THE New Zealand Herald AND DAILY SOUTHERN CROSS. FRIDAY, MARCH 17, 1922. THE ARAPUNI AGREEMENT.

New Zealand Herald, Volume LIX, Issue 18042, 17 March 1922, Page 4

THE New Zealand Herald AND DAILY SOUTHERN CROSS. FRIDAY, MARCH 17, 1922. THE ARAPUNI AGREEMENT.

i The memorandum presented by the . Mayor of Auckland to the first meeting of the district Power Board is j probably the most important docuJ ment of the kind that has ever been written in New Zealand. In a statement that is notable for lucidity and J completeness, Mr, Gunson has reviewed the negotiations between the City Council and the Government for the provision of hydro-electric, power, and for the success of which J no little credit is due to hiiu per- j sonally; presented the agreement i tentatively made on behalf of the! board; and given an admirable explanation of the basis upon which | the Power Board will take over the j municipal electricity business and i proceed to the wider functions of supplying the requirements of the! larger area under its jurisdiction. Last evening's proceedings marked not only the formal inauguration of the new administration, itself an important event in the history of tho 1 city, but also brought the realisation of the Arapuni scheme definitely into j view. The various reports to which, Mr. Gunson referred may be accepted i as having decided finally the source | from which power is to be obtained. , Thorough investigation has demon-1 strated that the Arapuni project is both practicable and superior to every other source of hydraulic power. From the reports by the engineers of the Public Works Department and the City Council's engineer, the advantage of waterpower over steam-generated electricity is also apparent. The comparison has been exhaustively made in Mr. Kissell's report, and it is sufficient here to point out that while the price of water-power depends almost wholly on capital costs, that of steam-generated powei: is mainly dependent on the cost of fuel. Thus in Auckland the cost of generation has risen almost fourfold in five years, from. £3 18s per kilowatt to £13 4s, and while the cost of power for the.Wellington tramways "rose enormously during the war period," that obtained by the Christchurch tramwavs from water-power fell consistently. , The proposed agreement between , the Minister for Public Works and the Power Board will of course be 1 closely examined on this point of 1 comparative costs. Mr. Gunson has < presented an estimate that suggests ; there would be little material advan- , tage in the change, but his figures have been based, and properly so, on a conservative estimate of the prob- ' able consumption and a liberal < estimate of the possible economies i in steam generation. In the first j place there is a wide difference be- < tween Mr. KipselPs and Mr. Wyllie's ( allowances for capital charges on the j stand-by plant, and any reduction t on the higher figure would of course ] improve the outlook for water-power. , On the other hand steam-generated ] current has been calculated at a - figure, £9 per kilowatt, that is cer- ( tainly problematical, since the actual cost last year was £16 4s per kilo- j watt. Moreover, while this conservative estimate indicates a slightly higher cost at the outset for Arapuni power—an element that is more 1 than counterbalanced by the greater security from industrial disturbances and the still greater immunity from fluctuations in costs of generation—it must b9 remembered that, with a given headworks capacity, the cost of current steamgeneration falls only slightly as the consumption increases, while with water-power the cost per unit falls in direct proportion to growth of consumption. In the former case additional consumption raises the fuel bill, in the latter there is no additional cost for fuel, and the capital charges are more widely distributed. This aspect has been so fully examined that, so far as price is concerned, it may be concluded that the change from steam to watergenerated electricity will be advantageous. In other respects the draft agreement seems to be based on a very fair balancing of one concession against another. The board has been asked to guarantee to purchase a definite quantity of power, but that quantity is probably less than it will require when the Arapuni scheme is completed, and is very much below the demand estimated by the Public Works Department. The guarantee requires a minimum payment of £105,000 a year, but the board has the option of paying standard rates, and if its require- i menu fall even slightly below the guaranteed minimum that alternative would protect it from loss. There is a further undertaking that the board is to purchase the whole of its requirements, reserving the 1 King's Wharf plant solely for a stand-by, and this will, of course, increase the basis of its payments, . since it might be economical to carry the peak-load on the steam plant. But against this may be set the provision reserving to the board the right to supply the requirements in its district of all Government departments, which may become very large consumers—for instance, if the suburban railways are electrified. There remains one aspect of the matter to which the board should give consideration before it ratifies agreement,, While pa the whole i

it seems that the proposed terms are advantageous to Auckland, particularly by ensuring the immediate prosecution of the Arapuni scheme, and secondly by guaranteeing the provision of power at rates that now appear favourable, it must be remembered that title agreement is of greater importance to the Government than to Auckland. Whether the agreement is confirmed pr not, the Government is pledged to carry out the project, and it cannot complete its policy of electricity development w thout Arapuni. A contract .with the largest consumer will cover the greater part of the risks involved, and with that safeguard the Government will be able to proceed with a security that has never previously been obtained or even contemplated for any public work. That is really as far as the agreement goes, for there is no definite undertaking on the part of the Minister to deliver power in 1928. On the other hand, the board is asked to guarantee to pay prices for power for at least 16 years ahead, and if completion is delayed, for longer than that Such an undertaking is more than it should give. It can with full confidence agree to draw all its requirements from the Government supply for ten years or a hundred years, and since there must be an arrangement in regard to i price either now or when power is available, it is reasonable that the agreement should define the terms on which the Minister will sell and | the board will purchase. But there should certainly be a provision that if at any time the Government finds that it can sell power at a lower price, then the contract should bo i reviewed. It is possible that tho ! rates proposed may prove entirely to j the advantage of the board, but in J view of the circumstances in which I the contract will be concluded it j would be anomalous for the Govern- | ment at some future time to sell j j power to consumers who have not j ! been asked for any such guarantee at lower rates than to the Auckland board. TJjis very point is emphasised by the concluding paragraph of Mr. Kissell's report, in which he says that " the Arapuni capital costs include a large proportion which is available for a supply up to three times the amount provided for in this report, and that in consequenco additional supply can be obtained from that source at even cheaper rates than are discussed in this report." This is too important a point to be left to a friendly understanding or for consideration at some future time. The board may reasonably insist upon a clear reservation of its rights being written into tho document, so that there shall be no risk of the Government insisting upon the strict performance of what is not so much a contract as a gentlemen's agreement.