HIGH COST OF POWER

Taranaki Daily News, 13 September 1934, Page 13

HIGH COST OF POWER

HYDRO-ELECTRIC SCHEMES POSITION IN NEW ZEALAND. BURDEN OF LOAN INTEREST. Hydro-electric power schemes in New Zealand have reached a critical stage, according to Jjfr. E. Hitchcock, .M.1.E.E., general manager of the Christchurch municipal electricity department, who read a paper before the annual conference of the Supply Authority Engineers’ Association, whjch opened at Wellington on Monday. Mr. Hitchcock, by inference, pointed out that the heavy interest burden on loans for hydro-electric development schemes was a factor in preventing the supply by the Government of cheaper power. “Something in excess of 11,000,000 pounds has been raised for electrical supply in New Zealand,” said Mr. Hitchcock. “Over 8 millions of this amount bears interest at 5 per cent, or more. Of this amount, one million is subject to 5J per cent., and a million and threequarters to 6 per cent, interest. This means that in an era of cheap money, when about 3J per cent, appears likely to be a prevailing figure for some time, the community will be called upon to meet interest charges over a long period of years based on these much higher figures. Quite substantial loans have recently been renewed within New Zealand at 31 per cent. This adjustment of interest rates is not only a local development, but a world-wide movement. The loans are admittedly overseas borrowings, and therefore not subject to the same methods of handling that might be applied to internal New Zealand loans, but at least the situation seems fully to merit the closest possible investigation of the two possibilities—either conversion to a • lower rate, or early repayment by re-raising at a lower rate. ELECTRICITY AND DAIRYING. “In a country consisting of large rural areas and relatively small urban areas,” said Mr. Hitchcock, “the problem early presented itself as to how best to ensure supply in rural areas. Power boards were formed, and undoubtedly very effectively they did bring electrical supply to rural areas. Progress was made, and an extent of electrical realisation reached that was outstanding—outstanding even using the word in a world-wide sense. This rural development was, however, dependent very largely on one industry, the various dairying activities. Estimates of consumption and electrical potentialities were largely based on the assumed continued prosperity of that one industry. The depression followed, that particular industry was badly stricken, and electrical development in New Zealand faced with some thing of a crisis. “If the situation had resulted from an economic movement which it could be claimed" would follow some reasonably definite cycle,” he continued, “recovery might be only a matter of time —it still may be—but there is a factor influencing the situation which cannot be disregarded. This is the rehabilitation of agricultural and pastoral pursuits in England, with its whole train of resulting quotas and economic effects. It is therefore true that in some small measure there is a real relationship between electrical difficulties in New Zealand and electrical development in Great Britain. RURAL v. URBAN AREAS. “The resultant electrical difficulties throughout the Dominion have emphasised to an almost acute stage what has always been latent if not patent; the seeming conflict of interests between rural and urban areas. The municipalities were naturally the first to take load from the Government, and they received it on terms that were considered reasonable, and have since continued on a similar basis. Power boards followed with something of a boom development, and this in turn has been followed by the economic difficulties of the last few years. Pertinent facts lie behind the present problem; the relative wilderness is unlikely to prove to be an electrical rose.”

The fact remained, however, that power boards had now been establish-

cd throughout the country, and altered economic conditions had confronted many of them with an exceedingly grave situation, which in turn confronted the Government with an equally grave situation regarding Dominion electrical supply. This was not a problem peculiarly the heritage of the boards or of the Government, but was one in which the municipalites and the whole country were also involved. It was, in fact, a Dominion problem as to how to use to the best advantage, and save from unfortunate developments, a national heritage. The acute facts were these:— GENERAL. (a) Tire present position of the dairying industry was a national calamity, and in one of. its results expressed itself electrically. This was not the fault of electricity or of electrical administration. (b) Agricultural and pastoral developments in England might have a permanent, ultimate influence on land values in New Zealand. The value and prospective value of the land which had been electrically reticulated would be a direct measure of the value of the reticulation and the load it was capable of absorbing. (c) Tlie acute difficulties of the dairying industry and related industries had compelled more searching attention to alternative forms of power supply, with results in some cases markedly detrimental to electricity.

(d) The struggling condition of the industry had reduced the returns of both power boards and the Government, and the consequent lack of development had postponed the prospect of lower bulk charges, and admittedly added to the difficulties of the Government in giving such reductions. FOR THE POWER BOARDS. (a) It was in response to the Government’s encouragement and policy that the boards were informed and incurred the expenditure on which they now had to find a return. It was claimed that the Government therefore had some share in the responsibility, and this could best be expressed in a reduction in bulk supply charges. (b) The changed economic conditions were not of the power boards’ making, and constituted a national rather than an individual problem. (c) Electrical supply was provided at the cost of the country as a whole, and its benefits should not be localised, and still less should they be diverted to the support of other civic activities. (d) The whole combination of circumstances had given rise to-criticism from the power boards of the better bulk supply rates given by the Government to municipalities. Such criticism under the circumstances, was not unnatural. The power boards with apparent reason asked, “If a great national industry is sick, or threatened with sickness, one part of it should not be treated as though the whole industry were well and even flourishing,” and the claim was made that the disabilities which had fallen upon rural supply should be shared by urban supply. FOR THE MUNICIPALITIES. (a) The municipalities originated electrical supply in New Zealand. They took the risk and bore the burden of the early load building. Theirs were the only loads available to justify the first development. Without them, the original hydro-electric undertakings of the Government could not have been launched. (b) Without the cities to absorb the bulk of the load and bear the bulk of the charges, rural areas could not have been given the supply facilities they now enjoyed, nor could they now, if desired, initiate supply for rural load only.

(c) The load characteristics, from an electrical point of view, of the municipalities, together with their geographical concentration, merited a more attractive electrical rate than did small loads of low load factor, scattered over wide areas.

ed) The power board legislation was presumably intended to extend the scope and application of what had been established, rather than to drastically alter the incidence of financial responsibility for development. Still less was it intended to provide compulsory overlapping of areas and rating of a kind surely never contemplated in the framing of the legislation. WIDER ISSUES. “It is a moot point as to how far industrial activity can be developed . in a country like New Zealand, having a population of about one and "a half millions, only half a million of whom arc wage earners,” said Mr. Hitchcock. “Pastoral productivity per head greatly exceeds industrial productivity per head.

Both require electrical power, but while the latter could exist on local markets, the former must have overseas markets. To reciprocate, manufactured goods would need to be imported. To this extent pastoral and industrial activities appear to be in conflict in New Zealand. It is therefore difficult to gauge how far secondary manufacturing industries can be developed, and where and from whom they will find their market, while primary exports call for secondary imports. On the other hand, it may be claimed that our own electrical development is as much an argument for the greater use of electrical power by the development. Ox local manufacturing, as is electrical supply in Great Britain.” . MR. KISSEL’S OBSERVATION. The chief engineer of the hydroelectric branch of the Public Works Department, Mr. F. T. M. Kissel, said he did not fully agree with Mr. Hitchcock in his remarks as to development in dairying areas, which, as a matter of fact, progressed at a greater rate tban in such city areas as Christchurch. I regard the position rather from . the point of view that overseas competition must be met by great efficiency in the dairy industry by the installation of efficient machinery,” he said. Mr. Hitchcock had suggested, continued Mr. Kissel, that the Public Works Department had surplus power and might give it away or sell it at a cheaper rate or enter into some form of profit-sharing arrangement, but if the department once gave a cheaper rate in the hope of increasing that rate at a later date then he said it was a pretty poor hope that they had of doing it. (Laughter).