DEPARTMENT’S THREAT

Manawatu Standard, Volume LV, Issue 40, 15 January 1935, Page 2

DEPARTMENT’S THREAT

PENAL RATE ON BOARD POWER SUPPLY TO CITY The surprising' announcement that the Public Works Department would impose a penal tariff upon the Mana-watu-Oroua Power Board if the latter permitted peak load cutting by the Palmerston North City Council’s electrical undertaking was received by the board _ from the department yesterday afternoon. A lengthy discussion followed.

Meanwhile, it was reported that the conference between the board’s representatives and those of the City Council concerning the terms for the renewal of the bulk supply contract between the two bodies had failed to reach an agreement, though offers had been exchanged on the assumption of the closing of the electrical plant operated by the City Council.

COSTLY ALTERNATIVE. Forwarded by the district electrical engineer (Mr I. R. Robinson), the letter from the Public Works Department, which accompanied the draft proposal for the renewal of the agreement between the department and the board for the supply of power by the Government, was as follows “Unless the board enters into an agreement with the Palmerston North City Council ensuring that the city’s plant is not used for peak-reduction purposes, the basis of charges will be as follow:

“That the department have the option of charging in any quarter either at the standard rates of £2 10s, £2 and £1 15s per k.v.a., or alternatively at .40 ponce per unit in all cases where the quarterly load factor is above 55 per cent, and at .40 pence multiplied by 55 and divided by the load factor in per coni, where the load factor is below 55 per cent. “At present the City Council are operating their plant and thereby saving the city a small amount, but seriously reducing the department’s revenue and to some extent that of the Power Board. The department’s comparatively low prices per unit have been charged on the assumption that boards and other local authorities <lo not use their plants for peak-reduc-tion purposes, and unless the authori-. tics concerned conform to the policy which makes these low charges possible, then another system of charging has to be used. The proposed system is one which has been offered to another board in similar circumstances,” stated the department.

USEFUL AS STANDBY. “At the same time, a standby plant in Palmerston North is no doubt of .some value to our system generally,” the department added, “but, "of course, of more special value to the city and to a somewhat lesser extent of special value to the local Power Boa rd.

“The department is prepared to recommend to the Minister to enter into one of our standard agreements with the special condition that we will allow the Power Board a rebate of £SOO per year, provided it in turn enters into an agreement with the Palmerston North city by which this plant shall not be used for the purpose of reducing the amount of power which might otherwise be taken from the board and the department, and provided that, the plant is maintained in an efficient condition and that it will supply power into our system when required by us at a reasonable price per unit. This price would, no doubt, be of the order of .625 pence per unit with a minimum guarantee for each occasion on which it was called upon to operate.

* With regard to the individual clauses of the agreement (between the department a.nd the board), these differ somewhat from the corresponding clauses in the existing agreement. You will, no doubt, make a comparison yourself, and will find that the new conditions are generally less onerous to the board.

“The amount of guarantee in the fifth year represents the cost of approximately 80 per cent, of the amount of power (6000 k.v.a.) which the board may demand in accordance with clause 10. If the board is unwilling to guarantee the amount of £40,000 shown in clause 22, the figure of 6000 k.v.a. in clause 10 will be reduced.

“The signing of this agreement will not debar the board from receiving any concession that might be granted should any such general concession ■ be decided upon following representations that will no doubt be made by 7 the special export committee set up by the Power Boards’ Association to make representations to the department.”

Air AL A. Eliott inquired what would be the difference m the two methods of supply, and was informed by the board’s chief engineer (Air AV. A. Waters) that if Palmerston North was allowed t,o cut the peak load, the board would pay £IO,OOO more a year.

The letter was received, Air Eliott commenting that he presumed the board’s executive would go into the matter a.nd report. This course of action adopted on the motion of Air P. G. Guy. CONFERENCE FAILS. Reporting upon the conference held with representatives of the Palmerston North City Council . concerning the bulk supply contract between the two bodies (winch expires on Alarch 31 next), the special subcommittee of the board said a letter had been read from the Public Works Department notifying that in the new contract agreement between the board and the department a penal rate would bo charged if the board allowed peak reducing by the Palmerston North plant. Consequent upon this, the Alayor (Air A. E. Alansford), who had said the City Council representatives were aware of the conditions, had asked the Power Board to make an offer to the council'to supply it with power on the assumption that the plant was closed. Mr Dernier had expressed the wish of the Power Board to take over the electrical undertaking of the City Council. The Alayor had replied that the latter could not entertain this proposal. Mr Dernier had then informed the council that the board was prepared to supply it with power oil the following conditions: “The council to pay Government standard rates plus the cost of transmitting the power from Buunyt.horpe to Palmerston North power house, plus £SOOO, less the diversity that the board would receive.”

After retiring to consider the offer, the City Council representatives had made the following counter offer: “The council to pay the board standard rates plus a service charge of £IOOO per annum, and to guarantee the board a return of £lsoo’ profit, this being from diversity and the £4OO of the first step of standard rates; the board to contract not to strike a uni-

form or separate rate over the Palmerston North city area.” Speaking on behalf of the board, Mr Dernier had signified that this offer was not acceptable to it, and the conference had then terminated, it was reported. “AGREEMENT UNLIKELY.’’ “It appears that there is no possible chance of coming to an amicable agreement with Palmerston North,” commented the chairman (Mr Dernier) in moving the adoption of the report. Mr Eliott: Is that your considered opinion ? —Yes. Mr Jos. Batchclar: What is your next step?—There is nothing to be done. Mr Eliott said the had been predestined to failure. Each body depended upon the advice of its experts, who, it was quite evident, differed widely on the value of the diversity, and on other questions; in fact, they were diametrically opposed, and he "suggested that an independent report be obtained from an electrical expert of high standing in New Zealand. The board, and the city too, if the proposal was acceptable, would then have an independent opinion upon the value of the diversity and also on what would be an equitable arrangement for supply to the city assuming that the city’s" plant at Terrace End was shut down, which appeared likely to happen. Such a report, while not binding, could lie made tlie basis for negotiations between the two bodies. Mr W. McKav: Then you practically want the matter settled by arbitration ? CITY COUNCIL’S PROFITS.

“lii deciding what we arc going to do for the future, I think it would be well for us to glance back over the way wc have come and then try and" form into our minds some picture of how our proposals are going to work out,” said Mr Guy. “In doing this, let us think of the possibilities of our hydro-electric scheme, and tlie functions it was meant to fulfil, No one will deny that it was instituted as a public service, to assist on the farm as well as in industry, and to be a source of convenience in the homes. It is not the only public service we' have in this country. It cannot be denied that, hitherto, Palmerston North representatives have managed to exempt their ratepayers from paying interest on tlie original £500,00t/ reticulation loan *that they voted for. They have done more than this: They have so arranged matters tliat the residential population of Palmerston North, as well as the country consumers of electricity, have been brought in to the assistance of Palmerston’s ratepayers. The hulk of the consumers of electric light in Palmerston North are purely residential but the price they pay their City Council for light enables that body not only to wipe out a considerable annual loss in the gasworks, which the residential population had no say in erecting, but also to make footpaths and other borough improvements that would, in the ordinary course of events, be charged to tlie ratepayers.

“Palmerston North representatives made the threat,” continued Mr Guy, “that if they cannot got what they consider a fair agreement with the Power Board (they considered the agreement just expiring a fair one) they would go direct to the Government. Tt would be no advantage to the Power Board to make another such agreement; it would he just as well off, if not better off, without the city’s custom. Nor can I see that such a step as breaking away from the Power Board is going to be of any real benefit to Palmerston North. I doubt very much whether the Government would supply Palmerston North city with electricity at the price that it is now getting it at from the Power Board. Can we imagine the Government assisting Palmerston North City Council in bolstering up its gas undertaking with profits from Government supplied electricity, in order that the gasworks might be in a position to compete against it? It does not sound likely. Our legislators would also have to consider other aspects of the position. What would be the effect of such a concession ? It does not take a prophet to foresee that such a step would be the beginning of a most unsatisfactory muddle; and in the end would prove rather an expensive method of teaching some people that social services can only be run satisfactorily and successfully on socialistic lines. There are COB miles of line in the Manawatu-Oroua Power Board area, while Palmerston North City has only 82; the number of consumers to each mile of line in the Power Board’s area is 8.05, while in Palmerston North there are 69.80 to the mile, while the revenue for each mile of line in the Power Board’s area is approximately £l2B against Palmerston North with £704. Palmerston North ranks amongst the first half-dozen power supply authorities in the Dominion showing the highest revenue received per mile of line. Considering that the Power Board’s price for light is only 7d net, with figures like those I have quoted there is little doubt that amalgamation would make this board one of the best country areas in the Dominion.” DIVERGENCE IN VIEWS'. “The proposals and counter proposals advanced are as far apart as the two Poles,” commented Mr E. O. Bond. “The Public Works Department, it appears, are going to settle a question with which we are incapable of dealing. I fear that we are more or less ‘stumped.’ ” Mr 0. McElroy: Does not the next move lie with, the City Council ?

Mr Guy: Would there be any possibility of the full board meeting the full council, with the Minister of Public Works presiding, to discuss amalgamation ?

Voices: None whatever. Comment was made by Mr J. Hodgens that under the Public Works Department’s threat the whole aspect of the matter had changed. The

council, if stopped from cutting the peak load, would stop only under protest, as the ratepayers had invested money in a plant costing some £BO,000. That was to remain idle at the dictates of the Public Works Department while the latter also waved a big stick at the board. The chairman said it would not be possible for the board to enter into a contract with Palmerston North unless the latter discontinued cutting the peak loads.

Mr Hodgens said this restriction meant that some of the revenue of the City Council automatically vanished, yet it was being asked to increase its payments to the board under the proposed new agreement. Furthermore, the prospoct of the closing of the Terrace End plant meant throwing men out of employment. Board members disclaimed any responsibility in that direction. The report of the sub-committee which attended the conference was adopted.