The New Zealand government is considering intervention in the national electricity market as power prices continue to climb, affecting businesses and households. Associate Energy Minister Shane Jones signalled potential measures on 8 August 2024, citing structural issues and profiteering in the sector.
“For a long time, I’ve felt there are some significant deficiencies in the actual structural makeup of our wholesale energy market,” Jones told Radio New Zealand.
“The Minister of Finance, along with the Minister of Energy, are getting some urgent work done to look at what short-term measures we can take if indeed there are some deeper structural failings in the rules and the regulations governing the energy market.”
Power Prices Soar Amid Hydro and Gas Challenges
Wholesale electricity prices have more than doubled since August 2024, driven by persistently low hydro lake storage levels, which remain at just 47% of the average, and ongoing natural gas shortages.
The Electricity Authority’s data continues to highlight these factors as the main contributors to the price spike. The impact has rippled through industries, with companies like Penrose paper mill having to consider closures.
Vector CEO Simon Mackenzie has long voiced concerns over affordability, stating,
“We have long been calling for the minister of energy to set a whole-of-system plan because we don’t see any entity has overall stewardship or custodianship of the energy system.”
These price hikes have come amid the ongoing challenges of transitioning to a greener energy model, with limited gas supplies, dry weather, and rising demand continuing to exacerbate the situation.
Former energy executive Roger Sutton described the situation as a “perfect storm” and suggested that the crisis is more nuanced than some critics claim. “The gas industry spent about a billion dollars in the last three years looking for gas, and it just happens that nearly all those wells they drilled were dry,” he said.
Government Accusations and Proposed Actions
Several months after the initial electricity price hikes in August 2024, the pressure on the government to act remains high. Jones has accused major energy companies of exploiting the crisis, saying,
“The energy generators aren’t operating in a competitive manner. There are provisions under the existing electricity legislation that enables the Crown to use a code of conduct which has legal force to change their behaviour.”
The government is still exploring legal measures and the possibility of importing liquefied natural or petroleum gas as a temporary fix, with government stakes in Meridian Energy, Mercury NZ, and Genesis Energy, however, not everyone supports intervention.
Mercury CEO Vince Hawksworth cautioned that it could destabilise the market and impede the country’s renewable energy targets.
“There is a real risk with any intervention that we accidentally undermine our broader goals and jeopardise the sector’s ability to double renewable generation by 2050,” he said. Hawksworth advocates for a broader, “whole-of-system view” to navigate the energy challenges ahead.
Calls for Long-Term Planning
The government’s energy strategy remains under fire, with the Labour Party continuing to criticise its lack of a clear plan for future energy security. Former Energy Minister Megan Woods pointed to the cancellation of the New Zealand battery project as a critical misstep, claiming it was a missed opportunity to stabilise supply and lower long-term electricity costs.
“They bowed to industry and they cancelled the very thing that could have given the security of supply and, in the long term, cheaper electricity prices,” she said.
Industry stakeholders, including Vector’s Mackenzie, continue to highlight the need for a more comprehensive approach.
“The industry since the Bradford reforms has been served okay, but we’ve been saying for probably about the last five or six years that’s past its used-by date,” he noted, stressing the urgency of updating the energy system to meet future demands and environmental challenges.