POWER MAHERS

Hawera Star, Volume XLVIII, 8 March 1929, Page 5

POWER MAHERS

HAWERA’S ELECTRIC SERVICE

ARIBTRATION PROCEEDINGS

COMPANY CONTINUES ITS CASE

(By Telegraph—From Our Own Reporter). ! WELLINGTON, March 7. To-day’s sitting of the arbitration tribunal' was the *hortest since coming to Wellington, the adjournment being made at 3.45 p.m. in order to allow counsel t-o confer with expert witnesses on accountancy matters. During the aiternoon evidence of the company’s filial engineering witness was fieai'd. This evidence included many pages of figures, showing how Mr McLeod arrived at his total valuation of £210,909. including goodwill. During cross-examination, two substantial errors were discovered in witness’s computation. The cross-examina-tion was cased on intricate lines of reasoning, and at one stage counsel on either side confessed to being at a loss in regard to the questions which were being asked through eouusel by expert witnesses on the board’s side. The engineers, however appeared to be perfectly at home with the maze of figures/ and obtained some amusement from tile inability of the others to follow their statements. When matters had been straightened out to the satisfaction of tne experts, it was revealed that there had been an error of 10,000,000 in one comi>utation of units of energy and 268,000,000 in. another.

When the last engineering expert had been disposed of the company called the first of its accountancy experts on the subject of goodwill. This witness began by putting into court a table of figures in neatly bound form. There followed a volume of prepared notes, the purpose of this second volume being apparently, to explain the meaning of the first. Some argument occurred .between counsel as to the admissibility of these “notes,” and after discussion it was agreed that the hearing should adjourn in order to give the board’s experts an opportunity to digest the documents and to allow counsel to ascertain whether they were all admissible. It was stated that the use of notes would shorten the taking of evidence. In reply to Mr Myers, Mr Spratt said that lie hoped to conclude the evidence of his three accountants on goodwill on the following day. Mr Myers said that if they., got that far he would deliver his opening address on Saturday morning. There is thus every prospect of the .hearing occupying the larger .part of another week.

Under cross-examination by Mr Myers, Mr N. G. McLeod said that he did not- think competition in supply could take place economically. It would be possible for the hoard, in competition with the company, to run their lines on private property or underground, but it would be an expensive expedient. It would also be possible to use the telegraph pole system, but that would be costly on account of the necessity to use covered wires. The underground system would be about four times as expensive as the ordinary uncovered overhead system of reticulation. The success of the board in competition would depend on the support given by the ratepayers. The incoming power authority would have a difficult row to hoe, and both the company and the hoard might make a loss. Witness agreed that meters should be tested every five years.

Mr Myers: “In your computation you allow only of -per cent for your £126,000 capital. Have you ever been in business ?”■ Witness: “Not in commercial business.” Mr Myers : “I thought so. ’ ’ Continuing under cross-examination, witness said that his depreciation of 2 per cent per annum wa.s based on new values. He had made no provision for income tax in his computation, and had worked on the assumption that the company shareholders were to have a- right in perpetuity. Upon it being pointed out by Mr Myers, witness agreed that in one of his tables dealing with units of energy there was an error of 10,000,000. During further cross-examination, witness admitted another error in his computation, which affected his unit charge basis very materially. Mr Spratt then called R. A. Glen, a chartered accountant and a member of the Wellington firm of Rowley, Gill and Hobbs. Witness defined goodwill as principally a valuation of prospects of the future, based on super profits of the past. Super profits he- defined shortly as profit over'and above a reasonable rate of interest on working capital. Witness then put into court bis computation and explanatory notes and tlie hearing was* adjourned, as previously stated.