M.E.D. finance

Press, 27 May 1985, Page 20

M.E.D. finance

Sir,—l was very interested to read the explanation of the manager of the M.E.D. on why it was necessary to impose a “service” fee on consumers. For many years the M.E.D. has regularly made big profits, and concealed them from the public by charging capital works to revenue. Would the manager say what was the trading profit of the M.E.D. for the last financial year? (excluding capital amounts such as buildings, underground reticulation, etc.), and what is the estimated trading profit for the current financial year? I haUe yet

to be convinced that the profit made by the M.E.D. warrants the abolition of the discount of 5 per cent given previously, or the imposition of the service fee. — Yours, etc J. G. POWER. May 16, 1985. [Mr C. S. Laurie, general manager of the M.E.D. replies: “I presume the ‘service fee’ which is Referred to is in fact the supply charge recently included by the council as part of the retail tariffs charged by the M.E.D. The basis of this charge and the reasons for the recent tariff increases have already been published in responses to previous correspondents and it is not proposed to restate these. In December, 1983, the council appointed a panel of inquiry, headed by an independent consultant, Dr B. Battersby, to advise on various aspects of M.E.D. financing, one of which was the method of financing capital works. The report states: ‘We conclude the policy adopted by the Christchurch City Council of funding capital development from revenue is a sound one for the base level of regular capital expenditure. At rates of interest currently being incurred it would be less than eight years for the effect of compounding interest charges to exceed the annual cost of capital investment assuming a constant annual capital investment level.’ Since the time that report was produced interest rates have increased dramatically, reducing significantly the period over which the effect of compounding interest charges would exceed the annual cost of capital investment, assuming a constant annual capital investment level, thus reinforcing the conclusion of the report.”]