NO POWER RATE THIS YEAR

Southland Times, Issue 22948, 22 July 1936, Page 6

NO POWER RATE THIS YEAR

The Board’s Decision FINANCIAL POSITION MUCH IMPROVED “BUGBEAR ABOLISHED” A decision io abolish the rate for the current year, to make provision for the transfer of £lO,OOO from the separate account to the sinking fund, and to work on an overdraft if necessary was made by the Southland Electric Power Board yesterday. It was said by the mover of the motion, Mr W. McChesney, and other speakers that it was recognized by the board as well as the ratepayers that the rate had always been the big handicap to the popularity of the Monowai scheme. It had been reduced from time to time, and business had improved to such an extent now that the board was justified in doing away with this very real cause for dissatisfaction. The motion was carried by nine votes to two. In accordance with a notice of motion, Mr McChesney moved:— That no rates be levied for the current financial year, that the estimates be amended to provide for the sum of £lO,OOO being transferred from the separate account to sinking fund, and that, if necessary, an overdraft be arranged for (against outstandings) in accordance with usual public body practice. “To-day is the last day on which the rate for the coming year can be decided,” Mr McChesney said. “If this motion is carried, it will mean simply that there will be no rate for the next year. “Without the slightest doubt, it has been recognized by the board for years that this rate was the bugbear in the whole business,” he continued. “It has been necessary from time to time to meet the deficit, but the reductions in that deficit are a true indication of the progress of the board’s business. But for the increased exchange, it would have been possible two years ago for the board to carry on without a rate, and I am satisfied that the board can do so now.” The carrying of the motion would mean that £lO,OOO would be transferred from the separate account to the sinking fund, and that there would be an overdraft of about £BOOO against outstanding accounts at the end of the year. But when he became a member of the board five years ago, the overdraft was £40,000, and no mention was made of it. Last year a credit balance of £9500 was shown. “Working on an overdraft is nothing in a business like this,” he said. The cash receipts for the quarter ended June 30 this year were £2170 ahead of those for the corresponding period of last year. That was definite business, and it could be expected with confidence that the improvement would be maintained. Cause of Discontent. “It is this rate that has caused, and still is causing, a lot of discontent,” Mr McChesney said. “Undoubtedly it has had a great influence on public opinion on the proposal that the Government should take over the scheme. And rightly so. There is nothing permanent about this. The position can be reviewed when the next estimates are being drawn up in 12 months.” Mr McChesney said he anticipated criticism of the proposal to “dig into the reserve fund, which it had been proposed to use for the extension of Monowai.” He intended to ask the finance committee to go into the question of obtaining more power without extending Monowai in the meantime. He outlined a scheme to open up the Invercargill city power plant, saying that there was every prospect that a very satisfactory arrangement between the board and the City Council could be arrived at. “I am satisfied that the finance committee’s report will show that there is no need to extend Monowai for several years,” he said. “Then there is the question of obtaining power from the national scheme. That has been refused in the meantime, but if Southland stands behind the board, I am sure that we will get it. The board is not out to extend Monowai at any cost. It began six years ago to try to get additional power from the national scheme. Its first aim was extra power from Waitaki; if that is not possible, to develop Monowai.” If the vote were against the motion, it would mean that a rate of id would have to be struck, he concluded. The Invercargill City Council and the Southland County Council had found it necessary to increase their rates. “Here is an opportunity to cut out this rate, which has always been such a bone of contention,” said Mr McChesney. “If the motion is defeated, there is no alternative but to strike the id rate.” Mr W*. J. McKenzie, who seconded the motion, said that he thought the move was one in the right direction. “We have been told that all the power at Waitaki will be used up in three years’ time and that the works will have to be extended to provide further power,” Mr E. K. Sim explained. Mr T. Golden suggested that if the chairman would report on his recent visit to Wellington and his interview with the Minister it would be of assistance to the members in considering Mr McChesney’s motion. Interview With Minister. The suggestion was agreed to and the following report was then read by the secretary (Mr C. Campbell) on behalf of the chairman:— “On July 9, Messrs A. McKenzie, Sim and S. M. Macalister accompanied me to an interview with the Hon. Walter Nash, Minister of Finance, at Parliament Buildings. Almost from the outset it became apparent that the Minister was not disposed to help us in the conversion of the loan in September. We made several suggestions, first in regard to the sinking fund. The Minister reiterated his refusal to make any alteration in the sinking fund, or to extend the Government guarantee from 18 to 25 years. We then suggested for his consideration the conversion of the loan with the Government guarantee on a 25 years’ term with the right to repay in 18 years. At the end of the 18 years, the board if called upon by the Government to undertake to refinance the balance of the loan so as to release the Government guarantee. This request was also declined. “We then suggested, as had been done previously, that seeing that the London market was for the time being unfavourable to New Zealand, and seeing that the Government had funds in London, the Government itself might lend us the money at 3J per cent, (or even 3J per cent.) on terms that the board would have to pay the current rate of exchange in London on all halfyearly instalments of interest, and also the rate of exchange current upon the amount of the loan at maturity date. This also was rejected, although we pointed out that if nationalization of

all New Zealand electrical undertakings were the aim of the Government, this would be a means of avoiding heavy conversion expenses. “In his reply the Minister mentioned that as far as he was concerned he was not considering the nationalization of all New Zealand power schemes at present. The only promise he would make in the matter of the loan was that the Government would confirm its guarantee for 18 years but no longer. We then asked the Minister whether he would reconsider his decision not to give us power in bulk from Waitaki.

Extraordinary Statement.

“Although in the Government’s offer to take over the Southland scheme the Minister had stressed that the Government would be aole to supply to Southland from Waitaki up to , 11,000 kilowatts for 24 hours daily, he yet made the extraordinary statement that unless Waitaki were extended, he could not supply the board with power in bulk because, with the promised extension to the West Coast, he would only have 2000 to 3000 kilowatts to spare. That, he stated, would soon be used up. “However, he reiterated his statement that he would place no obstacle in the way of the board’s getting a licence for the extension of Monowai, and practically advised the deputation that if the board considered it could get power much cheaper from Monowai, the best course for the board to pursue was to extend Monowai.” The view that the expedient would be only a temporary one was expressed by*Mr A. le H. Hoyles, who said that he thought it would be absolutely ridiculous to bring any more on the board by passing the motion. “We have enough trouble with the conversion loan in London,” he added. In reply to Mr W. Norman, the chairman (Mr J. T. Carswell), said that the permission of the Loans Board would not be needed to transfer the £lO,OOO. “Would the Loans Board object to the overdraft?” asked Mr Golden. The chairman: I do not see how it could reasonably object. Overdraft Secured. Mr McChesney: The motion, if carried, would mean that the overdraft would be secured not only against outstanding rates, ■ but also against revenue. Mr Golden: I take it that Mr McChesney means to take £lO,OOO every year from the separate account? Mr McChesney: No. The matter would be reviewed every year. “I quite agree with much that Mr McChesney has said,” remarked Mr Golden. “The rate has certainly been a bugbear; but I think it would be only a postponement of the position ”

Mr S. Rice: What about our increasing revenue? The chairman: Even if we took the £lO,OOO out of the separate account there would still be a large sum left to go on. The position will have to be reviewed every year, but I hope that there will never be the need for a rate again. One cannot say that definitely, but the prospects are excellent. Mr Hoyles: I feel that until we know exactly what the conversion is going to cost us we should not tinker about with the matter. We may have to pay 4 per cent. yet. Mr Golden: If the secretary can assure me the Loans Board would give its consent I would support the motion. The secretary: I cannot see why there is any need to go to the Loans Board at all. Mr McChesney emphasized that if the Invercargill steam plant could be started up right away the sale of electricity might be wonderfully increased. “I am feeling that this is being forced on the board to decide before the deputation waits on us,” declared Mr Hoyles. Mr McChesney: Members are quite conversant with the whole position. They know how they are going to vote. Mr Golden: We are all anxious to get rid of the rate, but we want it abolished permanently. The view that there was an idea that the special fund would be exhausted and that no money would be there when the time came to complete Monowai was expressed by Mr Sim. He was prepared to prophesy, he said, that when the time came power from Waitaki would be available. “The Last Opportunity.” In reply, Mr McChesney stressed the fact that it was their last opportunity to make any alteration for this year, and that it was a choice between no rate or a rate of a half-penny. The conversion of the London loan did not come into the matter at all. That was only at the negotiation stage and no one could say what the outcome was going to be. Mr Sim: I cannot see where this motion is going to affect the conversion. Mr Hoyles: It is not going to affect the conversion, but the conversion is going to affect the- motion. An amendment by Mr Golden that the motion should be held over until the afternoon was lost by six votes to five. Mr McChesney’s motion was then put to the meeting and carried by nine votes to two, Messrs Hoyles and Wraytt being the dissentients.