State-owned generators have been earning excessive returns in an insufficiently competitive electricity market, Finance Minister Bill English says.

When English appeared before Parliament's finance and expenditure select committee yesterday, Labour MP Trevor Mallard pointed to the Government's December Investment Statement which showed "total shareholder returns" from all the state-owned enterprises exceeded 15 per cent on average over the past five years, while the average 10-year bond rate was 6 per cent.

That metric reflects a combination of dividends and changes in the estimated commercial value of the enterprises. The Treasury cautions that the figures are skewed by different companies adopting commercial valuation methodologies at different times and the vagaries of the valuation process itself.

Why sell investments which so comfortably exceeded their cost of capital, Mallard asked.

"Generally the SOE model has been quite successful in that respect," English said.

"But if you look at those returns being generated particularly out of the electricity market, the Government has taken the view that that market is not as competitive as it should be."

The Government was making regulatory changes and reshuffling assets between the SOE generators to make the market more competitive.

"Power prices went up pretty relentlessly in an attempt to generate those returns. Getting a competitive electricity market is more important for us than maintaining returns which look reasonably high compared with the bond rate and are as high as private sector returns in the same market. Probably both are doing better than they should," English said.

"If your general point is if they are making good returns why wouldn't you just hang in there, well we are. In the mixed ownership model the Government is at least a 51 per cent owner and probably larger than that for quite some time."

He disagreed with commentators claiming the change in ownership model would mean higher prices.

"The combination of change in the regulatory structure and then partial public ownership is probably going to help moderate price increases."

Comparing shareholder returns to the Government with the rates at which it could borrow was an approach he disagreed with.

"It ignores risk. Under the previous Government they did have a pretty risk-free environment. They pumped up prices 72 per cent in seven or eight years. We are making it a riskier environment by adjusting the market to make it more competitive and that is going to mean it is hard to make those sorts of excessive returns. Public monopolies will always rip off the consumer."

Greens co-leader Russel Norman asked why the SOEs not issue bonds instead, providing a safe investment without compromising ownership.

"A number of them already do it. If there is a weakness in that process it is in doing it in a way that is more retail-friendly," English said.