POWER SUPPLY NATIONALISATION

Nelson Evening Mail, Volume LXXI, 19 October 1937, Page 7

POWER SUPPLY NATIONALISATION

PROPOSAL OPPOSED BY BOARDS REPORT OF SPECIAL COMMITTEE One of the most important questions which has yet conic before any of the annual conferences of (he New Zealand Electric Power Boards and Supply Authorities Association is that of the proposal that the electric supply and distributing industry should lie placed upon a nationalised basis. The question did not come before the 1086 conference in any but a very general way, but in view of the frequent references to “nationalisation” and the uncertainty the conference set up a special ronimittcc to investigate (he whole position, to examine sonic of the proposals, and to place before the Minister of Public Works information regarding tlic present development in this country in relation to similar development elsewhere. The report of this special committee, which met under the chairmanship of Mr F. Purnell (Wanganui-Itangitikei Power Board) and comprised board members, engineers, and secretaries representative of power boards and authorities of both islands, is before the present conference.

The committee contends that an industry which is almost entirely publicly owned and operated, and which is closely regulated by the central Government, canont be described otherwise than as already fully “nationalised.” What the critic of the present system of electric supply desires is more accurately “centralisation," in which the full control of both generation and distribution will be in the hands of one central authority. In the interests of a great national industry, a searching discernment is called for to examine ponetratingly into these proposals and pronouncements. states the committee. The danger is that what might be is apt to appear more attractive than what is, and accomplished results, gratfying in their magnitude, suffer in comparison with the assumed possibilities of untried alternatives.

The report is necessarily greatly abridged. It might almost be said, states the committee, that the proposal for nationalisation has arisen as a result of problems of rural reticulation. Residents in areas that have not ye received supply, and those in areas where supply is considered to be unduly expensive, appear to believe respectively that in nationalisation they might have supply or they might have it more abundantly. A city counts its load in consumers per mile. In some country districts the density is as low as one consumer per mile. The cost of distribution charges affects the cost of electricity. The variation in the cost of the current would probably be found to be more or less comparable with the variations in prices for general commodities in two such districts.

EARLY DEVELOPMENT

There is one aspect of local control that impresses itself strongly upon the committee. All the pioneering work, not only originally in the cities, but much later in the country areas, has been carried out under local control. This method has been successful in guiding the electrical supply industry through its infancy and its early development period. It is not questioned that a stage may be reached in the development of such an industry when if. would be advantageous to change over to an alternative method If nationalisation is for the country’s good, it should be viewed with an open mind, and given an opportunity of making its contribution. The changeover at this stage to another method, however, has in it all the dangers of accrediting to the later method the results of the spade work carried out by the earlier method.

The committee is strongly of the opinion that there is one fundamental question to be considered and answered in determining the bearing of town and country problems upon proposed nationalisation: “What is the real aim of electrical distribution?” Is it to extend electrical supply over the greatest possible area, or to intensify electrical development over the ‘wisest’ possible area?”

After full and careful examination of a particular district, it may be found that to carry electrical supply into

lit could not be economically justified. If nationalisation be then advocated, and under nationalisation such an area be reticulated, is the result for good or ill? Is a Government any more justified in following an uneconomic course than a local body would be? Such a course may be locally altruistic, but would it be nationally altruistic? If an enterprise were locally creditable and nationally blameworthy, nationalisation would have to accept national responsibility. It may be' claimed that the Power Boards Act of 1918 was inspired by the ideal of making supply available to every farmer and every dweller in the backblocks. as well as those resident in city areas. This ideal was to be applied also within each supply authority’s area. The first large-scale power board development was based on the aim that every consumer should be charged the same tariff irrespective of his geographical position within the area of supply. This has developed into widely-applied practice. Remembering all the difficulties of relating the ideal to the real, it must be acknowledged in tribute to electrical supply as developed in the Dominion to-day, that this ideal has 10 such a large extent been made real.

LEVELLING UP AND LEVELLING DOWN

If electrical supply throughout the Dominion is to bear the cost of providing cheap rates in expensive areas, or of providing electrical supply in impracticable areas, it is comparable to suggesting that the ports well endowed by Nature should contribute towards the cost of artificial facilities for ports less happily endowed. It is conceivable that such a course may, in some measure, be decided upon as a national policy. If so, it should be made clear beyond any doubt. Elec-

UNIFORMITY IN RATES

trical administration and engineering should not operate under the wellintentioned instructions of a social kindliness, and then be tried at the bar of a severe economic efficiency. There should be a consistency, or at least mutual recognition, between the policy adopted and the judgment passed upon its results. If it be the declared aim of Government hydro-electric policy to extend supply over the greatest possible area, irrespective of cost rather than to j intensify development over the wisest possible .area, with future economic development always in view, then centralised nationalisation of distribution, in part at least will probably be the only solution, because there would be some local authorities which could not accept such a responsibility. If, on the other hand, electrical supply is to be extended as far as economic prudence permits, and at the same time is to be developed to its maximum possibilities within those limits, then it appears probable that local control is especially fitted to secure these aims. The sense of local responsibility will set the limits. The zeal for local development should ensure that the frontiers are pressed forward as far as may be. and at the same time that development is stimulated to its fullest extent within those frontiers. The Power Boards Act in New Zealand was passed in 1918. If by 1986 supply has been made available to a , total supply authority area containing the equivalent of 93 out of every hundred of the population, the achievement has been remarkable. Percentage improvements—when they reach the nineties—are exceedingly difficult to gain, and the cost of gaining them proportionately difficult to justify. The remaining 7 per cent, admittedly represents the most difficult area of country supply Local control as a method of administration has been blamed for thus falling short of its ideal. Any method of administration which has achieved 93 per cent, of a possible objective deserves well of the community. In point of fact, at the moment, plans are in hand that will increase this percentage up (o the remarkable figure of 97 per cent. It is to be remembered that this 97 per cent, refers to the population in Ihe total area that has now been included j in that covered by established supply ! authorities. ; There will inevitably be some homes | within board areas as well as without, that can never be reached by any distribution system normally and economically permissible. It would, in fact, be less costly to present such consumers with an electric generating plant free of charge, then attempt to supply them from the board’s mains. To any administrative or engineering mind, optimistic proposals for entirely attaining the theoretically possible should, in the public inlcrests, be examined very searchingly.

It is self-evident, states the committee. that the whole industry would be benefited if the Government’s bulk supply charges were reduced, but there are no grounds for believing that bulk supply charges could be lowered earlier if the sale of power in bulk were a transaction between two Government Departments instead of between a Government Department and a local body There are those of whom “uniformity of rates” appeals as a solution of all difficulties. Suggestions have not been lacking that nationalisation would make possible the offering of a single Dominion-wide retail “flat rate” for electrical supply. Electrically it would be impracticable. Even a uniform scale of charges would produce widely differing results due to the nature of load. If electrical characteristics are wholly disregarded, some degree of uniformity in charges might be a possible result, but not an economic benefit, of nationalisation. It must be remembered that uniformity would, for economic and financial reasons require first to be uniformly upwards for all the larger supply authorities. The first result would be for the large authorities, though possessing better characteristics, to pay more. Even if some kind of uniform Dominion rate could be devised, it would definitely militate against intensified local development. Those localities where such intense development was possible, economic, and productive of lower charges wculd be retarded. Such a measure could benefit backward areas only by penalising enterprising areas. It would appear to be a wiser policy to encourage the demonstration of possibilities of growth, and ensure that the latter stimulated the former, rather than allowing the former to retard the latter. Comparisons with the costs and charges overseas are made by the committee. NEVER DEFINED CLEARLY Nationalisation has recently been a much-used word in New Zealand, the report continues. It has never been explicitly defined. “Centralisation” is what is usually meant. When the term “nationalisation” is used in reference to electrical supply in New Zealand, it can mean only to centralise an already nationalised industry. There appear to be three possibilities applied to the whole electrical industry: (a) Generation and transmission— Government. Retail distribution—

local authority. Sale of equipment

the trade. (b) Generation and transmission— Governbent. Retail distribution — Government. Sale of equipment—the trade. (c) Generation and transmission— Government. Retail distribution— Government. Sale of equipment— Government. In America and even England today private enterprise is in some quarters vigorously opposing as “nationalisation” local body control of both generation and distribution. As compared with private enterprise, the electrical supply industry in New Zealand is now in eflect completely nationalised. Public ownership is an established principle. The central Government controls generation and transmission. Local government controls distribution. The committee would stress Hie fact that nationalisation in whatever degree it is proposed, is an alternative method of dealing with certain problems, not an elimination of such problems. Those problems which arise from inherent characteristics of electrical supplyproblems of load factor, diversity, rural and urban characteristics—can be no less acute under one form of administration than under another. If, financially, a particular burden is spread, this may be an alternative solution, but not necessarily, in the overall economic sense, a better solution. PUBLIC WORKS DEPARTMENT - ADMINISTRATION In addition to both alternative methods of control, and greater development under the present method, there is the possibility of modification within the present general method, states the committee. The hydro-elec-tric branch of the Public Works Department began as a small section of a large Department. It has grown to be a major national industry operating electrical supply, and administering a commercial undertaking, and its activities difl'er entirely from those of the Public Works Department proper. The committee believes there has long been a case for considering the advisability of separating the electrical branch from ihe ordinary Public Works branch, giv- j ing it an identity of its own, and ensuring independent control under whatever form of authority is retained or selected. j The committee cannot refrain from j making this observation upon the organisation of the electrical branch of the Public Works Department. Heavy

responsibilities are being carried, and highly technical services rendered under conditions of staffing and remuneration that cannot be considered as other than inadequate. The almost individual administrative responsibility of an activity directing the State's investment of over thirteen million pounds, should be provided with a greater measure of supporting and collaborative staff, and financially deserves better of the country it serves. In this connection, the administration of generation and transmission under commissioner control, as in Canada and elsewhere, is submitted as meriting consideration. With the necessary technical advice and with carefully selected representative experience in the commissioners, the required combination of engineering technique and commercial administrative skill would possibly be better ensured by this method than by any other.

THE COMMITTEE'S FINDINGS Having given careful consideration to the results already attained by the method of control of electrical supply adopted in New Zealand, end to the information available regarding some of the alternative methods of administration of electrical supply elsewhere, the committee unanimously finds that: (a) There is no evidence that electrical supply in New Zealand would give better results if distribution were administered under Government control in the same way that generation and transmission are now administered. ib) That available evidence of the results attained under methods of electrical supply control elsewhere, docs not make a sufficiently strong case to conclude that any better results would necessarily be secured (under New Zealand conditions) by the adoption of r.ny one of these alternatives to New Zealand's present method.

(c) That there is definite and encouraging evidence that the remarkable results achieved in the development of' retail electrical supply in New Zealand during the past twelve years, are attributable to the successful administration of electrical destribution under the stimulus of local control by power boards and supply authorities. (d) That in conformity with the statement of the Minister that power boards and supply authorities are partners with the Government in this great national undertaking the committee submits that before any drastic change is decided upon, consideration be given to the views of the electrical supply industry expressed through the representations of the association.