IMPROVED POSITION

Taranaki Daily News, 20 April 1935, Page 9

IMPROVED POSITION

TARANAKI POWER BOARD

BIG LOANS CHANGED TO PROFITS. GOOD PROGRESS MADE SINCE 1929. PRICE REDUCTION THOUGHT WISE. The marked improvement made in the financial position of the Taranaki Electric Power Board during the past year and over the last two terms since 1929 was traced at the board meeting at Eltham on Thursday by the chairman, Mr. H. G. Carman, and members of the board, particularly Mr. N. H. Moss, Stratford. Mr. Carman dealt mainly with the current financial aspects of the board’s work but Mr. Moss went back to March 31, 1929, when the board showed a loss of £10,650 and outlined features that had since that time enabled the board to show a small profit both last year and this year despite reductions in charges to consumers.'

The chairman stated that the provisional balance-sheet for 1934-35 showed an addition of £248 to the net revenue account. The principal item of revenue was £42,044 from the salb of electricity. The cost of producing and distributing (including power purchased from the Public Works Department), was £9929. Interest and principal repayments on loans totalled £26,299, and capital items and depreciation fund payments, £2120, and administration costs, £4OlO. Stocks were reduced by £667 during the year, the repairs department showing a profit of £BB. Capital expenditure during the year was £9416, mainly on the Waitara main transmission line and . sub-station and Clifton county reticulation. A reduction of Id per unit was made in the charges for small motors as used for milking machines. That concession, based on the ; .evious year’s figures, represented a decrease in revenue of £2717, and a saving of a similar amount to those consumers.

Increased consumption of 55,577 units during the year reduced the anticipated decreased revenue under that heading to £1636, the comparative figures being £12,201 for 1933-34 as against £10,565 for 1934-35. GENERAL RESERVE URGED. The time had arrived for the. board to consider and adopt a definite policy of establishing a general reserve. Until three years ago the board was fortunate in having the use of the full amount allocated to the depreciation' reserve. That fund, in addition to the current annual allocations, was now being paid to the depreciation fund commissioner at the rate of £623 per annum. Until a reserve was established to replace those . payments, they would require to be paid out of overdraft. As the total payments spread over the next 11 years would amount lo £6852, it was obvious some steps must be taken to avoid any eventual increase of the overdraft.

The depreciation reserve was at present represented by stocks, advances to consumers, stoves and motors on hire and credit accounts. The amount paid on the board’s loan indebtedness for 1934-35 was: Interest £19,318 and principal repayments £6992, a total of £26,310. This year, including thb Clifton and supplementary loans, the payments would be: Interest £19,694, principal repayments £7917, a total of £27,611. The latter amount would be required annually for the next 'ten years, and, although the amount required for payment of interest would'be about £3OO less each year, the proportion of principal repayments would be correspondingly increased, As the principal repayments increased, the amount payable on account of the depreciation account decreased. By transferring annually to a reserve fund a sum equal to the reduction of the payment to depreciation fund, as between the amount paid last year, via., £2lOO, and the ■ amount due to be paid each succeeding year, a substantial reserve fund would be assured. In seven years, that fund would, be at least sufficient to replace the depreciation reserve, and thus assist in keeping down overdraft interest. “I think we should, when making the estimate, consider restoration of salary cuts,” the chairman added. Mr. Moss: We? You mean the new board.

The chairman: Oh, I think we will be back again. Mr. Moss: Optimist! It was pleasing to see that a small profit was shown even though certain charges were reduced,-Mr. Knuckey said. He hoped that further reductions could be made next year as some of the charges were fairly high. SMALL PROFIT SHOWN. For the second year in succession the board had balanced the budget and shown a small profit, Mr. Moss said. The present board could look back on six years of definite progress. At March 31, 1929, . there was a loss of £10,650 and at the start of the current term of the board at March 31, 1932, the loss was £5500. Now at the end of the term the board could show a small profit for the second time. The revenue during the past year was less than for the year ended March 31, 1932, when there was a loss of £5500. That decrease in revenue was due to the loss of the New Plymouth bulk supply and decreased charges to consumers. The reason for the profit this could be found in reduced costs, of which the interest reduction of 20 per cent, was an important factor in the board’s being able to balance its budget and those people—he did not mean the board members—who opposed the introduction of the 20 per cent, cut might well reflect on that point. When the reduction of Id per unit for current used by milking motors was made it was expected that the board would lose substantially, but careful management had enabled the board to show a profit at the end of the year. The revenue for the coming year should be at least £lOO0 z more than the revenue for the year just closed, because there was an increasing demand for electricity. The board’s term of office had been a very busy one, Mr. Moss said. The board had put through its conversion loan which would provide a substantial saving and place the finances of the board on a sound basis for all time so that in 25 years’ time the board would be practically free of debt and consumers then, would be very fortunate for charges would be very low. The board had completed supply to the Inglewood borough and the contentious question of supply to Waitara was finalised. Much of the work in respect of these matters had to be done in committee and ratepayers had no idea of the time taken to bring them to a successful issue. During this year Clifton should be connected with the supply system and have the benefit of power. The future activities of the board would therefore be chiefly of an administrative nature.

Dealing with the chairman’s suggestion regarding reserves, Mr. Moss thought that the first objective of the board should be to get charges down to as low a figure as justified by the financial position as he did not favour collecting revenue from consumei-s to put to reserve. The chairman seemed to be changing his attitude of about a year ago when he

wanted to get £7OOO on overdraft to build the Waitara line. The plan was definitely opposed by a number of the board members and in the light of subsequent events that opposition was justified, because, had the sum been found from overdraft instead of loan, the board could not have reduced charges to consumers.

There was £500,000 involved in capital in the board’s undertaking and the revenue amounted to about £lOOO n week so that management called for activity and conscientious service on the part of board members. He .would offer himself for re-election and if he were returned he would give consumers all the service that was in his power. Consumers should appreciate the. reductions that had been made especially on current for milking motors, Mr. M. Gernhoefer stated. He thought that the Tariki area and perhaps Huiroa would be reticulated at some future date but it might be many years before power was carried to the outer districts.. It was said that the Tututawa district people were anxious to secure power and had a signed guarantee ready but no more had been heard of the plan. REDUCTION HOPED FOR. Mr. C, E. Foreman felt that more revenue' would be received from Clifton than was expected or guaranteed. He hoped the end of the coming year would prove his statement and that a reduction in the charge of current for milking motors would be possible .there as well as in Central Taranaki. Mr. J. Dobson did not favour putting money to reserve and providing for depreciation, too. No reductions could be made to. the consumer if both funds were maintained.

The question of reserves was one for careful consideration, Mr. H. Marchant stated, and he considered there was no advantage yet in building up reserves. The bold step in connection with milking charges was the right step. Ratepayers could feel that the board had coped with its problems successfully and with prudent administration there was no reason why charges should not be reduced to a very favourable level. Despite cuts in salaries the staff had served the board splendidly and the board and consumers too appreciated the service given, he added. Replying on the matter of a reserve fund, the chairman said it would not be necessary to increase the annual appropriation. His suggestion was that the reduction in appropriations to the depreciation fund be devoted to reserves. The total amount paid to depreciation and reserve would then be the same as was paid now to depreciation alone. (