POWER BOARD AFFAIRS

Otago Daily Times, Issue 22269, 23 May 1934, Page 5

POWER BOARD AFFAIRS

PAST YEAR REVIEWED TURNING POINT REACHED SATISFACTORY FINANCIAL POSITION At the annual meeting of the Otago Electric Power Board at Milton yesterday the chairman (Air A. E. Bussell) presented a comprehensive report on the administration of the board's affairs during the year ended on March 31 last. The Report stated: — "March 31 marked the conclusion ot the ninth complete year of the board’s supply of electrical energy, and lour months from the close of the year the board achieved the turning point in its history when its financial position with the hank disclosed a credit balance. It is particularly gratifying to me to be able to reach this position during my chairmanship, because I have had the opportunity of developing the financia. plan that was laid down when I became chairman of the Finance Committee three years ago. That plan was based on current operating and managing expenses at the time, and provided for uniform rating of £9OOO each year until 1936 in order to meet all * statutory requirements. Byeconomies and interest reduction the position aimed at has been reached two years earlier than the date prescribed by statute. At March 31, 1931, the overdraft was £20,384. At March 31, 1934, with all accounts paid, there was a credit balance of £1978. “ The draft cash statements disclose the following important features:— (1) Increase of £BO6 in sales of electricity; (2) increase of flOlO'in cost of power; (3) decrease of £675. in wages and salaries; (4) decrease of £1782 in interest charges; (5) decrease of £967 in general expenses; (6) decrease of £367 in motor expenses; (7) decreased deficiency of ,£3245 compared with last year; (8) improvement of £7508 in financial position after crediting rates amounting to £9119. ECONOMIES INTRODUCED. “You will remember that early in the year I expressed my concern regarding the tendency of power to increase in cost without a profitable increase in the revenue from its sale, and at my suggestion an investigation was made by our executive officers, Mr Potter (secretary) and Mr Yeitch (engineer), in conjunction with our consulting engineer (Mr J. C. Collins). Their report, which was submitted jointly, but with independent remarks in certain cases, disclosed (a) that our charges for industrial and bulk supply power have in some cases been unprofitable; (b) that the depression has seriously reduced the revenue from certain profitable lines of power consumption; and (cl that the increased connected, load has been mostly during peak hours at low profitreturning rates. While some adjustments have been made, the position at the end of the year shows that the matter still demands serious consideration. With a view to getting a better distribution of our connected load, our engineer during the year designed and installed a peak recording instrument, but pending the arrival of an integral part from Sweden, satisfactory use of the instrument has not been possible. It will be seen that improvement in the board’s financial position has been principally due to economical working and reduction of interest. The reduction in the amount paid in salaries and wages has been due to regrading, to reduction in staff, and to reductions of salary for engineering. Compared with £Bll4 paid for wages and salaries during 1930-1931, this year’s amount of £5310 indicates , drastic economies. It is my opinion that the board’s staffing, though adequate for immediate requirements, is now on the border-line of an efficiency number, and payment in some cases is scarcely commensurate with the nature and quality of the services rendered. General expenses have been kept down by careful buying and economical use of existing equipment, while motor expenses at £629 compare very favourably with £996 in 1933, £1035 in 1932, and £1203 in 1931. The board now-buys its petrol and oil in bulk; services and repairs its own vehicles; and employs a mechanic f°r overhaul purposes. The total mileage run by the entire transport of 11 vehicles for the year was 58.649 miles; the average running cost per mile, including repairs, petrol, etc., 2.6 d; the average cost per mile, including 17 per cent, depreciation, 3.5 d; the quantity of petrol used, 3864 gallons, and the cost of oil and grease, £25. When it is considered that no new trucks have been purchased since June. 1932, the figures of cost; are economical indeed. A reduction in meter reading costs has been effected by the purchase of a car in August for the meter reader. A very informative graph and statistical record of transport running costa is now kept. Our motor vehicles are extremely well cared for, and our men deserve credit for this, and also for their comparative freedom from accident during the past 12 months. All these factors contribute to the reduction which has taken place in the board’s accumulated deficiency, which, at March 31. 1933, stood at £20,527, and is now £13,019, or £7508 less. DISTRICT FINANCES.

“ It gives me especial pleasure to record that my own district of Owaka is the first to show a profit on the year’s working. Actually this position would have been reach last year but for the purchase of a residence and garage for the linesman. The saving in rent, however, assisted towards a further reduction of working expenses with the result that though the revenue fell short of last year’s by £44, due to economical consumption and bad debj-s, the Owaka area shows a credit balance for the year of £345, reducing the accumulated deficiency of this area to £164. The northern and southern and Lawrence accounts, though still showing a loss, have been improved considerably, as will be seen from the following comparative table: — Deficit. Deficit; Deficit. - 1932. 1933. 1934. Area. £ f £ Northern {. L. 2214 1542, 1046 Southern ~ ..5641 2071 336 Laurence .. .. 1624 1095 574 Owaka 83 146 *345 ' *Profit. “The accumulated deficiencies, after crediting this year’s rates, now stand as follows: —Northern area £3132, Southern £6690, Lawrence £3083, Owaka £ll4; — total, £13,019. The position in the Manio-toto-Strath Taieri area is that, after crediting this year’s rates amounting to £135 against the balance of the expenses incurred there, an amount of approximately £lO9 remains to be cleared off. ELECTRICITY SALES. “The total revenue earned for the year from sales of electricity amounted to £39.698, and after allowing for operating and managing expenses there was a profit in the power account of £21.047. Payment of £14,030 interest left a profit of £7017, and after providing £3403 for the sinking fund account the profit remaining was £3614. Unfortunately, in the efforts to clean up the stock of trading appliances purchased in the early years of the board at a high price, losses had to be incurred iu order to make sales, and a further 10 per cent, depreciation has been provided for. This again caused a loss in the trading account of £413, but our stock ot appliances has now been reduced to a value of £lOl3, though at Match 31, 1929, the stock of trading appliances on hand was valued at £3484. Even allowing for this loss of £413, the profit for the year was £3201. Depreciation, however, required £4651. and the sum of £IOO was spent on fitting up and shifting to the new offices at Milton. Though the depreciation fund account now stands at £23,627, it is as yet only a formal balance sheet entry provision. In the financial year 1935-30 provision will, in accord with the existing Statute, have to he made in actual cash at the rate of approximately £6500 annually. In view of this, and in consequence of another matter which I shall now refer to, it does not seem to me to be either wise or exp- dient to reduce the rates to any drastic extent, though a reduction of, say, 20 to 25 per cent, for the current year could, porh i fied, “ It will be noticed that only in the southern and Lawrence a.eat,_ uiu- ui>; revenue from the sale of electricity show an increase on last year’s figures. In the northern area the revenue decreased

by £137, and in the Owaka area by £44. A further analysis of the revenue disclose* the following:— 1932- 1933- DeSource. 1933. 1934. crease. £ f f Public lighting .. 1,415 1,405 10 Domestic lighting, heating and cooking .. . . 26,085 25,963 122 Industrial motors 9,607 10,664 "*1057 Bulk supply (hospitals, etc.) .. 1.864 1,655 209 * Indicates Increase. “It will be seen that the increase has been due to industrial motors, the other items showing a decrease. Mining operations at Wetherstoneg and at Macraes, metal crushing for the main highway at Clarendon, and work on the new bridge at Balclutha have been mainly responsible for (he industrial increase. Two ot these at least are only temporary so that au increase in revenue for the current year cannot bo relied upon to improve the board's financial position. INTEREST PAYMENTS. “ Before concluding this financial review I would like to refer for a moment to our interest payments. During the year Mr Smith and I visited Wellington and arranged with the Treasury for the conversion of the board’s total loans of £276,000 (exclusive of the Owaka loan of £16,500) to one table loan on the principal plus interest basis for a period of 30 years until 1964, by which time the full amount will be liquidated. The conversion order is now under way and 1 a. further saving in interest of approximately £320 will commence from August 1. The saving of £1782 in interest for the past year has been due to the further 10 per cent, reduction and to a saving in bank overdraft charges. The following is a statement of bank overdraft interest charges during the past few years: —1930-31, £854; 1931-32, £639; 1932-33, £322; 193334, £SO. OTHER MATTERS. “ Next to the passage from a debit bank balance to a credit one, .the most important event of the year was the transfer of the board’s head offices from Dunedin to Milton. The controversy over the matter was both long and somewhat heated at times, but 1 am glad to say that it has not affected the willingness of each and every member to co-operate in all mutters for the board’s welfare. An important concession to consumers was granted during the year by way of a 24 per cent, discount on accounts paid cash to the meter reader. This had the desired effect of getting electricity revenue in more promptly, enabling ns to keep down the overdraft at the bank, and, judging from the increased amount paid in cash each month, the discount has been appreciated by consumers* “At the annual conference of the power boards and supply authorities in September, the board was represented by Mr Smith, the engineer, c.nd myself, and during the year, at your request and at the request of some of the Farmers’ Union branches in our district, I appeared before the Tariff Commission and gave evidence in support of the free entry of electrical appliances to the Dominion to assist rural power boards. " As chairman' of the board during the past two years, it has fallen to my lot to face many difficult and perplexing problems and to do many distasteful things as a matter of financial and economic necessity. The redeeming and consoling feature of it all is the fact that, despite the difficult times through which we as a people have been passing, the affairs of the Otago Electric Power Board are brighter and sounder to-day than they have been since the board commenced operations. I feel that the optimism which I expressed last June has been justified and that we can now look ahead with confidence that we will be able to reduce rating and eventually some, at least, of our power charges! _“ I cannot retire either without referring to the loyalty and devotion to their respective duties of each and every member of our staff. The complete change in executive control which was made during my term of office was a serious matter for any board to undergo; and I confess to no little concern at the time. In Mr Potter and Mr Veitch the board has two executive officers of outstanding ability, and I am confident that they can be relied upon to ateer a straight and safe course.” MEMBERS’ APPRECIATION. Mr Smith moved a vote of thanks to the chairman for placing so comprehensive a report before members. He had succeeded in giving them a very clear idea of the board’s position. He had indeed had two difficult years as chairman. The shifting of the offices’’and the whole concern had itself been a large undertaking, and the keeping of the whole machine in order had been done in a manner which reflected the greatest credit on the chairman and his executive officers.

The motion was seconded by Mr D. Boyd, and the other members also extended their congratulations.