Port lobbyists warned on regulation danger

By Yoke Har Lee

The chairman of the Lyttelton Port Company has warned lobby groups seeking a re-regulation of utilities that their success could backfire.

Brent Layton says port companies could use it to raise prices where they were unable to at present.

Under regulation, utilities would be able to earn a full return on capital, a target the port was not yet achieving.

"Ironically, given the motives of those that started the lobbying for regulation, the outcome could be that Lyttelton and other port companies might get regulatory backing to raise prices to levels they cannot achieve in the current environment," he told shareholders in the port's annual report.

The port, which is 65 per cent owned by Christchurch City, achieved a net profit rise of 2 per cent for the year ended June 30, to $13.15 million.

Mr Layton said the Port Lobby Group's argument was that ports were natural monopolies and used that to charge uncompetitive high prices. The group wants regulations to control the ability of ports to do so.

He dismissed the argument put forward as void of any real substance, adding that ports had limited, if any, natural monopoly.

Further, port companies faced large shipping groups which had superior comparative price knowledge and considerable negotiating power, he said.

There was also no evidence of port companies earning monopoly benefits.

"Even the best ports, such as Lyttelton, are still not getting a full return on capital, and the returns for many smaller, local ports are tiny."

Mr Layton said the port company's profits could not be described as satisfactory.

"Net profit after tax needed to be around $1.5 million greater in order to achieve a full return on this basis," he added.