ELECTRICITY SUPPLY

Southland Times, Issue 22449, 12 October 1934, Page 4

ELECTRICITY SUPPLY

OPPOSITION TO LOWER CHARGES. MINISTER’S STATEMENT. The claims of electric supply authorities for lower charges for the bulk supply of electricity are replied to by the Minister for Public Works (the Hon. J. Bitchener) in his annual statement to Parliament. The Minister does not consider it possible to lower the charges. The Minister states:—

During the year there has been an organized agitation by electric supply authorities, particularly in rural areas, to obtain a reduction in the Government charge for supply of power in bulk. The statements put forward by various authorities vary quite considerably in their criticism of the present system and in their attempt to show an improved method. The only general particular in which they might agree is that some alteration should be made which would result in the price of power to their particular board being reduced. The question of supply charges is exceedingly complex, and in many cases is only partially understood by local authorities who are joining in the agitation. We have even had suggestions made, intended to reduce the cost of power to the type of board making the request, which interpreted exactly as written, would actually have increased the cost considerably. Partners with Government.

The Government and the electric supply authorities are really partners in the business of making powei’ available to the actual consumers. The cost of power supplied and purchased in bulk represents only about 30 per cent, of the total cost of powei - supplied to the actual consumer. With varying cost of distribution it is obvious that even if there were a uniform charge for power supplied to the distributing authority, there would be no guarantee that there would be a uniform charge to the actual consumer. Then again, bulk purchase by the supply authorities at the same price a kilowatt quarter, the usual basis for wholesale supply, does not necessarily mean that they buy at a uniform price a unit—the usual basis of retail sale to their consumers.

Some authorities, by reason of the nature of the load in their particular areas, are able to use power for a larger percentage of the hours in a quarter than are other authorities, and, although on account of the lower total load they may be paying slightly more than others on a kilowatt quarter tariff, they may actually be paying less on an ordinary unit tariff. Nor does it follow that if the Government charge for power supplied to the various boards was equal in all cases, the total cost for power to them would be equal. Some of the boards have expensive generating plants of their own, and the annual cost of these has to be borne and passed on to the consumer, in addition to the charge for power purchased from the department. Such plants have a certain amount of value to their owners as an insurance against interruption and, if large enough, a certain amount of value also to the Government and the system generally for the same purpose. Under the maximum demand system of charging for bulk supply these plants also have value to their owners as a means of reducing the peak load that would otherwise be taken from the department. Reserve Plants. It has been found necessary, in some cases, to depart from a general system of unconditional maximum demand supply in order to ensure that these plants shall not be used for the purpose of peak reduction to such an extent as to reduce seriously our revenue. It may be quite equitable to consider that the owner of such plants is entitled to some consideration for the capital he has invested in them before the Government supply was generally available, but it is not equitable to expect the Government to recognize the annual cost to the supply authority consequent on the existence of these plants, and at the same time allow it to operate the plant in conjunction with a partial supply only from the Government in such a way as to give the plant a value considerably above any value it might possess as an independent source of supply. To meet all the varying conditions of supply it is necessary that there must be variations from any one definite form of contract. The various supply authorities themselves discriminate over very wide ranges between different types of consumers, and different supply authorities have different charges even for the same type of consumer in different districts. If each of them is to balance his accounts from year to year this difference must exist. Allowing for Losses. The Government, in fixing its charges for power in bulk, has not been unmindful of the fact that in a highly capitalized business such as this it must be prepared to carry forward losses in earlier years of operation, and following any large increments of capital expenditure. Annual costs must vary considerably from year to year, but it would be impossible to fluctuate our selling prices, which are made on comparatively long-period contracts to correspond with varying costs. In some years we may show a profit, in others a loss. I have indicated elsewhere just what the Government system has done in the way of paying charges and setting aside reserves. These reserves, however, to a considerable extent fall short of what is required by the provisions of the State Supply of Electricity Act, and consequently, it does not appear that reductions in bulk supply charges can be given at present. The present charges, however, are such that a highly successful general system of power distribution has been built up. Consequent partly on the reasonable terms on which they have been able to purchase power for distribution, and partly on the enterprise and initiative with which they have carried on their own section of the business, the various supply authorites purchasing power from the Government have, almost without exception, been able progressively to reduce their charges for electricity supplied to the consumer, until at present the charges compare very favourably with those holding _ in any other country with even considerably higher density of population.