By Stephen Wright

WELLINGTON, New Zealand--New Zealand's electricity market regulator said two of country's largest power generators weren't manipulating prices under current rules when they spilled water from hydro dams more than a year ago.

The Electricity Authority said Thursday it had ended its investigation into Meridian Energy Ltd. and Contact Energy Ltd., which was sparked by allegations from electricity retailers of unfair price hikes stemming from spills in late 2019 and early 2020.

The market behavior of the two companies, which together generate more than half of New Zealand's power, was within the limits allowed by safe harbor provisions, according to the authority's investigation.

In mid-2020, the authority had issued a preliminary ruling that Meridian Energy had manipulated the power market by pushing up wholesale power prices.

In its updated ruling, the authority said trading rules weren't breached because "both generators demonstrated consistent offers (in the wholesale market) in periods where they were pivotal with offers in periods where they were not."

However, it also acknowledged that the safe-harbor provisions are difficult to apply in practice and could shelter market manipulation. Specifically, Contact and Meridian could maintain offer prices despite water having zero valued when spilled during floods.

A decision on changes to the rules is expected in June, the authority said.

Electricity retailers had said the spills increased power prices for consumers by about 80 million New Zealand dollars ($57.7 million).

Write to Stephen Wright at stephen.wright@wsj.com

(END) Dow Jones Newswires

04-21-21 1807ET