The Southland Times PUBLISHED EVERY MORNING. “Luceo Non Uro.” THURSDAY, SEPTEMBER 10, 1936. The Power Board’s Circular

Southland Times, Issue 22991, 10 September 1936, Page 4

The Southland Times PUBLISHED EVERY MORNING. “Luceo Non Uro.” THURSDAY, SEPTEMBER 10, 1936. The Power Board’s Circular

We very much doubt whether the Southland Electric Power Board will assist its case by the circular which it has issued to ratepayers throughout the province at the request, it declares, of a conference of ratepayers held in Invercargill last week, privately. Ratepayers will do well to compare this circular with the temperate letter sent out with the ballot papers in which the Government states plainly and concisely the terms on which it has offered to take over the Southland power scheme. The board’s circular is headed: “The Government Versus The Southland People’s Electric Power Scheme”; and that heading is typical of the kind of propaganda it contains. Ratepayers and consumers are asked, for a start, to go on paying £30,000 a year (which would be the immediate financial relief if the Government takes over, apart from other benefits) because Government control would prevent the people having “any voice” in the management of their scheme (what voice have they had in the recent controversy when the board completely ignored numerous requests for a referendum made by the people through their representatives in many parts of the province?); because Government control would mean control by a Government department “with all its red tape” (is the board so free of red tape?); because it would involve “a definite increase in the army’ of civil servants” (by turning into “civil” servants people who are already ’’local body” servants!). The circular makes the Southland power scheme seem to be a veritable gold-mine; it quotes cash funds, growth of consumers, growth of load, the value of Monowai, the efficiency of the reticulation, the decline in the overdraft, and so on and so forth. But there is one important thing which the circular does not say. It does not say why. if the scheme is the magnificent proposition it is painted, the Southland Power Board was prepared to hand it over to the Government a few weeks ago for concessions in charges amounting to a mere £BOOO a year more than it was offered. Speaking at Seaward Downs Mr W. McChesney said “the board had offered the scheme to Mr Nash if he would make a 10 per cent, reduction in the cost of power to consumers” which “was equal to £ll,OOO of the retail business.” Mr Nash subsequently 7 offered the board a reduction in charges equal to £3000; but this the board refused. In other words, the board was prepared to hand over the scheme —which according to the story told in the circular will return Southland quite immeasurable benefits in the future —for additional concessions amounting to a paltry £BOOO a year or substantially less than 10 per cent, of the present revenue! If they consider this extraordinary volte face, we do not think the ratepayers will have much difficulty in drawing the only possible conclusion.

The board’s circular pictures the State as the arch-villain who is holding out “tempting bait” to rob the people of Southland of “a great co-operative enterprise”. Now in actual fact, far from coercing the board the State has helped it in many ways. The State guaranteed the principal and interest on the board’s London loan, for which special amending legislation was required. The State agreed to renew this guarantee after conversion, contrary to its usual practice. In 1927 the State loaned the board £15,000. The board’s overdraft facilities were extended by the Finance Act, 1928. The Finance Act, 1929, allowed the board a further postponement of the funding of depreciation, giving it a total postponement of 12 years. (The board’s depreciation fund to-day on assets which it values at “over £2,000,000” is the insignificant sum of £16,411.) By the Finance Act, 1933, the State authorized the charging against sinking fund of moneys borrowed by the board to pay exchange on interest. Other local bodies have to pay exchange from current revenue. From first to last the State has helped the board; and now, when the State refuses to allow the board to fix its own terms for sinking fund on a State-guaran-teed loan, the board violently attacks it, the more particularly as the Government in power happens to be a Labour Government. As we have said before we cannot see that it is at all unfair or unreasonable for the Government to have refused the board special exemption from the general rule regarding sinking fund on a Stateguaranteed loan. The board’s original London loan of £1,500,000 was raised, on the State’s guarantee, in respect of assets with an anticipated life of 30 years: the sinking fund, accordingly, was lj per cent. After 12 years a sinking fund of approximately £400,000 was accumulated in

New Zealand. The board then of its own accord wished to take advantage of improved conditions in London to convert its loan to a lower rate of interest. Since the existing sinking fund was to be used in part repayment of the loan it was no longer available to accumulate compound interest towards payment of the converted loan. Therefore a higher rate of sinking fund—£4 2s per cent. — was necessary to provide an amount that would repay the loan outstanding within 18 years which is the balance of the original term of 30 years. The assets on which the converted loan was to be raised were the original assets — why should the life period be extended beyond the original 30 years? The State as guarantor of the loan on behalf of the people of New Zealand is surely bound to protect its guarantee, the more particularly as the board’s depreciation reserve after 12 years is something like only .8 per cent, of the value of its assets. The board declares in the circular that Mr Coates a year ago gave a “definite promise” that the sinking fund rate would be fixed at £2 10s pei- cent, and it asks ratepayers to sign a requisition calling on Mr Nash to redeem this “promise” instead of charging the £4 2s per cent, to which we have referred. In a statement published in The Southland Times yesterday and repeated to-day Mr Coates denied ever having made such a promise; and there is no evidence in Hansard, to which the board refers ratepayers, that he ever did make this promise. Mr Nash has no record of it. But the board does not hesitate to saddle Mr Coates with a promise that he says he never made and then solemnly to call on Mr Nash to redeem it! This piece of misrepresentation alone i must seriously discount any value the circular may have. Nor is it the only mis-statement. The circular declares: “Southland is entirely free from any taxation in connection with Government electric power schemes.” Now it may be true that the whole of the expenditure on the Government schemes has been charged to the Electricity Supply Account and not to the Consolidated Fund, though we doubt this; but it is a fact beyond dispute that at the present time the cost of exchange on interest due in London on money borrowed to develop the State’s electricity schemes is being met from the Consolidated Fund to which all taxpayers contribute. The cost of this exchange amounts to £llO,OOO annually. We do not say that Southland taxpayers pay any big proportion of this sum; but we do emphatically say that the statement that Southland is “entirely free” from any taxation foi’ the Government schemes is false and can be proved false by reference to the Government accounts.

Turning to the board’s finances, the circular makes a great deal of the cash assets at March 31— Sinking fund, £400,826; cash in bank, £90,425; depreciation account £16,411. Now the first of these assets was a sinking fund required by law to be held in New Zealand against repayment of the board’s loans. Certainly the Government would take it over, but it would also take over the corresponding loan liability. Of the second cash asset (£90,425) the sum of £69,000 represents money originally borrowed by the board for loans to consumers and now repaid. It is a cash asset, but it is borrowed money against which there is a corresponding loan liability. The Government again takes over the liability as well as the asset. A series of figures is quoted showing the growth in revenue, in the number of consumers, and in the load. “These figures,” says the circular, “prove progress”; and undoubtedly they do. We readily admit that the board is making progress, but many other power boards are making much more rapid progress and the fact remains that the Southland board’s business is so over-capitalized that it will have to secure further very substantial increases in its sale of power before it can make ends meet. The capital outlay involved in the Southland scheme is £32.6 per head compared with an average for all power boards in New Zealand of £15.98 pei’ head. The capital outlay per £1 of revenue is £l2 compared with an average of only £6.42 for all New Zealand power boards. But the number of units of electricity sold retail per consumer in Southland (1378) is substantially below the New Zealand power board average (2148) and the Southland consumers pay more per unit (1.98 pence) than the average of New Zealand power board consumers (1.28 pence). The units sold in Southland per £ of distribution capital are only 21 compared with a New Zealand power board average of 49. Moreover the capital cost of generation, transmission, and main substations is in the Southland scheme £7O per kilowatt while the average for all the Government schemes is £5l. These figures, which are taken from the latest official sources, are the significant figures. The board gets nowhere merely by quoting figures to prove that its undertaking is progressing, for no one doubts that. What is interesting and significant is the comparison of its capital position, progress and charges with those of similar electrical undertakings in New Zealand. These comparisons are in general by no means favourable to Southland, as the figures we have quoted show. Incidentally, the amount collected

by the Southland Power Board in rates in 1935 was £l.BB per ratepayer, while the average rate per ratepayer collected by other New Zealand power boards was .435 pence. The board persists in making vague promises for the future, as it has been doing since the controversy began. The circular contains many of them; such statements as—“the board will make a progressive decrease in charges for electricity and it will reduce or abolish minimum charges as the sale of electricity increases.” The board declares that the Government is anxious to acquire the scheme “holding out a promise of abolition of a small land rate and making vague and indefinite promises of reduced minimum charges”; and then goes on in the circular- to make promises infinitely more vague than the Government’s. There is no vagueness about the three main terms of the Government’s offer:

(1) To abolish the “small” land rate (saving £23,000). (2) To abolish metei- rents (saving approximately £3500). (3) To reduce the highest power charge at once from 7d to 64d (saving estimated at over £3000).

If the board could show, by quoting facts and figures and not opinions, that in the future it could recompense the ratepayers and consumers for the sacrifices they have made, are making, and will continue to make (should the board retain the scheme) then the verdict of the ratepayers might be different. But while the Government has made a concrete offer, what the board can offer the ratepayers in the future has amounted to not much more than a series of pious hopes. Government control will give the province an immediate saving of £30,000 for the first year. Government control will give Southland the huge resources of Waitaki—a guaranteed supply from a duplicate source, avoiding risk of interruption, of all the power this province will need. Expenditure on connection with Waitaki, making available to the people of Southland an extra 10,000 or 15,000 kilowatts for 24 hours a day, is surely a far bettei- proposition for this province than approximately the same expenditure to produce only an extra 5000 kilowatts from Monowai, making the whole Monowai plant capable of producing 11,000 kilowatts on a 50 per cent, load factor. Moreover, Government control will relieve Southland of the mortgage which now burdens the whole province, and it will relieve the province of a possibly heavy exchange liability when in 18 years’ time the converted loan has to be redeemed. We think that the people of Southland have nothing to lose and something very considerable to gain by asking the State to take over their power scheme. That they will gain in the immediate future there is no doubt; and we think the weight of evidence shows that they will gain in the distant future also. The board is appealing to the pride of ratepayers to retain the scheme for which they have made so many sacrifices, and we can understand that many people may be loath to part with an undertaking which they themselves have created and developed. But why should the people of Southland fight on against a burden of heavy rates and an uncertain future when they can, merely by saying the word, be free of it all, gain immediate reductions in power charges and good prospects of further reductions, and secure connection with the New Zealand national supply system?