The Government's decision to give voters another say on MMP could cost $23 million but opposition parties are backing it.
Justice Minister Simon Power announced yesterday the first referendum would be held at the same time as the 2011 general election and ask voters whether they wanted to retain MMP.
If they don't they can choose another system from a list of alternatives.
If a majority don't want to retain MMP there will be a second referendum at the same time as the 2014 general election.
The second referendum will be binding and will run off MMP against the alternative that gained the most votes in the first referendum.
Mr Power said the cost of holding both was about $23 million and the Government was also going to put "significant resources" into publicity campaigns explaining the alternative systems.
"There's no doubt in my mind that a 'social contract' existed at the time MMP was brought in, to the extent that people would have another opportunity to have another say," he told NZPA.
Prime Minister John Key said the Government had proved the system was working well.
"But we promised New Zealanders on the campaign trail they would have an opportunity to kick the tyres."
Labour leader Phil Goff said it was appropriate after having MMP in place for nearly 15 years.
"If we are going to get any constitutional change, then it needs to be approved by a binding referendum," he said.
The Greens also agreed with testing the electoral system and that there should be a choice between MMP and a specific alternative.
Co-leader Metiria Turei had concerns about the wording of the questions and said it should be an independent process with public input.
ACT leader Rodney Hide and United Future leader Peter Dunne also backed the exercise.
Mr Dunne said it was overdue and he would have preferred a referendum next year.