While the Electricity Authority (EA) said its investigation into whether an undesirable trading situation (UTS) was "not necessarily about attributing blame", the report points in particular at the actions of Meridian Energy, New Zealand's largest electricity generator.
The conclusion could see the regulator reset prices in the wholesale electricity market for a three week period. A separate process will seek to determine whether any companies breached the trading standards of the electricity market.
A complaint by a group of electricity companies claimed actions by generators Meridian and Contact Energy, during a period of exceptionally heavy rainfall in the South Island in December 2019 meant prices were not as low as they would be expected in a competitive market.
A year after the event, and after a hotly contested interim report, the Electricity Authority maintained a UTS had occurred, even though some spilling was necessary.
"The Authority has decided the situation was such that confidence in the wholesale market was, or may have been, threatened," the executive summary of the EA's report said.
"We consider market outcomes during the UTS period were significantly different from what would reasonably be expected if the market had been operating normally."
EA chief executive James Stevenson-Wallace said the investigation found the dynamics in the wholesale market during the UTS period "were far from normal outcomes" given the conditions at the time.
"There was a lack of competitive pressure which meant prices remained relatively high despite an abundant supply of water and no increased demand during the period. Water was wasted when it could have been used to generate power."
The study does not provide any sanctions, with the EA working on an "actions to correct" paper, a draft of which is expected to be released in February.
In a statement, Meridian said it was disappointed that the EA had concluded that the event was a UTS and would take time to review the detail of the decision.
Electric Kiwi welcomed the report and accused Meridian of hypocrisy.
"The EA's confirmation that Meridian was unnecessarily spilling water from its dams while offering high prices shows the utter hypocrisy of Meridian," Electric Kiwi CEO Luke Blincoe said in a statement.
"Meridian says its purpose is 'clean energy for a fairer and healthier world'. By unnecessarily spilling water to jack up profits, it shows they're not interested in fairness. And by spilling water and causing more thermal energy to be used they're also not interested in clean energy or a healthier world. They're interested in one thing and that's getting more money into their pockets."
Blincoe said the unnecessary spilling during the period could have led generators to extract more than $70 million in excess profits.
