THE PRICE OF GAS.

Evening Star, Issue 11890, 19 May 1903, Page 7

THE PRICE OF GAS.

TO THE EDIT 08. oir,—Your second article is no reply to my rejoinder, and you again.,misrepresent toe. I said the profits for three years (£17,000) consisted solely of residuals, hence the whole cost of gas was as much as we got lor it. In other words, had there been no residuals there would be no profite. You say the “ cost of gas in the holder waa 2s 6d per 1,000 cubic feet,” but what about the official and other expenses and the interest on loan and depreciation? But you ■actually take 2s fid as the sole cost! For you say the “ sale price at Ss would constitute a profit of 2s fid per 1,000 ft.” Were you correct, the profit on gas sales for twelve months ended March, 1903, would be over £15,000! This would have paid the overdraft at the beginning of the year, and left a credit balance at the end of the, year Of £8,300, instead of an overdraft of £2,662. _ And upon further inquiry yon will find! did not include the sinking fund contribution in the cost of production. But by an irrational method of bookkeeping £4,396 accrued to the sinking fund for the three years actually appears in the profit and loss account as a credit to lessen the cost of production! The profit, then, of £17,000 should be £12,604, and this is whnt Mr Park makes it. And when you consider this did not provide for £20,000 for renewals and improvements charged to capital account, no wonder the gas account is fai trouble. And for practical purposes there is no difference in adding the interest on loan to the cost of production, or deducting it from profits. In either case it comes out of revenue. Moreover, I have the figures for twelve months ended March, 1903. The gas sales are £30,348, the expenditure (excluding the sinking fund) £31,197. Where is the profit? But if w-; add the residual credits, there is a profit of £3,847. Unfortunately, however, £4,102 is in unsaleable coke taken into stock at the selling price! And the profit is further affected by £1,789 charged to capital account. Why, if all the coke was turned into cash there would only be a credit balance at the bank of £1,560. This would not go far towards the prospective liabilities of £IO,OOO odd I previously referred to, nor the £20,000 which wou say in your footnote to my letter is urgently required for a new gasholder. Both would absorb eight years of accumulated profits (including coke), but I believe the gasholder was obviated by the erection of the water gas plant; if not, then the. reduction in the price of gas is further off than I anticipated. Moreover) if you divide 109,145,000 cubic feet (the year’s production of gas) into £31,197 (the year’s expenditure), it gives 6s 9d per thousand cubic feet as the cost price. You propose to sell it at ss! Why, the oil alone for producing 24,480,000 cubic feet cost £2,417, or 2s Old per 1,000 cubic feet, sod the coal alone for producing 84,665,000 cubic feet cost £10,498. or 2s 5Jd, so that von are all at sea in your estimate of the cost price of gas. I have compared the 1901 balance-sheets of the Auckland, Wellington, Christchurch, and Dunedin gasworks, and find that we require a Greater Dunedin to increase the output. The other towns have no competition in the suburbs. Though their gas Is a little cheaper, ours is better; but I enclose two tables of comparison which you can publish at your convenience. I find no fault with the' engineer. Generally, I believe he had to contend with inadequate works.. This is borne out by Mr Maitland, who, in his first election speech, said: “In order to remedy this defect (in pressure), 24in pipes had been ordered to replace the 18in main.”

And you misinterpret my contention that Jio further loan should be sanctioned. The consumer might at any time throw up gas fo£ electric light, and saddle the loan on the general body of ratepayers, and not upon the users of gas, for whoso special benefit the works existed.

Further, _if as yon say gas is cheaper than electric power, then the Corporation made a mistake in choosing the latter to drive the trams. But as the motive power of the electric light in the towns you quote is steam, no doubt gas is cheaper; but with us the motive power will be water, which every engineer here held was infinitely cheaper.—l am, etc,, JOSEFIX BEAITHWAITE. May 15.

[Cr Braithwaite is quite right in saying that our second article on the price of gas was no reply to his rejoinder ; • it would have been published whether he had written to us or not. As we have already indicated, the matters touched oh by the councillor will doubtless receive the attention of Mr Maitland when he returns to town, as ho is responsible mainly for the data on which our first article was based. But to Cr Braithwaite’s present communication we have much to say by way of reply. So far from misrepresenting him, the boot is vety much on the other leg. We are for once in agreement with the worthy councillor—the profits of the gas department for the three years under review (1900-2) were obtained from the sale of residuals, and totalled £17,000. But we dispute his right to divide these profits as ha does, and we say that his system of bookkeeping will not meet with the approval of business men. It is unfair (to use a very mild term) to piek out any particular item from a balancesheet, and say that the entire profits of the concern were obtained from this, that, or the other article; the business must be taken as a whole. And this is especially so in gas-making operations, because it would be absolutely impossible to carry on the manufacture of gas without using bituminous coal, which consists chiefly, of coal, gas, and tar. The first-mentioned is essential; (he other two products go to make profits. A coal that would not produce coke would be quite valueless for gas-making purposes. Cr Braithwaite tries to make a great deal of the profits obtained from the sale of rosiduals,and the profits from the sale of gas he at-—nay, he reduces them to vanishing point—quite overlooking our contention, which has the support of some of the bestknown gas-making authorities in the Old Country, that "gas used during the hours or daylight could be sold without loss” at the cost price in the holder. We repeat, for the reasons already advanced, that the cost of Dunedin-made gas, as supplied at the holder, is 2s 6d per I,oooft, and if the Corporation are paidfis for the same article there is a substantial margin of profit. We note here that, Cr Braithwaite appropriates for his argument the entire consumption for the penod he selects, and includes therein domestic anti public lighting, as well as special supply, which is a veritable splitting of hairs. H« hi taken the quantity used for special purposes—i.e., the supply which! is retailed at 6s—for the three years, he would have found that it amounts to 71,948,000 cubic feet. That consumption, on our assumed profit of 2s 6d per I,oooft, represents £8,993, to which has to be added Cr acknowledged sales .of residuals (£17,000), giving a gross total of £25,993. Now, this sum comes very near to the actual profits, as stated by us, that were capitalised during the years, 1900, 1901, 1902—viz., £24,631. It might be possible to arrive at the figures with more exactitude were we in possession of all the data. It is, however, clear that with a capital expenditure paid for out of profits, representing £24,631 in three years, and -with the overdraft standing at £2,562 in the last-mentioned year (1903), the gasworks, as a whole, are doing very much better than Ch Braithwaite would have the public believe. The overdraft as at' March 31 lost appears to affect Cr Braithwaite as a nightmare, but it is after all a bogey, for it it largely made up of stock actually in hand—to wit, about £I,OOO for coal and £350 for oil, the balance representing mains —snd paid for out of revenue. Our contentions, stated nakedly, are—(l) That these items are properly capital charges, and do not affect profit and loss, save that the cost has under existing conditions to be met out of currant revenue;, (2) that the Council have no justification, except on the •core of expediency, for taking £24,531 in three years from profit and loss without (to —* the words of the Mayor of Leicester) totunung to the consumers a large share of

tliose profits. While on the matter of the balance-sheets, we qrould direct Cr Braithwaite’s attention. to' the item of £6,728, shown as depreciation during the past three years, as we contend that t.hi« amount is needlessly charged against revenue for the reasons given below. This revenue account is -reduced by the sum of £6,728 for the thrce-yoarly period cited, although the money is still available, and as a. matter of fact is used for purposes other than those for which it was charged. Were this item deleted from the balance-sheet the balance of profit and lose would always show that sum better, but the bank account would not be affected. Cr Braithwalto will realise the effect of this when we add that we have been informed on good authority that the maintenance charges cover what expenditure is necessary to keep the works in an efficient state, and that (as a matter of fact) the old works are in a better condition today than they were ten years ago. Cr Braithwaite next- declares that he did not include sinking fund charges in his cost of production, but at Bussell street he gave out the figures showing that cost to be in 1900 5s 9d per 1,000; m 1901, 5s lOd; and in 1802, 6s 4d, We repeat, so that the public may judge between us, the actual data on which these totals were constructed, aud which bear a remarkable resemblance to the figures given by Cr Braithwaite:— 1800. 1901. 1902.

Df ducting from profit and loss, the interest charge and sinking fund respectively stated at—in 1900, 16,031 d; in 1901. 15.537 d; and in 1902, 15.616 d—it will be found that the corresponding years give the reduced gross price of gas in 1900 53,289 d, in ISOI 54.279 d, and 1902 60.041 a. Our figures for the cost price at the burner are thus shown to have been more than liberal. In conclusion, Cr Braithwaite was sorely pressed when he is driven to say that we argued—which we have not—that gas is cheaper than electricity for motive power. We have never introduced this aspect into the present discussion, which has been limited to the consideration of gas ns an illuminantEd. E.S.]

Manufacture d. d, d. 45.144 46.721 52.923 L'istributioo, 2.261 2.802 2.273 General charges ... Interest and bask 5.884 4.756 4.845 charges 13.433 13.132 13.535 Sinking fund. 2.598 2.405 2.281 d. 69.320 69.816 75.857