Mercury Energy's planned $441 million purchase of Trustpower's retail business may hinge on the outcome of a Commerce Commission investigation which is due to be completed soon.

Trustpower announced on Monday it had agreed to sell its electricity, gas, broadband and mobile retail business to Mercury.

This is subject to a number of conditions which include approvals from the Commerce Commission and Trustpower shareholders.

Mercury indicates the sale was also conditional on the Tauranga Energy Consumer Trust, which has a 27 per cent shareholding in Trustpower, continuing to be allowed to pay all its distributions only to Mercury's Trustpower customers following the sale.

It is not clear whether the continuation of that arrangement is a given.

A Commerce Commission spokesman confirms the TECT arrangement was under investigation.

'The commission is in the process of concluding an investigation into the matter and has no further comments at this time,” he says.

The ministerial Electricity Price Review said in 2019 that it believed that the arrangement might warrant investigation by the competition watchdog.

Some submitters to the ministerial review argued the arrangement 'undermined retail competition in the western Bay of Plenty”, its inquiry team said at the time.

The Electricity Price Review says in its report: 'We do note that Trustpower's prices average about $575 a year more than the cheapest alternative in the Tauranga area”.

Tauranga resident David Riley, who has criticised the arrangement, says TECT had assets worth about $1 billion and its distributions had allowed Trustpower to charge higher prices than it would otherwise be able to charge power users in that local market while still maintaining a high market share.

'The arrangement in effect uses TECT funds which belong to the Tauranga community to subsidise a private company,” he says.

Any benefit of the arrangement currently enjoyed by Trustpower would appear to transfer to Mercury under the proposed terms of the transaction between the companies.

Mercury indicates it did not expect the takeover to be derailed by any of the conditions attached to the sale, saying it expects the transaction to clear all hurdles by the end of this year.

Assuming the sale does proceed, Trustpower will offload its 231,000 electricity, gas, fixed and wireless broadband and mobile retail customers to focus on its generation business.

More than half of Trustpower's customers take two or more products, which is something Mercury, which only offers gas and electricity, would like to tap into. The combined business would have some 780,000 connections across energy and telco services.

'Customers value the convenience and ease of bundled services in their home and Trustpower has deep expertise in bundling products in a way that people clearly appreciate,” Mercury chief executive Vince Hawksworth says.

'We see this adding material value to our customers and Mercury.”

Combining the retail businesses of Mercury and Trustpower would also give Mercury the scale to make 'meaningful investment” in its IT systems that would allow greater innovation for its customers, he says.

Trustpower has about 550 staff in its retail business based in Tauranga and Oamaru.

Mercury says the purchase price would work out at $1060 per connection.

It would fund the purchase through a new bank loan.

Mercury is the smallest of the three majority state-owned generator-retailer businesses, behind Meridian Energy and Genesis Energy, and is 51 per cent government-owned.

- Tom Pullar-Strecker and Tina Morrison/Stuff