MONOWAI PLANT

Southland Times, Issue 22449, 12 October 1934, Page 7

MONOWAI PLANT

PURCHASE OFFER DECLINED BY POWER BOARD VALUABLE ASSET On the grounds that its position would not be improved, the Southland Electric Power- Board has declined to accept the offer of the Public Works Department to purchase the board s generating plant at Monowai and to sell power to the board in bulk, to be retailed to the consumers in the province. A statement concerning the negotiations which have taken place between the board and the hydroelectric branch of the department was issued yesterday by the chairman of the board (Mr W. Hinchey). Mr Hinchey said that the effect of the department’s proposal was:— (1) That the board, in lieu of generating power for Southland at the Monowai electric power station, should sell to the Government, that portion of the board’s works consisting of Monowai, the main (66,000-volt) transmission lines conveying the power from Monowai to the boards sub-stations and parts of the sub-stations. (2) That the board should purchase Southland’s power requirements in bulk from the Public Works Department. (3) That the board should retain the ownership of the reticulation and continue to distribute the electricity to consumers as at present. Capital Cost,

The capital cost to the board of the works proposed to be purchased was £430,000, which amount was re-pay-able by the board in London in sterling. The department was offering £400,000 in New Zealand currency or equivalent to £320,000 in London at the present rate of exchange.. Tire department’s policy in regard to the price of power from Waitaki was equivalent to saying that that price must return to the department the Government's outlay in purchasing Monowai, also the cost of the transmission line from the north to Southland, as well as some return on a share of the original capital to construct the Waitaki scheme and on the lines between there and Dunedin. Mr Hinchey said that the board had viewed the offer purely from the point of whether the board’s ratepayers would be afforded any permanent relief by the proposed change. The board decided that the offer as presented by the department’s officers had failed, to convince it that the board’s position would be bettered by selling the gen crating works, and it had decided that the proposal should be declined. Use for Money. Continuing, Mr Hinchey said that it would serve no useful purpose to the board to obtain £409,01)0 by way of the sale of portion of its works unless it could turn that money to some advantage. The way to do that would bo to use the money for the redemption of debentures. Before the board could carry out such a transaction it would have to send the £400,000 to London. At the same time the board would have to send its accumulated sinking fund to London. The remitting of these moneys would cost the board at least £160,000 in exchange. That £160,000 would have to be borrowed in London, the board would have to pay the cost of raising it, also the stamp duty and, for a period of 18 years, the sinking fund and interest, and finally, the ultimate cost of sending the redemption money to London. This and other more vital factors had been very fully considered by the board before reaching the decision to decline the Government’s offer. Secretary’s Proposals. Mr Hinchey said that in regard to the matter of power supply two alternative proposals had been formulated by the board’s secretary (Mr Charles Campbell) and submitted to the Public Works Department but both had been declined by the department. The proposals provided for a payment by the board of £46,000 per annum for power provided that when the board was able to show a surplus without collecting a rate the initial payments were to be increased by such additional sums as the Minister of Public Works deemed just and equitable taking into consideration the financial position of the board and the burden of rates levied by the board. The suggestion was turned, down by the department on the grounds that the initial payments would not pay the department its operating and full capital charges on the capital which it would have invested in the Monowai system and connecting line to Dunedin, and would provide nothing towards . the cost of any power generated at Waitaki or towards a share of the line from there to Dunedin. The department said that it must maintain the same price per kilowatt throughout the years of any contract made with the board so as to obtain some return on a share of the original capital expenditure, on the Waitaki scheme and on the lines between there and Dunedin. An Economical Scheme. Concluding, Mr I-linchey said that in the Monowai generating plant the board had a very economical scheme which could be increased from 6000 kilowatts to 11,000 kilowatts. The work of extending Monowai, if proceeded with, could be spread over a period of three years and tne board anticipated no difficulty in financing the cost of the extensions without having to resort to borrowing. To extend the Monowai plant to 11,000 kilowatts capacity would cost no more than the cost to bring a line down from Waipori to Gore. Even after the board included in its costs for power sufficient provision to pay off the total costs of Monowai in 18 years and provision to establish a very substantial reserve for renewals, the total costs meantime would be much less than would be the case if tne board purchased power from the department under its present offer. The board’s most valuable asset was its cheap and efficient generating works. The ratepayers of Southland were entitled to the full benefit of those works or of an alternative not less advantageous.