M.E.D. charges to rise by 10%

Press, Volume CXI, Issue 32789, 14 December 1971, Page 18

M.E.D. charges to rise by 10%

The Municipal Electricity Department’s retail charges will be increased by 10 per cent from the beginning of next April.

The decision was made after the general manager (Mr J. P. Shelley) had recommended an in-| crease of 20 per cent;! and after the council had • agreed to engage man-i agement consultants at aj cost of $9OO for a pre-1 liminary report on pos-l sible economies in the department. Mr Shelley’s report referred first to the increased cost of electricity—the tariff for bulk power from the New Zealand Electricity Department will rise by 10 per cent —then to additional costs re-! suiting from increases caused by natural growth of the department and increased labour and material costs; capital required in addition to amounts provided by depreciation; and the need to improve the cash position, which after paying the April New Zealand Electricity Department account, was likely to show an overdraft of more than $500,000. An increase of at least 18.5 per cent in the over-all revenue was required. Mr* Shelley said, before recom-| mending the 20 per cent in- J crease, an unchanged night; rate of .625 c a unit (adopted by the council), the introduction of a combined controlled tariff of 1.5 c a unit (altered by the council to 1.375 c) for space heating, power, water heating, irrigation and other approved non-domestic loads

which could stand an inter-1 rupted supply without no-| tice; and minor alterations to; some special rates to simplify the schedule. “Considerable savings”

“After considering the i general manager’s report, the committee formed the opinion that the proposed study I by W. D. Scott and Company ■ could result in considerable savings,” the development, finance and electricity committee said when recommending the schedule. The company wrote that capital expenditure in the M.E.D. had been curtailed during the present year, and this implied that the coming year would require at least the expenditure saved to be reinstated in addition to the normal capital expenditure if the intended position over the two years was to be achieved. The department was operating in a “deficit” budget role, the consultants said, and “there are indications that the size of the deficit, the cycle of tariff increases and the trend in cost increases call for the introduction of more complete administrative planning and control functions.”

They proposed to study the present situation, the immediate future plans and expectations and to report to Mr Shelly and the council action which would produce “the most desirable cost-effective-ness result,” and said this would be done within four weeks.

I The last time “efficiency experts” had been engaged to inquire into the M.E.D., I the Labour Party had been ! totally opposed to it, Cr L. ’ G. Amos said. The report had cost about $3OOO and its major recommendation was that accounts go out every three months instead of two. What would the final cost be? he asked. Citizens’ Association councillors were not opposed in principle, to any investigation that would possibly give economies, Cr H. G. Hay said, but they did question the haste in engaging consultants.

There was a need for a look at the long-term capital needs of the undertaking, because he was not convinced that the present generation should always have to meet future costs. He would have been failing in his duty as chairman of the committee if he had not acted to get consultants because of the way the M.E.D, finances had deteriorated, and this had happened under the previous administration, Cr D. R. Dowell said. He had the greatest confidence in the general manager. On the increased tariffs, Cr Hay said there was an assumption that there would be no M.E.D. loans raised in a three-year period. Whatever savings might result, there would always need to be loan finance for an electricity undertaking. It was not fair on the consumer to have to pay capital costs. Ten per cent could be the forerunner of extra increases.

Joint approach Electricity suppliers should join together in an approach to the Government for relief from the payroll tax, which he did not think should be a charge on the consumers, Cr Hay said.

At the last committee meeting the whole subject was discussed with Cr Hay, Cr Dowell said. He had been told that it might be necessary later to put on another 5 per cent, but that he (Cr Dowell) would delay anything until it was known what the consultants could achieve.