During the 1990s, the country's electricity generation and transmission activities were separated and re-regulated to favour market activities, including the development of an electricity generation and transmission market. These changes were unpopular with the voting public which, having been assured of benefits, experienced spiralling domestic electricity prices and increased instability of electricity supply. Most of the country's electricity is hydro-generated in remote areas of the South Island and transmitted north via a high-voltage transmission grid to the more populous areas of the South Island as well as via undersea cable to the North Island where most of the country's population lives. Without that grid, much of the country would be without electricity. It is, therefore, a key strategic asset in New Zealand.
Among the SOEs, not privatized is Transpower New Zealand Ltd, which has sole responsibility for owning and operating this high-voltage transmission grid. Despite its responsibility, the election pledge of no further privatization and the known public opposition to further privatization, Transpower engaged in a transaction that effectively sold the South Island portion of the grid.