The big energy companies clearly won the battle last week to protect their oligopolistic market rort in New Zealand. Energy Minister Simon Watts announced what he had promised would be “fundamental reform”, but it turned out to be an embarrassingly timid package of reforms that has been criticised by everyone in the debate except for the energy companies. Today’s Otago Daily Times editorial complains that the reforms announced “had all the oomph of a low-watt bulb”.
The only sympathetic sector seems to be the investors, who responded by instantly pushing up the electricity company shares by about $700m. This was a clear vote of confidence that the “Big Four” electricity companies were going to be able to continue to charge high prices and make mega profits. The market correctly interpreted the Government’s actions not as a threat, but as the removal of a threat — the threat of meaningful change.
The various critiques also paint a picture of New Zealand becoming an oligopoly economy, where a handful of corporate players dominate essential markets (electricity, supermarkets, banking, and more) and governments – beholden to lobbyists and free-market ideology – consistently shy away from truly breaking their power.
The big question is now: How did we end up with broken markets, and with governments that won’t fix them?
How did the energy oligopolists get their way?
It is rare to see such unanimity among political commentators, but on the electricity reforms the verdict has been near universal. Writing in the Herald yesterday, Heather du Plessis-Allan introduced her column like this: “So much for ‘fundamental’ reform of the energy sector. What Simon Watts produced as a solution for our high electricity prices was like installing another checkout at your local grocery store and calling that ‘fundamental’ reform of your supermarket. If we’re honest, a better description is tinkering. Tweaking. Adjusting. Or, disappointing.”
In the Sunday Star-Times, Andrea Vance delivered a damning indictment, arguing that New Zealand isn’t merely in a cost-of-living crisis – “maybe it’s actually a ‘markets gouging us blind while raking in massive profits’ crisis,” she wrote.
Vance’s column painted the power sector as emblematic of a wider malaise in New Zealand’s economy: “The electricity market is a rort,” she declared – a 1990s system sold on promises of efficiency and competition that has “delivered neither to Kiwis”. Consumers are fleeced coming and going: “The only truly renewable part is the cycle. Consumers pay, gentailers profit, and the Government collects.”
In Vance’s view, the gentailers behave less like rivals than a cartel – “three parts of the same club… entirely structured to reward shareholders” – while politicians wring their hands about prices but quietly bank the dividends.
How did the energy oligopolists get their way?
Vance has expertly diagnosed four drivers of government timidity: the Crown’s addiction to dividends, the ideological straitjacket, the power of the lobby, and the fear of spooking investors. These are all worth examining in greater detail.
Pillar 1: The Crown’s addiction to dividends
The Government is trapped by a fundamental conflict of interest: it is both the market’s primary regulator and the majority shareholder (owning 51%) in three of the four dominant gentailers. As Vance notes, the government is “hooked on the profits”, with dividends from these companies flowing directly into Crown coffers to help balance the books.
Similarly, today’s ODT newspaper editorial explains: “the dabbling announced last week seems to have been more designed to keep the government’s coffers topped up from its 51% shares in Genesis, Mercury and Meridian than to make a meaningful difference to anyone’s power bills.”
Since the partial privatisations, the gentailers have paid out over $13 billion in dividends while investing a fraction of that in new capacity. Any meaningful reform that lowered electricity prices would necessarily reduce gentailer profits, thereby cutting a significant and politically convenient revenue stream for the government. This has created a powerful fiscal disincentive to fix the electricity market.
Pillar 2: The Ideological straitjacket
Decades of market-first thinking have left politicians ideologically constrained. As journalist Tom Pullar-Strecker observes in the Sunday Star Times yesterday, it is difficult to solve complex problems while wearing an “intellectual straitjacket”.
Energy Minister Simon Watts has openly described himself as “non-interventionist in my approach”, a mindset that defaults to believing the market will fix itself, even when, as Vance argues, “the evidence shows it won’t”. This dogmatic adherence to a free-market ideology, even in the face of a clear oligopoly, prevents the consideration of necessary structural interventions.
Pillar 3: The Power of the lobbyists
The energy oligopoly wields immense political influence. As Vance powerfully articulates, “The incumbents themselves also wield enormous influence and know how to mobilise powerful industry voices against regulation. Consumers, by contrast, don’t have Wellington lobbyists on the payroll… Tackling concentrated corporate power is costly and politically risky”.
The Integrity Institute has long warned of lobbying and policy capture in New Zealand, and here was a case study in broad daylight. In fact, writing for the Interest website today, Chris Trotter states: “Bryce Edwards’ Integrity Institute would no doubt attribute this resistance to the small army of lobbyists and fixers that infests the capital.”
Indeed, it is difficult to view these reforms without seeing the influence of the very vested interests they were supposed to regulate. The “Big Four” gentailers – Meridian, Genesis, Mercury and Contact – have spent years fiercely lobbying to prevent any structural changes that might threaten their profits. But this influence is not merely external. As I pointed out in my last column, the Prime Minister’s own office is staffed with senior advisors who are former energy industry executives and economists, blurring the line between regulator and regulated.
Pillar 4: The Fear of spooking investors
For decades, New Zealand has marketed itself as a “safe, lightly regulated place to park capital”. The ever-present threat of “capital flight” or a negative reaction from investors acts as a powerful chilling effect on any government considering robust regulation. This prioritises the sentiment of distant investors over the welfare of local consumers and businesses, creating a deep-seated institutional aversion to any policy that might be perceived as “heavy-handed”.
Déjà Vu: A Pattern of inaction on broken markets
The Government’s capitulation on energy reform is not an isolated incident. It is part of a depressingly familiar pattern of government failure to confront entrenched oligopolies across key sectors of the New Zealand economy.
As RNZ’s Gyles Beckford has noted, there’s “much similarity” between the electricity reforms and the supermarket competition efforts – “lots of talk of significant changes… but then gradual and piecemeal measures, that disappoint many”.
Similarly, Heather du Plessis-Allan writes: “This is unfortunately becoming a theme for the Nats. First, it was the promised fixing of the supermarket duopoly that never really eventuated. Then it was the fixing of the banking system that failed to appear. Now it’s the electricity market… Of all three, though, energy is the most disappointing because this is a proper crisis. This is wiping out businesses.”
Business journalist Tom Pullar-Strecker concurs, observing that hopes for genuine competition in the grocery sector “appear near their lowest ebb”, while the highly profitable Australian-owned banks remain “largely insulated from new competition”. This recurring cycle of hype followed by inaction is creating a deep public cynicism. It is, as du Plessis-Allan remarks, “all very Ardern-era in the persistent hype without results”.
This parallel is crucial. It reveals that the failure to tackle broken markets is not a flaw of one particular party or ideology, but a systemic feature of New Zealand’s political economy. Governments of both the left and right have correctly identified these problems and promised bold solutions. Both have ultimately delivered timid tweaks that preserve the status quo. The consistent political calculation appears to be that the immediate, focused, and well-funded backlash from a powerful oligopoly is a far greater political risk than the diffuse, disorganised, and longer-term anger of the general public. This explains the recurring cycle of “hype without results” and the steady erosion of public trust in the ability of government to act in the public interest.
Andrea Vance put it more cynically yesterday: “Tackling concentrated corporate power is costly and politically risky. Ordering a review, blaming political rivals or just writing another stern letter is far easier.”
A Turning point for trust
The Government’s failure on energy reform might well represent a significant turning point in its relationship with the public. The chasm between the promise of “fundamental reform” and the reality of protecting an extractive oligopoly has crystallised a perception of a government captured by vested interests. The decision was not an accident or a result of incompetence; it was a deliberate choice, predictable from the four pillars of policy capture (above) that prioritise corporate profits and investor sentiment over public welfare.
The problem for the National-led Coalition is that the damage to their credibility extends beyond its political opponents, encompassing commentators across the spectrum and frustrated business groups watching the de-industrialisation of the economy. This episode stands as a stark illustration of how broken markets, powered by the influence of vested interests, can undermine the integrity of public policy. When faced with a clear choice between the public good and the profits of a powerful few, the Government chose the few. The political consequences of that choice will reverberate for a long time to come.
This gap between rhetoric and reality is politically poisonous. It calls to mind Prime Minister Jacinda Ardern’s infamous “Year of Delivery” in 2019 – a promise of transformative results that became a punchline when flagship policies like KiwiBuild and child poverty reduction fell short.
Just as Ardern was chastised for over-promising and under-delivering, the current Government now faces a similar moment of reckoning. Announcing “fundamental” reform and delivering trivial tweaks is the kind of broken promise that the public tends not to forget. It reinforces a narrative that this administration, like its predecessor, either cannot or will not stand up to powerful interests to secure real outcomes for ordinary people.
Writing in the Listener today, Politics Correspondent Danyl McLauchlan also points to this parallel: “One of the recurring themes in recent New Zealand politics is governments that overpromise then underperform. The Ardern government announced things it could not deliver. The current one pledges reforms in sectors it doesn’t really want to change but pretends it does to placate an increasingly irritated and impatient public. This year, we’ve seen minor tweaks to the banking and grocery sectors and the peculiar spectacle of Finance Minister Nicola Willis promising to confront the head of Fonterra about the high cost of dairy only to be told the price is set by the market.”
It’s the slowness to act that is particularly troubling to McLauchlan: “The dire state of the energy sector is arguably the nation’s most pressing challenge. During 2024’s winter crisis, then-energy minister Simeon Brown announced the government would act ‘with urgency’ to legislate consents for an importation facility to bring liquified natural gas into the country. Nothing happened. In February, it commissioned a report from Frontier, a global energy consultancy. This was delivered in late May and published on October 1.”
Could the broken markets break the Government?
McLauchlan believes this timidity could also come back to bite the National coalition: “Even some inside National consider this a high-risk option. By delaying then merely tinkering, it has made itself a hostage to fortune. If it’s a dry year in 2026 and there’s another crisis, the coalition will lose the election and win a place in history as one of our worst governments.”
It seems that there is now a significant chasm within the Coalition Government over the problem of all the broken markets. McLauchlan explains this today: “This inability to respond to unexpected challenges seems to be systemic. This is our first three-way coalition, and it’s made up of parties that are conservative, or at least inclined towards the status quo across many policy domains. If a problem emerges and the solution is not spelt out in the coalition agreement, the way forward requires consensus across a rather fractious and discordant three-party cabinet. At least one faction will have a constituency or donor group that wants to keep things the way they are. They’re like three people trying to build a house but their hands are all tied together and none of them is inclined to help each other.”
NZ First’s Shane Jones, the Associate Energy Minister, had publicly railed against the gentailers and even floated radical ideas like re-nationalisation. But in the end, Jones’ populist push was overruled by his senior partners. As Pullar-Strecker observed, “in this ideological gridlock, all bold options were vetoed”. The coalition’s internal compromise was to do the least they could agree on: instead of confronting the “underlying problem” of a dysfunctional market structure, they chose politically safer measures – minor rule tweaks, gentle nudges, and writing a “stern letter” to the power companies.
NZ First is now positioning itself to campaign against its own Government’s pro-oligopoly reforms. Chris Trotter points out the machinations: “The Deputy-Leader of NZ First, Shane Jones, has made no secret of his inclination to re-nationalise the electricity system. Very sensibly, Jones made a point of absenting himself from the formal public announcement of the Coalition’s anaemic energy plan. Rather than stand alongside his Cabinet colleague, Energy Minister Simon Watts, the Deputy-Energy Minister opted to stand before a meeting of the Māori Women’s Welfare League in Northland!”
Writing yesterday, Tom Pullar-Strecker therefore asks the question: “Could competition policy – energy, supermarkets, banks — be the spanner that breaks coalition politics on the centre-right at the next election and points the country towards an era of minority governments?” There’s no answer to that as yet. But watch out for the politics of oligopolies and broken markets become a key theme in next year’s election campaign.
After similar inaction on supermarkets and banking, a narrative is cementing of an administration that is either unable or unwilling to stand up to powerful corporate interests to deliver for ordinary New Zealanders.
This is more than a policy failure; it is a failure of political leadership that spotlights the cosy nexus between political and corporate power in New Zealand. The fallout has united voices from all quarters — journalists, economists, business leaders, and consumer advocates — in a rare consensus that the market is broken and that the Government blinked when faced with a choice between the public good and upsetting a powerful, entrenched industry.
Dr Bryce Edwards
Director of The Integrity Institute
Further reading:
Andrea Vance (Sunday Star Times): Current affairs: why no-one is fixing the energy market rort draining Kiwis (paywalled)
Tom Pullar-Strecker (Sunday Star Times): NZ not advancing beyond ‘square one’ on competition (paywalled)
Heather du Plessis-Allan (Herald): Reform of the energy sector? More like tinkering (paywalled)
Gyles Beckford (RNZ): Government takes softly softly approach to energy reform
Danyl McLauchlan (Listener): Government promises should be taken with a grain of salt (paywalled)
Otago Daily Times: Editorial – Dim energy announcement (paywalled)
Chris Trotter (Interest): Some nations are congratulated for embracing the ideas needed to overcome adversity, others are damned for succumbing to ideologies that only make things worse
I think you have hit the nail on the head with a pneumatic hammer Bryce. “The various critiques also paint a picture of New Zealand becoming an oligopoly economy, where a handful of corporate players dominate essential markets (electricity, supermarkets, banking, and more) and governments – beholden to lobbyists and free-market ideology – consistently shy away from truly breaking their power.” I would debate the word ‘becoming’ and argue New Zealand has already arrived at the land of ‘opolies’. I think the unprecedented kiwi citizen departures and rapidly growing inequality are testament to the rich getting richer and the poor getting poorer, a phenomenon ‘opolies’ amplify. This ‘mojo’ draining and depressing dynamic is now rapidly seeping into the New Zealand psyche.
Frankly, Christopher Luxon should be sent back in exchange for a full refund. Not only has he failed to deliver what he advertised, promoted, and promised, pre-election, he has in stark contrast, delivered bitter failure, which has been wrapped in cruelty, financial and economic myopia, and egotistically fuelled, ideological arrogance. It is remarkable that Luxon and/or his coalition are still in contention to remain in power for a second term. That should be a five-alarm fire right there for anyone who values a humanistic society.
Not only is New Zealand becoming an ‘opoly’ paradise, it’s becoming a right-wing ‘opoly’ paradise, and that doesn’t bode well for breaking their power. If anything, that will encourage them to come completely out of the closet to reveal their authentic selves. They will no doubt bring their kissing cousin, ‘privatisation’ with them. A golden age of lobbying beckons. I would also argue that Luxon and his government have been completely and very effectively captured by immovable and inflexible ideological dogma, by donors and vested interests, by political and personal expediency, and most dangerously of all, by an absence of ideas. The needs of the nation keep on knockin’, but there’s no one home. Queue Little Richard.
"the immediate, focused, and well-funded backlash from a powerful oligopoly is a far greater political risk than the diffuse, disorganised, and longer-term anger of the general public" which can only lead to one conclusion: the Realm of New Zealand is not a democracy. Not really.
But look deeper and one will see that while domestic power bills are generating the anger, the real damage being done by the failure of New Zealand's energy policy is de-industrialization. When that process is complete, people will be looking for scapegoats, and, inevitably, some will suggest that National and ACT deliberately destroyed New Zealand industry in the interests of foreign powers. Whether de-industrialization is intentional, negligent, or the result of gross incompetence, it will give rise to an unprecendented level of distrust and conflict between the former industrial working class and those who can continue to enjoy a comfortable life as the New Zealand farm manager for the affluent classes of Asia and North America.