A senior government minister says the government is exploring the option of intervening into the electricity market to force major energy generators to cut prices to major users.

Wholesale power prices have doubled in the past three weeks, in part because of New Zealand's hydro lakes storage which is about 57 percent of what it would normally be at this time of year.

Wholesale power prices on the spot market were more than $900 on Wednesday.

Some major users say soaring power prices are putting their viability at risk and two timber mills say they are considering closing.

Speaking to Morning Report, Associate Energy Minister Shane Jones has accused the big power companies of profiteering.

Jones said advice was being sought on potential regulatory interventions and the Crown had options.

"The gentailers no longer operate in New Zealand in a way that enhances competitiveness number one. Number two, the gentailers no longer operate in a vein that boosts or gives greater primacy to the greater interests. Therefore there are provisions under the existing electricity legislation that enables the Crown to use a code of conduct which has legal force to change their behaviour," he said.

"For a long time I've felt there are some significant deficiencies in the actually structural makeup of our wholesale energy market.

"The minister of finance along with the minster of energy are getting some urgent work done to look at what short-term measures can we take if indeed there are some deeper structural failings in the rules and the regulations governing the energy market."

Demand management has always been a key element of the New Zealand structure "but there's nothing to stop the Crown from codifying a new set of rules, a new set of expectations under the EA...sadly that agency has proven to be a chocolate teapot in regulating the excess behaviour of the gentailers who I feel are probably the most powerful economic institutions in New Zealand beyond the supermarkets and the Aussie banks."

Jones said the government needed to reengage with the sector.

'Scarcity goes straight through to profiteering'

Victoria University economist Geoff Bertram told Morning Report the root cause of this was the design of the market.

"The market is doing exactly what it was set up to do, which is to get high prices and high profits at times of scarcity.

"If it were a competitive market then you could run some economic theory to say well that might be OK, but it's not a competitive market, this is a market where scarcity goes straight through to profiteering.

"The idea that somehow in the fast of scarcity and high profits companies will somehow rush out to invest in producing more is simply nuts, because it takes up to a decade to get that investment through."

The companies are a cartel, he said.

"That is to say they're a bunch of companies with enormous market power to exploit situations such as the present one and that market power is exercised at the pursuit of profits, which is what these companies are set up to do."

He said ordinary household power users bore the brunt of high prices.

"The real pain from price gauging goes down on ordinary New Zealanders, not on the big companies."

The blame was not just on gentailers, he said, but Parliament which legislated this and "governments that over the years have systematically failed to fix it".

He said when the programme was set up in the 90s, the government could have put in longterm contracts.

Short term fixes were relatively ineffective, he said.

"This is a time to take a really deep breath and set about fixing the market structure. One of the things that will mean is that we open the way for new competitors to come in to generation and that means above all, ordinary New Zealanders are able to put solar in their roofs at an affordable price and in a market where they're facilitated to do so, not locked as they currently are."

Meridian Energy has declined to comment and reply is being sought from Mercury, Genesis and Contact.

Main image (RNZ/Samuel Rillstone): Associate Energy Minister Shane Jones.