Commission issues draft determination proposing authorisation of Gentailers’ app…

The proposed arrangements give Contact, Meridian and Mercury an option to access certain notional generation capacity from Genesis’ Rankine Units at the Huntly Power Station until 31 December 2035. In exchange, Contact, Meridian and Mercury will pay an annual premium, which Genesis will use to contribute to the cost of maintaining, operating, and resourcing the Rankine Units.

Commerce Commission Associate Commissioner Nathan Strong says the proposed arrangements provide Genesis with an economic incentive to maintain Rankine Unit 2, a gas/coal-fired unit at Huntly Power Station, for use as ‘dry year cover’.

Genesis has stated it will retire Rankine Unit 2 in January 2026 if authorisation for the proposed arrangements is not given.

“Authorising the proposed arrangements means the capacity of Unit 2 can be made available to the wholesale market during dry winters,” Mr Strong says.

“Our provisional view is that this will improve security of supply and lower wholesale prices while new capacity in the pipeline comes to market, compared to a situation where Unit 2 is retired.”

In assessing the authorisation application, based on the evidence received to date, the Commission is provisionally satisfied that the proposed arrangements create net public benefits that outweigh any potential lessening of competition.

“Genesis has also told us 135 megawatts of Rankine capacity remains unallocated. If these arrangements go ahead, Genesis has said it will design hedge products for the remaining Rankine capacity that are suitable for third parties such as independent retailers and generators, industrial customers and financial intermediaries,” Mr Strong says.

“We expect Genesis to promptly follow through on this commitment.”

Given its assessment of the likely benefits and detriments, the Commission provisionally considers it appropriate to authorise the proposed arrangements for ten years, until 31 December 2035.

A copy of the Commission’s draft determination is available on the case register.

The Commission seeks submissions from interested parties in relation to its draft determination.

Submissions can be sent by email to registrar@comcom.govt.nz with the reference “Huntly Authorisation Application” in the subject line.

Any submissions by interested parties should be received by midday on 10 October 2025, with cross-submissions due by midday on 17 October 2025.

Background

New Zealand’s electricity system is susceptible to ‘dry year risk’: extended periods of dry weather that lower lake levels, thereby reducing the amount of hydroelectricity that may be generated and increasing the risk that there is inadequate electricity supply to meet demand.

Genesis owns the Huntly Power Station in the Waikato. The Huntly Power Station comprises a number of thermal generation units, including three Rankine units. The Rankine Units are well suited to help manage dry year risk. They are coal-powered electricity generators that can be turned on as required during extended dry periods to help ensure sufficient electricity supply.

However, Genesis has determined that without support from other market participants in the form of long-term hedge contracts, it will close one of its Rankine Units in early 2026, referred to as Unit 2. Unit 2 requires significant investment if it is to remain operational. Genesis has stated that the uncertain revenues from operating Unit 2 as ‘dry year cover’ through other arrangements or spot market revenues are unlikely to offset the costs of maintaining the plant and a sufficiently large stockpile of coal.

The Gentailers submit that the proposed arrangements will help meet New Zealand’s electricity demand for at least the next ten years by keeping Unit 2 operational. This will improve security of supply and result in lower wholesale prices compared to a situation where Unit 2 is retired, while New Zealand pursues net zero carbon emissions by 2050.

Authorisation requirements

The Commission may grant authorisation under section 58 of the Commerce Act 1986 (the Act) for agreements that may breach the Act if it is satisfied that the agreement will in all the circumstances result, or be likely to result, in such a benefit to the public that the conduct should be permitted.

The Commission’s Authorisation Guidelines explain when anti-competitive agreements that may lessen competition or which contain a cartel provision can be authorised under section 58 of the Act, and our process for determining applications.

A copy of the guidelines can be found on the Commission’s website.