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W & K

Price Gouging or a Lack of Service

Running a company for the benefit of the shareholders rather than the potential customers is invariably a can of worms. Directors of a company have the obligation to meet the financial and ethical demands of the shareholders.

 

It is results time for many companies listed on the NZX. Three of the reporting companies were the energy companies that were partially floated during the past eighteen months or so. Profits in general were ahead of forecast which is great for all shareholders, and the holders of debt in the various companies.

The general public through the Crown 51% ownership are also indirectly shareholders. For the members of the public who are KiwiSaver investors it should also have been good news, as many KiwiSaver funds are invested in one or more of these energy companies.

The moment increased profits are announced, there is usually a counterargument that the companies must be ripping off their customers by charging too much. Most of us have been having our highest power bills of the year as it has been over the higher use winter month’s period. The reality is that the increased profits are usually the result of improved efficiency, increased levels of renewable energy such as geothermal or wind turbines coming on stream, or their overseas investments becoming cash flow positive.

There are two really simple ways to decrease the cost of power to your household. Firstly reduce power use by turning off non-essential electrical items, or lights in rooms not being used. The most dramatic cost saving measure may be by changing supplier. The anticipated savings can be calculated by using www.whatsmynumber.org.nz.  If you have a bad credit history, it maybe that the swapping supplier option is not available to you.

Air New Zealand is another company that has recently reported very good profits. There have been calls to decrease the cost of airfares especially to and from the provincial centres where there is little or no price competition. Whakatane is relatively well serviced with flights to or from Auckland.

Unfortunately for those travelling to or from overseas destinations the timings are such that accommodation is invariably needed in Auckland. Despite the reasonable frequency of flights to Auckland the best laid plans of business people can be radically destroyed when you get bumped off an overbooked flight, despite having paid top dollar for ones tickets and checking in well within the required check in times.

If trying to do business in centres other than Auckland there is the added complication of connecting flights to consider. While flying may be feasible, the costs can be prohibitive.

Perhaps the answer is to apply a surcharge on the main trunk flights Auckland/Wellington/Christchurch and use the resultant money to cross subsidise flights to and from the regional centres. Another method may be to use regional development funding to lower the flight costs.

If the regions are to grow and take housing pressure off Auckland and Christchurch, businesses especially small to medium sized ones need to be encouraged to relocate to the provinces. Lower regional airfares and better flight schedules would make it easier and more feasible to do business, both domestic and international from the provincial regions such as the Eastern Bay of Plenty.

Disclaimer

Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.