That meant KiwiRail was essentially running a "railway within a railway", Reidy said.
"The doubling up of service facilities, inventory, training and maintenance required with two separate systems on the line adds to the inefficiencies and unreliability," he said.
"We looked long and hard at the electric options and for our business, and most importantly our customers, they just did not stack up."
However, Green Party transport spokeswoman Julie Anne Genter said replacing electric trains with a diesel fleet was a "massive step backwards".
"National has promised to take climate change and transport issues seriously, but it's underfunding of rail is responsible for short-sighted decisions like this. National should commit to completing the electrification of the North Island main trunk line. This would send a clear signal to KiwiRail that they can invest in an electric future.
"New electric trains are cleaner, quieter, and have lower fuel and maintenance costs over their lifetime. They're also powered by local renewable energy rather than imported oil."
Labour's transport spokeswoman Sue Moroney said the decision meant National's new Cabinet was "already looking like a relic of a bygone era".
"Minister Simon Bridges has approved the daft decision, making his apparent commitment to increasing the use of electric vehicles to reduce carbon emissions look hollow and hypocritical."
"The electrification of the main trunk line between Hamilton and Palmerston North was a $250m "Think Big" project investment in the 1980s. The rest of the world is now following suit."