Photo: RNZ / Mark Papalii
The Electricity Authority has proven itself not to be a "chocolate teapot", the associate energy minister says.
In a bid to make energy more affordable, the authority will require generators to offer the same price to all retailers - and ban the bigger power companies from giving themselves discounts.
The government said the change would increase competition, giving consumers more choices.
Associate energy minister Shane Jones - who has previously been heavily critical of the authority and has threatened to end it unless it flexed its authority - was pleased.
"The EA (Electricity Authority) have proved that they're not totally a chocolate teapot. Anything that shrinks the cost of energy and secures greater security, I think Kiwis should be happy."
Jones accused big electricity companies of currently operating as if they had more power than Cabinet.
He said the change was a surgical instrument - and in future he would like to see a sharper instrument taken to the gentailers' (companies that are both generators and retailers) corporate makeup.
Octopus Energy chief operating officer Margaret Cooney told Morning Report the proposal was a set of principles, and the rules needed more substance behind them.
Retail and generation businesses should be separate legal entities - stopping short of separate ownership - to make contracts and pricing more transparent and more easily monitored by the Electricity Authority, she said.
Cooney said there had been "massive consolidation across the sector" with the big four "incredibly dominant" at a time when at a time when new players were needed to build more generation.
Energy Minister Simon Watts told Morning Report the new rules were mandatory.
"If they do not comply with these rules then the regulator has the ability to enforce and fine these entities.
"Kiwis can have assurance that these changes coming in are real."
On whether there had been enough investment to ensure supply for the next 10 years, Watts said there were "gaps in that plan".
Watt said building thermal power capacity to cover periods when renewable energy wasn't available because of weather events was coming through too slowly.
Labour leader Chris Hipkins. Photo: RNZ / Marika Khabazi
Meanwhile, Labour was also backing the move to level the playing field between big power companies and smaller outlets.
Leader Chris Hipkins said he wanted to see what kind of enforcement there would be behind the new rule.
"I think there probably needs to be more teeth behind it, and I think that they actually need to go further than that - but it is a good start."
The change came out of the Energy Competition task force, which was set up last August in response to the winter power crisis.
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