The O'Brien Column: Utility reverses cost-freeze policy amid market's midwinter blues

By Peter V O'Brien

Friday 12th July 2002

July is a funny month in the local and international business world and financial markets.

New Zealanders await results from June balancing companies and the northern hemisphere gears up for the dull summer holiday period.

The month consequently sees usual "silly season" publicity at the other end of the world and limited business news in Australasia.

It was different this year. Accounting shenanigans in the US spread from the always dubious Enron and WorldCom to blue-chip Xerox and alleged fudging at Merck & Co, the giant pharmaceutical group.

The WorldCom mess had a ludicrous aspect when founder Bernie Ebbers claimed "the Fifth" this week when called before a US congressional investigating committee.

That amendment to the US Constitution is in the Bill of Rights. It was designed to prevent over-zealous law enforcers trapping people into statements made when investigations into one matter could be used later as evidence in other, unrelated proceedings.

Mobsters, sundry criminals and corrupt politicians have used the provision to refuse answering questions about their affairs. That could have Bill of Rights compilers Thomas Jefferson and colleagues lamenting from the grave how later generations distorted their noble attempts to protect fellow citizens' rights.

A similar comment applies to the right to carry arms, formulated in a frontier, often lawless, society and pushed to include the "right" of hoods, hoons and sundry nutters.

Mr Ebbers may or may not be eventually found guilty of criminal behaviour but do not bank on it.

The excess days of the late 1980s in New Zealand should have led to criminal convictions against several people if "justice," as opposed to "law," was dominant.

The New Zealand investment scene recently saw two issues that showed someone had the guts to move on situations, whether they "won" or "lost."

Stock Exchange authorities reckoned they had a case against brokers JB Were over GPG's acquisition of shares in Rubicon. That could go either way but the issue was taken up.

The sale of control of fishing group Seafresh got a restraining order from the Takeovers Panel. The order could be subject to submissions or appeal before it expires on July 18.

Rights or wrongs of the restraining order were immaterial in the context of the panel's decision to act.

Another matter which affected individuals, whether investors or others, arose this month. There was considerable debate over the past year about the activities of power generation supply companies.

Coincidentally, this column considered the convoluted relationship between Natural Gas Corporation and its subsidiary On Energy exactly a year ago when the latter company lifted its kilowatt hour rate, apparently to recover losses.

On Energy has shot through. That company's electricity customers in Wellington were "sold" to Genesis Energy, although they had no say in the transaction or in the one-sided "contract" their supplier imposed.

Genesis Energy chief executive Murray Jackson said the price increase was necessary, because Genesis' profitability was under pressure at the retail level.

Fair enough. Mr Jackson can probably produce figures to prove his point.

Perhaps he could explain why he signed and/or approved glossy brochures extolling his company's operations (both undated) after customers received documents from On Energy and Genesis, saying "nothing will change."

Customers then got a non-glossy one-page statement saying prices would rise an average of 10% from August 1, because costs increased.

The increase must have been in the works before Genesis formally took over from On Energy.

Comments from our readers

No comments yet