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The new non-discrimination obligations in practice
As of 1 July, the four major electricity generator-retailers are bound by new non-discrimination obligations (NDOs) requiring them to offer risk management contracts to potential competitors on the same terms as their own retail arms.
The NDOs are part of the most recent instalment in a package of reforms flowing from the Energy Competition Task Force (Task Force), which has been mandated with enabling new market entrants and providing more options for consumers.
We set out the rationale behind the NDOs, how they will apply in practice and what comes next.
Policy rationale
The Task Force identified long-term price certainty and access to firming as key issues affecting the New Zealand power purchase agreement (PPA) and risk management contract markets. It saw NDOs as a way to secure easier access to risk management contracts, with the aim of improving market access for developers and sponsors.
Risk management contracts, including fixed-price physical supply contracts and contracts for difference, are financial hedges that serve a wide variety of purposes in the electricity markets (one of which is to effectively secure access to the firming capacity mentioned above).
For developers of new generation, risk management contracts provide revenue certainty, underwrite equity risk and reduce finance costs where project finance is used. For buyers, they provide price certainty and may offer access to discounted electricity pricing over longer periods.
The Task Force originally contemplated ‘initiative 1A’ which would have required gentailers to allocate minimum volumes of flexible generation to underwrite PPAs for new entrants. However, in response to submissions, it has stopped work on 1A and pivoted to a focus on initiative 1D, comprising a bundle of competition and transparency measures (the NDOs and Retail Price Consistency Assessments (RPCAs)), which it has determined is better suited to addressing its underlying competition concerns in the market.
What do the new rules require?
The Task Force says the NDOs will ensure even-handed supply of risk management contracts, support the liquidity and competitive pricing of risk management contracts, and facilitate investment in the electricity industry. They apply to Contact Energy, Genesis Energy, Mercury NZ and Meridian Energy. There are six NDOs.
NDO 1: Core non-discrimination obligation
Gentailers must not discriminate between buyers when supplying risk management contracts, or in favour of their own internal (retail) business units when supplying and/or pricing risk management contracts, without an objectively justifiable reason.
Discrimination is defined broadly as “engagement in differential treatment except to the extent a particular difference in treatment is objectively justifiable.” Differences in treatment that are objectively justified are not discrimination.
The NDO Guidance issued by the Electricity Authority explains the gentailers are expected to apply an evidence-based approach that is reasonable, consistent and transparent when considering whether any behaviour is objectively justifiable. Further, a gentailer’s non-discrimination policy (which they are obliged to maintain and publish) should list the objectively justifiable reasons it expects to rely on for the large majority of relevant transactions, as well as the evidence likely to be needed to establish such justification. Participants should be aware that the NDO Guidance expressly contemplates discrimination through implied (as well as actual) risk management contracts.
NDO 2: Trading in good faith
Gentailers must engage with buyers in good faith and in a timely and constructive manner in supplying risk management contracts.
The NDO Guidance provides broad expectations for gentailers to adopt trading practices and processes that are transparent, efficient and objectively justifiable. However, it also provides concrete expectations by way of example, including that gentailers respond to buyers’ requests for risk management contracts within five business days and that buyers have at least five business days to respond to offers (and potentially longer).
NDO 3: Objective credit assessments
Gentailers’ credit terms and collateral arrangements must reflect a reasonable, consistent and transparent assessment of the risk of trading with a buyer.
The NDO Guidance provides that in determining the risk of trading with a buyer, gentailers should refer to a range of relevant information including that submitted by the buyer, follow an established and transparent process for assessing creditworthiness, consider (and where appropriate discuss) a range of credit options with the buyer and ensure credit terms and collateral arrangements offered reflect the outcome of the assessment.
The Electricity Authority expects gentailers to be able to demonstrate they have done so.
Gentailers are also expected to indicate to buyers when any credit decision might reasonably be made, proactively notify the buyer of progress, and submit to the buyer alongside any offer “the basis for its credit decision”.
NDO 4: Equality of access to commercial information
Gentailers must ensure commercial information about risk management contracts made available to their internal business units is also made available to buyers at the same time.
The NDO Guidance clarifies that NDO 4 applies to relevant commercial information broadly, even if that information is commercially sensitive or that could affect competition if shared with buyers.
Gentailers may wish to consider not sharing commercially sensitive information with their internal business units to avoid the obligation to share this with buyers. They are expressly advised to avoid sharing information with their internal business unit if that information could facilitate tacit collusion or affect competitive dynamics (such as methodologies for pricing of risk management contracts or forecasts of the gentailer’s internal capacity).
NDO 5: Protecting confidential information
Gentailers must protect buyer confidential information, not use that information for a purpose other than for which it was provided, and establish “robust processes” to prevent disclosure to, and use of, that information by any of the gentailer’s internal business units that may compete with the buyer.
As a companion to NDO 4, NDO 5 prohibits gentailers from disclosing to their internal business units any information obtained through their dealings with a buyer that would, or would be likely to, provide an advantage to the internal business unit (whether or not the buyer flags that information as ‘confidential’ when providing it).
NDO 5 also applies generally to confidential information relating to the buyer (including any information concerning a person that is or intends to become a customer of the buyer). In practice we expect participants will need to consider these obligations against any express contractual arrangements they have between them.
NDO 6: Record keeping
Gentailers must keep records that demonstrate compliance with the NDOs.
Without limiting NDO 6, the Code prescribes certain information that gentailers must keep in order to meet their record keeping obligations:
- the risk-adjusted capacity of the gentailer to offer risk management contracts over the next three years;
- the gentailer’s monthly electricity supplied over the past 12 months;
- the gentailer’s expected monthly electricity supply over the next three years;
- the gentailer’s methodologies for pricing of risk management contracts;
- any reason for discriminating between buyers, or against buyers in favour of a gentailer’s own internal business units, for the purposes of NDO 1; and
- all complaints received by the gentailer by any person about any conduct of the gentailer that the person believes might constitute a breach of this subpart.
Retail price consistency assessment
Gentailers will be required to publish the first RPCA on 3 September 2026. The RPCA is a six-monthly assessment requiring gentailers to demonstrate the link between their retail prices and their expected cost of supply.
The RPCAs are designed to assist the Electricity Authority to determine whether an “as efficient” independent retailer could compete by purchasing electricity at observed hedge prices. The aim is to give assurance that a gentailer has not assumed an unjustifiably low cost of supply when setting its own prices, or otherwise inappropriately suppressed retail margins to the detriment of downstream competitors.
Non-discrimination policies, plans and audits
In addition to the NDOs, gentailers must maintain a non-discrimination policy and implementation plan. Amongst other requirements, a non-discrimination policy must detail operational policies, practices, methodologies, processes and accountabilities in place to ensure the gentailer’s trading of risk management contracts occurs in accordance with the NDOs.
The policy must be reviewed and approved by the gentailer’s board at least once a year and a copy must be submitted to the Electricity Authority within 10 business days each time the policy is amended.
An implementation plan must detail the gentailer’s approach to complying with the NDOs and must include the non-discrimination policy and planning for compliance training of staff, directors and agents (such as through regular audits). The implementation plan must be provided to the Electricity Authority and published on the gentailer’s website by 3 September 2026.
Gentailers are obliged to appoint an independent auditor to audit the gentailer’s compliance with its obligations under the new rules. Gentailers also must prepare an annual report which demonstrates whether and how it has complied with the NDOs during the previous 12-month period.
When providing the annual report, the gentailer must certify it has complied with the NDOs during the relevant 12-month period, unless it has reported breaches to the Electricity Authority. Both the audit report and annual report must be submitted by 30 September each year.
Enforcement and escalation
Enforcement will be grounded in the existing statutory compliance and enforcement framework. Under the Electricity Industry Act 2010, the Electricity Authority can seek penalties for breach of the Code, including the NDOs and RPCA rules.
The Electricity Authority has recognised the fast-paced implementation of these obligations and has stated it is unlikely to rely on a negative margin RPCA result or report in the first September 2026 round of disclosures as evidence of a potential breach of the NDOs unless:
- there is egregious conduct by the gentailer, or
- the gentailer has not made complete, robust, good faith disclosures, or
- the initial RPCA result forms part of a pattern of negative margin RPCA results over time.
What comes next?
- 1 July 2026: NDOs entered into force under the Code.
- 3 September 2026: Gentailers publish implementation plans (including non-discrimination policies) and provide first RPCAs to the Electricity Authority (45 business days after commencement).
- 9 March 2027: Second RPCA to be provided as part of six-monthly reporting.
- 30 September 2027: Annual reports provided to the Electricity Authority by gentailers (and published within 10 business days) including audit report.
What does this mean in practice?
- For renewable developers and sponsors: the reforms are intended to improve non-discriminatory access to risk management products which may support PPA bankability and underwrite project finance.
- For financiers: a more liquid, less discriminatory hedge/PPA market may improve debt-sizing and reduce reliance on equity.
- For independent retailers: NDOs and RPCAs are designed to reduce any risk of margin squeeze by gentailers and improve access to risk management contracts.
- For gentailers: new compliance demands including six-monthly RPCAs, non-discrimination policies and regular audits, alongside penalty exposure.
Get in touch
We are tracking closely the Task Force’s work and will update you as changes develop. If you would like to discuss what the NDOs, RPCAs, or the Task Force’s broader programme mean for your business or projects, please contact a member of our team.
The Government’s broader energy work has centred on the Energy Package announced in October 2025 (see our commentary here).
Our thanks to William Ferris for his assistance in preparing this article.
