HYDRO ELECTRIC SCHEMES.

Hawke's Bay Tribune, Volume XIV, Issue 282, 8 November 1924, Page 7

HYDRO ELECTRIC SCHEMES.

POOLING INTEREST RATES. A CANTERBURY PROTEST. At a meeting of the Canterbury Progress League this week, the organiser, Mr P. R. Climie, reported on the Lake Coleridge interest charges, stating that despite a promise made by the Minister of Pubilc Works that each hydro - electric undertaking should stand on its own basis as a commerical undertaking, and that rates should be arranged accordingly, the interest rate charged against the Lake Coleridge undertaking had been raised this year to a substantial extent in order, according to the Minister, to bring those charges into line with those incurred in respect of certain later installations. A good deal of the money borrowed for the purpose of the scheme was secured at low rates of interest —4 to 4| per cent-, while money borrowed for some of the later schemes had been at a very much higher rate of interest—up to 6 per cent. Mr Coates had, on more than one occasion demonstrated a desire to make Lake Coleridge pay for the North Island installations. A couple of years ago he propounded a scheme for a wholesale pooling of finances and the charging of a flat rate to consumers ail over the Dominion, quite irrespective ofi the cost of cmrrent from the undertaking that happened to be supplying them. The League made a vigorous protest which was followed by a Ministerial explanation. Mr Coates said that when the Lake Coleridge system has wiped off its accumulated loss of £29,171 and the accumulated deficiency on the sinking fund account, and was paying its proper reserve funds in accordance with the law, the question of revision of the charges would be considered on its merits. • . . Each scheme must show its own profit and loss, and when all the requirements of the law with respect to the Government hydro-elec-tric schemes had been fulfilled, any one scheme which showed a prifit would have its rate reduced.

The lack of foresight of the Public Works Department, and the timorous and dilatory manner in which the task f equipping the installation to cope with the demand had been approached, year after year, were the cause# of the Lake Coleridge deficiency, but despite these handicaps, and despite the fact that once more demand was treading hard on the heels of supply, the accounts in recent years had given promise that the installation would, in a comparatively brief term of) years, be free of debt.

Between 1923 and 1924 capital cost had increased by £44,768, and the interest charge by £9168. Assuming that the whole of the year’s accretion was miraculously accomplished on April Ist., a charge of 4 per cent- on it would amount to only £1790. They would have to be charged 24 per cent, on the new money to account for tne sudden jump in the interest charge. However, the Minister explained that it was due to a pooling of the interest rate. It would seem that a process of conversion was going on whereby the money borrowed by the Government for hydro-electric purposes tended to be

set down in the liabilities at an increas- ‘ mgly high rate of interest. i The average rate of interest on the ( whole amount was £5 8b per cent, Ao. ; cording to Mj J. McColibß, M.P who ! brought the matter up in the House! last week, it was this pooled rate of ; £5 8s per cent, that was now being | charged on Coleridge. As the rate i would tend to rise as the low-interest I debentures matured and were replaced I by securities at a higher rate of inter- j est, the prospect was not a pleasing one-

The League decided to make an emphatic protest against the system of pooling interest charges on the capital cost of hydro-electrical undertakings.