Auckland-headquartered Genesis and Wellington-based Todd Energy announced the deal yesterday in a joint statement. Genesis is to purchase FreshStart, which has 22,000 customers in the Wellington region and lower North Island, effective from June 1. Details of the deal remain confidential.

This is the second time in two years that Genesis has raked in thousands of customers as spiraling electricity spot prices hit its competition. In September 2001 Genesis paid $NZ109.7 million for NGC's 290,000 On Energy North Island customers as wholesale electricity prices soared. The Government-owned Genesis now has a retail electricity and gas customer base exceeding 600,000.

Todd Energy downstream chief executive Peter Reidy said in a statement that it was commercially prudent to sell FreshStart in light of the current environment.

"The market has changed markedly since 1999 when FreshStart was launched as a start-up retailer in the lower North Island. We believe FreshStart did make a difference to the market when it launched following deregulation of the electricity sector, offering competitive prices," he said.

Earlier this month Tauranga-based power retailer TrustPower said it was exiting its Wellington and Christchurch operations, primarily because of high wholesale electricity prices, and told the 32,000 affected customers to buy their electricity elsewhere.

It is believed smaller retailers, such as FreshStart and TrustPower, have found it difficult competing against the vertically integrated energy companies of Contact Energy and the government-owned trio of Genesis, Mighty River Power and Meridian Energy.

These big companies have large generation capabilities and balanced portfolios of generation, wholesaling and retailing; while the smaller firms have only small generation facilities and less balanced portfolios, leaving them more exposed to the volatilities of the electricity spot market.