The rebate that wasn’t
From 1 April 2026, all 29 electricity distribution businesses were required to pay rebates to households and businesses that inject stored power back into the grid during peak demand. The policy was elegant in theory: reward battery owners for deferring expensive infrastructure upgrades, saving everyone money.
In practice, lines companies have applied “adjustment factors” that reduce peak-time battery rebates by up to 95%. Nearly three-quarters have chosen adjustment factors above 50%. Orion NZ calculates that peak-time battery injection saves it $0.30 per kWh but pays out only $0.06 after applying an 80% adjustment factor. The lines company captures $0.24 of every $0.30 of value created by someone else’s investment.
Josh Ellison from Rewiring Aotearoa argues the adjustment factors “tip the scales in favour of infrastructure investment over battery solutions, benefiting lines companies’ regulated asset base and earnings.” He notes that Australia manages 70% household solar penetration without network stability issues, while New Zealand sits at just 3%.
Follow the dividends
The incentive structure explains the behaviour. Lines companies earn regulated returns on their physical asset base. The bigger the base, the more they earn. Cheaper alternatives like batteries and smart charging threaten that model.
Vector, New Zealand’s largest lines company, paid out $250 million in dividends in the last reported year despite recording only $154.7 million net profit after tax. Northpower made $19.6 million after-tax profit but paid $16.4 million in dividends. Top Energy paid $3.65 million in dividends despite losing money.
Meanwhile, businesses in Auckland’s Onehunga are experiencing 7-8 power outages annually, forcing production halts and risking machinery damage. Jim Jackson, owner of Jackson Industries with 90 staff, has publicly questioned why lines companies prioritise dividends over network resilience.
$3 billion left on the table
The cost of this misalignment is quantifiable. In May 2025, analysis commissioned by the Energy Efficiency and Conservation Authority found that shifting a quarter of New Zealand’s peak electricity use to lower-demand times could save up to $3 billion in infrastructure investment. The technology is cheap: Wi-Fi-enabled devices retrofitted to hot water cylinders for a few hundred dollars.
But cheap solutions do not grow the regulated asset base. ENA-commissioned modelling identifies EV charging as “the biggest new challenge for managing demand on the grid – but also the biggest opportunity” through smart charging. If flexible loads are actively managed, the need for costly distribution upgrades drops significantly. If nothing changes, the infrastructure bill balloons.
The demand challenge is real. MBIE’s 2024 scenarios project a 35-82% increase in total electricity demand by 2050. Transpower’s 2025 planning report anticipates a 68% demand increase and 137% increase in installed generation capacity. Someone will pay for that.
Who actually wears the bill
Right now, lines charges represent approximately 39% of the average power bill, with the national average retail price sitting at 39.3 cents per kWh. Regional variation is brutal: Kerikeri pays 48.43 c/kWh versus Wellington’s 34.74 c/kWh, a 39% gap reflecting the absence of competitive pressure in what remains a natural monopoly.
High up-front connection costs compound the problem. The Electricity Authority flagged in November 2025 that some lines companies are blocking new housing, commercial developments and EV charging stations with excessive charges, effectively taxing electrification at the point of entry.
ENA’s Tracey Kai says the adjustment factors “manage real uncertainty in a new pricing mechanism.” The Electricity Authority’s Tim Sparks argues it is “easier to increase incentives later than reduce them after investment decisions are made.”
That is a regulator’s logic, not a market’s. When lines companies can simultaneously extract dividends exceeding their profits, gut the rebates designed to reduce infrastructure costs, and earn more by building rather than managing demand, the incentive structure is not cautious. It is broken. Business owners investing in batteries and flexibility deserve the value they create, not a 6-cent consolation prize on a 30-cent saving.
Sources
- Lines companies ‘putting their finger on the scale’, advocates say (2026-04-14)
- Businesses warn lines companies: Put power supply before profits (2026-03-31)
- NZ could save billions just by changing when we use electricity, new report finds (2025-05-05)
- Peak demand in 2050 and avoiding an energy gridlock (2025-03-19)
- Transmission Planning Report 2025 (2025)
- High electricity connection costs a barrier for development – Electricity Authority (2025-11-17)