power over New Zealand's economy. It's time to choose freedom over monopoly, resilience over vulnerability, and competition over state-protected oligopolies.

References

1. RNZ. “The essential item that's 900% more expensive than in 2000.” 27 August 2025. https://www.rnz.co.nz/news/business/571151/the-essential-item-that-s-900-percent-more-expensive-than-in-2000

2. Consumer NZ. "Profits surge for New Zealand's gentailers." 31 August 2023. https://www.consumer.org.nz/articles/profits-surge-for-new-zealand-s-gentailers ; North & South Magazine. "Power Play." September 2024.

3. Wikipedia. “New Zealand Electricity Market.” Accessed 27 August 2025.
   https://en.wikipedia.org/wiki/New_Zealand_electricity_market

4. Commerce Commission. "Electricity Lines and Transmission Charges: What are they, why are they changing and what does this mean for your electricity bill?" 2025. https://comcom.govt.nz/regulated-industries/electricity-lines/electricity-lines-and-transmission-charges-what-are-they,-why-are-they-changing-and-what-does-this-mean-for-your-electricity-bill

5. Electric Kiwi Times. "Big Four Gentailers Profiting at the Expense of Kiwi Households." 31 July 2024.

6. Energy Connects. "NZ Takes Urgent Action as Energy Price Rises Hurt Businesses." 26 August 2024. https://www.energyconnects.com/news/utilities/2024/august/nz-takes-urgent-action-as-energy-price-rises-hurt-businesses/

7. Industry Edge. “How is NZ’s Energy Crisis Impacting the Pulp, Paper and Packaging Industry?” 1 September 2024. https://industryedge.com.au/how-is-nzs-energy-crisis-impacting-the-pulp-paper-and-packaging-industry/

8. New Zealand Herald. "Mercury sees average 9.7% power price rise from April." 25 February 2025.

9. Electricity Authority. "Exemptions granted for innovation trial." 1 April 2024. https://www.ea.govt.nz/news/general-news/exemptions-granted-for-innovation-trial/

10. Stuff. "Will new rule big four electricity companies really bring down power bills?" https://www.stuff.co.nz/politics/360795971/will-new-rule-big-four-electricity-companies-really-bring-down-power-bills

11. Commerce Commission. "Progressive applies for clearance to acquire Woolworths." 16 May 2001. https://comcom.govt.nz/news-and-media/media-releases/archive/progressive-applies-for-clearance-to-acquire-woolworths ; Commerce Commission. "Commission releases Progressive/Woolworths decision." 26 July 2001. Commerce Commission. "Market study into the grocery sector: final report." 8 March 2022. https://comcom.govt.nz/news-and-media/news-and-events/2022/grocery-market-study-recommends-changes-to-improve-competition-and-benefit-consumers ; Consumer NZ. "Petition: stop misleading supermarket pricing." Accessed 12 August 2025. https://campaigns.consumer.org.nz/supermarkets

12. Commerce Commission. "Market study into the grocery sector: final report." 8 March 2022. https://comcom.govt.nz/news-and-media/news-and-events/2022/grocery-market-study-recommends-changes-to-improve-competition-and-benefit-consumers ; Consumer NZ. "Petition: stop misleading supermarket pricing." Accessed 12 August 2025. https://campaigns.consumer.org.nz/supermarkets

13. RNZ. "NZ grocery prices higher than OECD average, Commerce Commission says." 4 August 2025. https://www.rnz.co.nz/news/business/569172/nz-grocery-prices-higher-than-oecd-average-commerce-commission-says ; NZ Herald. "Grocery Action Group hits out at supermarkets as Kiwis keep paying high prices for groceries." 7 August 2025.

14. Electricity Authority. "Energy Competition Task Force looks to level the playing field between the gentailers and independent generators and retailers." August 2025. https://www.ea.govt.nz/news/press-release/energy-competition-task-force-looks-to-level-the-playing-field-between-the-gentailers-and-independent-generators-and-retailers/

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Nick Stewart
(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 422

Value vs Values: The True Cost of Short-Term Thinking

The weekly budget trap cuts across all wealth demographics. It makes you think, “I can’t afford those $200 boots that will last ten years. I’ll just buy the $40 ones that last eight months, because they cost less now.”

But this isn’t financial logic; it’s a fallacy. You spend more and get less value. The mathematics are brutal: those $40 boots become $600 over a decade, whilst the quality pair would have saved $400.

It’s easy to just blame pay cheques or tax brackets, but this is typically more about human psychology and cash flow management than poverty. Even high earners often live month to month as lifestyle creep sets in, optimising for immediate affordability rather than lifetime value (i).

Are you buying what you need, or filling the void?

Somewhere along the way, we transformed shopping from necessity into recreation. Buying essentials became buying feelings—the momentary rush of acquisition, the brief satisfaction of choice, the fleeting sense of control. We end up with wardrobes full of clothes we don't wear, garages packed with gadgets we don't use, and credit card bills that remind us monthly of our attempts to purchase happiness.

The cruel irony is that this consumption-driven approach to fulfilment often leaves us feeling more empty, not less. Each purchase promises to be the one that finally satisfies, yet the satisfaction fades faster than the credit card bill arrives (ii).

The Temu temptation.

Consider the Temu phenomenon: millions of consumers buying directly from manufacturers they'll never meet, purchasing products with no meaningful recourse if things go wrong, no customer service to speak of, and no ongoing relationship beyond the transaction. You buy with a click, guilt-free, because you never have to look anyone in the eye.

This represents the ultimate evolution of consumer culture—a generation that has learnt to decouple purchasing decisions from moral considerations entirely. The vendor is invisible, the supply chain is opaque, and the true costs are externalised to people and places you'll never encounter.

What does thinking short term really cost us?

When we optimise for immediate affordability over long-term value, we inadvertently support systems that externalise their true costs.

• Environmental degradation occurs when cheap goods mean cutting corners on sustainability.

• Labour exploitation thrives when low prices depend on underpaid workers in poor conditions.

• Community erosion accelerates when bargain-hunting drives business to the lowest bidder, often far from home.

This is where frameworks like B Corp certification become valuable—not as the solution to everything, but as a useful validation tool. When you're trying to align your spending (and your financial activity in general) with your values, B Corp status provides third-party verification that a company actually operates according to stakeholder-focused principles (iii).

Critics might dismiss this shift towards values-driven business as merely the world "going woke," but this misses the fundamental point. Perhaps it's time to recognise that whilst things haven't exactly gone to the dogs, this is simply the new normal.

Better business practices, stakeholder consideration, and community responsibility are essential adaptations to a world where consumers increasingly demand authenticity and accountability. Furthermore, they’re invoking responsibility for the long-term consequences of today’s decisions; in life and in finance, some careful forward thinking is always a good idea.

The case for prioritising value

The fundamental question isn't whether to buy cheap or expensive goods—it's whether our economic system should encourage decisions that prioritise immediate savings over long-term value (as it currently seems to). When short-term thinking is economically rationalised across all income levels, the issue isn't individual choices – it’s the systems that make those choices feel necessary.

This is where holistic financial planning becomes essential. Understanding the true lifetime cost of our decisions—whether buying boots or choosing business partners—helps us align our spending with our values whilst building genuine long-term wealth. It's not just about budgeting for today; it's about creating a financial strategy that reflects who we want to be and the world we want to live in (iv). 

The goal isn't to shame anyone for buying what they can afford today. It's to build a world where what people can afford today also serves their interests tomorrow—and doesn't come at someone else's expense.

References

(i) Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
(ii) Ariely, D. (2008). Predictably Irrational: The Hidden Forces That Shape Our Decisions. HarperCollins.
(iii) B Corp Movement. (2024). About B Corps. Retrieved from https://www.bcorporation.net/
(iv) Jackson, T. (2017). Prosperity without Growth: Foundations for the Economy of Tomorrow. Routledge.

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Nick Stewart
(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 421