Annual Expenditure

Northland Age, Volume 5, Issue 35, 29 May 1936, Page 7

Annual Expenditure

In the past the heaviest item against revenue of Power Boards has been that of capital charges. As an example, it may be stated that several of the larger Boards raised loans in London at 6 percent interest and have for the past few years been paying 25 percent exchange, equal to 7i percent interest. At the present time the Loans Board do not authorise the payment of interest at rates above 3i percent. But it seems doubtful whether interest rates will remain so low as this, and it may be anticipated that 31 percent may have to be paid. Even so this is only half of what in some cases is being paid by older Boards. Besides interest, an allowance of approximately 2 percent is required for sinking fund and depreciation. It will be prudent, therefore, to allow 6 percent for annual charges on capital. In the matters of administration, supervision and maintenance it would be premature to set out a programme for the location of the Board’s offices, depots and receiving stations, and for the personnel and location of its staff. These details will best be decided upon when the Board has become established and its policy framed after full consideration of the facts. Meantime, in making provision for these expenses we are guided by a careful comparison of the costs obtaining in other existing power districts, whose systems are comparable with that proposed herein. £ P.W.D. charge for power : 200 k.v.a. at £lO, 650 k.v.a. at £8 7,200 Administration costs, including salaries and insurances .... 3,500 Maintenance, including wages, transport, stores, etc 4,000 Capital charges, 6 percent on £228,000 13,700 Total Annual Expenditure .. £28,400 Margin of profit, £2OOO per annum. This investigation thus shows that the scheme as set out should be self supporting from the start. The margin of profit would be increased if some of the lines included in the schedule were omitted, thereby decreasing the item “capital charges.” We may point out, however, that this position will be automatically provided for in that the Board will not make any extension without first obtaining payable guarantees. And

by the time the Board is ready to undertake the more questionable extensions it is probable that increased settlement will have taken place sufficient to show an adequate return. Consequently we advise that authority shoud be sought for capital sufficient to finance all the extensions listed. Experience has shown that further extensions are soon required after the main scheme of reticulation has been established and it involves needless expense to repeat the formalities necessary in the obtaining of authority and in the raising of further loans. Estimate of Revenue Our estimate of the revenue which may be expected when the Board has its scheme well established, say in the second year after commencement of supply, is as follows : £ Rural Consumers : Lighting consumers, 90 percent of 1283 houses, 1154 at £5 . 5,770 Iron in 70 percent of 1154 consumers, 808 at 20/- 808 Grillers, kettles, immersion heaters in 30 percent of consumers, 346 at £4 1,380 Water heaters in 40 percent, 460 at £5 10/- 2,530 Milking motors in 70 percent of existing sheets having 25 cows or over, 70 percent of 800, 560 at £l7 8,670 Ranges in 10 percent of 1154, 115 at £l2 1,380 Town Consumers, 860 at £8 .. 6,880 Street Lighting 500 Large Power Consumers, say . 2,500 Total Annual Revenue £30,418 In formulating these estimates we are of course guided by experience elsewhere. We believe it reasonable to assume that if the cost of power to consumers is made equal to that prevailing in other districts that they will in your district make use of it in the same manner.