The Electricity Authority has launched a new tool to promote competition in the retail market.
The first auction of Financial Transmission Rights will be held on Wednesday.
FTRs are financial hedges that help protect energy purchasers or generators from large, unpredictable price movements caused by transmission losses and constraints.
Each FTR, measured in megawatts, will cover the price difference between locations such as Otahuhu in Auckland and Benmore in the South Island over a calendar month.
The first month will be auctioned in July and the results published the day after the auction.
Electricity Authority chief executive Carl Hansen said the market will progressively build up until it eventually gives companies up to two years of hedges against the risk of price differences.
He said FTRs are one of a number of tools aimed at enhancing retail competition.
About eight companies are expected to bid for the opportunity to hold FTRs.
