As far as James Bushnell, professor of economics at the University of California, Davis, is concerned, New Zealand's gentailer-dominated electricity system has a lot going for it."Yeah, so I mean, what's challenging for me visiting New Zealand is there are lots of elements of the market here that I find really appealing."Challenging, no doubt, because his visit comes at a time when high power prices and bumper profits have led to growing calls from MPs, business leaders and academics for the government to step in and break up the four major gentailers.The gentailers, Contact, Mercury, Genesis and Meridian, made combined profits of around $1 billion this year.All have electricity generation and retail arms, which is known in business as being vertically integrated.James Bushnell.SuppliedBushnell, who is an expert in electricity markets, has been hosted in New Zealand by the Electricity Retailers and Generators Association.He said he was reasonably sympathetic to the vertical integration model and, when it came to a break-up, pointed to a similar exercise in California in the early 2000s that did not go well."So, my experience was from California in the early 2000s, where we had sort of the opposite, where there was a forced separation of the large retail entities from the suppliers or the generators, and that didn't go so well."He said what happened was that everything became transacted on a daily spot market, which then led to severe market power in the wholesale market."That has always influenced my sort of perception of the vertical integration model looking around the rest of the world," Bushnell said.Bushnell, who peer-reviewed the 2025 Frontier report on New Zealand's electricity system, said typical fluctuations in electricity supply and prices created risks when it came to investing capital, so having retail and generation arms within the same company made sense, as it could help smooth out and manage those risks."And so, my version of the trade-off is I think it's very helpful for a reasonably competitive wholesale market, and the arguments then come down to the retail side and how contestable retail can be, and that's sort of where I think the authorities here have really tried to focus on ways of trying to facilitate entry of smaller independent retailers. There is a lot of churn, a lot of different choices."However, long-time critic of the gentailer model and Victoria University economist Dr Geoff Bertram said he totally disagreed with Dr Bushnell's assessment of the New Zealand market and that it was wrong to compare New Zealand with the US market."I flatly disagree with him. He's coming at this with the mindset of somebody who has worked in the United States and California, which is a market where there are lots of players. There is scope for competition. There are multiple generating options."Bertram said New Zealand is a smaller market and there is effectively no competition."The important thing to remember about the gentailers is the reason why they are vertically integrated is not just that it's an effective way to manage risk, it certainly is that. If you're in a profit-driven model, avoiding risk is a big thing. And the benefits of avoiding that risk go entirely to the owners of the companies. In other words, there's nothing in this for consumers."Calls to break up the gentailers have ranged in recent years from a full structural separation, whereby the power companies would have to sell their retail arms, to less comprehensive break-ups that involve the retail arm and wholesale arm being forced to operate separately while still under the same ownership structure.Bertram, however, said the only solution is to force them to sell off their retail arms."There's just an overwhelming case in the New Zealand setting for breaking these companies up and not just separating them, because even if they have joint ownership, the incentive to collude in a vertically integrated way will remain there."Bertram said he accepted that, from the point of view of brute engineering efficiency, there's always a case to be made for a vertically integrated monopoly.But he said that only made sense when New Zealand electricity was in the hands of a non-profit monopoly."Once you make it a profit-oriented monopoly and you give the management the job of maximizing shareholder value, game over for competition and it's game over for consumers."For Bushnell, however, a move away from a market-driven model would not mean cheaper power prices."But as far as kind of choosing which technology should be built and how to finance them, generally markets seem to do better at this than political processes."