STEAM PLANT

Wanganui Chronicle, Volume LXXXI, Issue 18973, 26 March 1924, Page 5

STEAM PLANT

COUNCIL DECIDES TO SELL POWER BOARDS OFFER ACCEPTED The offer from the Wanganui-Rangi-tikei Power Board (previously published) to take over the Wanganui steam plant came before the Borough Council last evening. The Mayor (Mr Hope Gibbons) moved that the offer be accepted, and that a committee consisting of the Mayor, Crs. Green, Gohns, Burnett and Brown be set up to arrange the details. Cr. Brown spoke in support of the acceptance of the offer. Cr. Luxford said the crux of the matter was what ” reasonable rate” should be paid for power. The mistake that the Council made at the start was joining with the Power Board. Cr. Richardson considered the offer was a liberal one, but they should be careful to make the best provision for the ratepayers. Cr. JSpriggens considered, after the ratepayers’ vote, there was nothing else left but to dispose of the plant. Cr. Gohns said he was sorry that they had to entertain the selling of the plant, but after the vote of the ratepayers there was nothing else for it. Cr. Burnett said in spite of minority representation on the Board they could count on getting fair treatment. It was proper to regard the matter from a wide point of view. Cr. Halligan said the only point was to get the .best price of power for the trams. The Mayor said if the Power Board made any profit Wanganui would get 25/26ths of it. The Board had been given powers by the Minister that the borough did not have. The steam plant had gone £.35,000 to the bad, and would lose £lO,OOO every year if they went on. The Board had taken a very broad view of the matter. The motion was carried unanimously. The report of the tramways egineel (Mr F. P. Taiboys) on the matter was as follows:—• TUB POWER BOARD OFFER. The Power Board to take over at cost the steam plant and reticulation and become sole controller of the supply of electricity to the public of Wanganui. The Power Board w r ill pay the losses on the power plant and reticulation, to date, amounting to approximately £35,000. GENERAL COMMENT ON POWER BOARD OFFER. The following matters should be given weight in considering the foregoing offer: 1. —The constitution of the Power Board. Greater Wangcaui will have four members on the Power Board, while the country districts will have eight, consequently in a conflict of interest between tow’n and country, the town will be in a hopeless minority every time. Control by the Power Board means control by the country members. 2. —Such a conflict of interests actually exists, and ns unav idable. 3. —The profits from the sale of current must be mainly made in the town, where the demand will 1 e greatest and the distributing costs will be less. If these profits go to reduce the charges, it is clear then that the country districts must benefit at the expense of the town, and much more so if the profits are used as they certainly will be to extend reticulation in country districts. 4. —The profits made in the town would be considerable. All municipalities find their electrical undertakings profitable. These profits can be used to reduce the charges to our own consumers, and also to benefit other municipal services. Tramway services, for instance, are in some cases run at a loss, and are carried on primarily because of the great public convenience. By adding an electric department to the. tramways, extensions to this great public utility can be obtained without loss to the community.

s.—By parting with control, the borough would lose the power to foster new industries by temporary or permanent concessions in rates.

6. —The efficiency of street lighting!, lighting of public parks, etc., will largely depend on its cost, and will therefore be dependent on the Power Board which fixes the rates. Lighting for open-air entertainments or any charitable purposes which the Council might desire to encourage, could not be expected to be given gratuitously from the Power Board. 7. —The Power Board has fixed its rates for to-day, but no one knows what the rates will be in seven years’ time. It is certain that for a long time the Power Board services will be run at a very considerable loss at the present rates over the w’hole system. This loss for the first seven years is to by capitalised, and at the end of these seven years will mean a heavy interest charge to be added to the present costs. INVESTIGATION OF POWER BOARD’S OFFER. I.—The Power Board’s oK*tr includes paying the loss up to date on the steam plant and reticulation, which is approximately £35,000. This looks attractive, but w’hat can be done with this sum? Can it be unconditionally available for the relief of rates or towards the running expenses of the tramways, or would all or a portion of of it have to be paid into the sinking fund? If placed to the account of the tramways it would only make up the deficiency, which will result if the electrical part of the undertaking is disposed of, for a period of, at most, five years. A

2. —The Power Board takes over with the steam plant and reticulation the loans for plant taken over. In return the borough must become part of the Power Board’s rating area. This means that Wanganui would b come liable for a proportion of the Power Board loan of £375,000 recently raised. This turn will have 0 be added to approximately £IBO,COO monies required to pay for the steam plant and reticulation. This gives a total loan of £555,000, plus £35,000, and equals £590,000. As Wanganui is one quarter of the valuation of the whole rat ing area, it will carry the responsibility for a loan amounting to £147,500. This does not seem a great improvement on the present position, as Wanganui is only now liable for a 9sd rate, approxb mately £9500. 3. —For a cash bonus of £35,000, and a reduction of loan responsibility or £33,000, Wanganui is asked to part with the control of 1 s own electrical enterprise within its own area.

4.—The principal effect of this surrender of control will be as mentioned before, that the profits which might be derived from this enterprise will go to reticulate the country area. As a municipal enterprise this electrical undertaking could be made to yield a profit without hardship to the consumers, as is now d r ue in the matter of gas supply. In fact, the supply of electrical light and power is looked upon in most municipalities as the most profitable municipal concern. The need for such profits to meet prospective losses in present municipal enterprises is impcrath )ly great. The tramway extension to the cemetery is being run at a loss. The proposed St. John’s Hill extension cannot possibly pay. The taking over of the Gonvillc and Castlecliff tramway system will, for years, involve a heavy annual loss. Both the tow r n and the Gonvillc-Castle-cliff tracks require considerable expenditure to put them in a proper state of efficiency for the traffic they have to carry. Town consumers, it should be noted, will not benefit in any way by the suggested change, the "owrer Board rates being practically the same as the borough rates. ALTERNATIVE. My personal opinion is that it would be a serious mistake to accept the Power Board’s offer, and so lose control of an important municipal service, and one which will in the nc .r future be a valuable source of revenue, the profit from which could be used to assist other useful but less profitable services. I suggest as an alternative that the Council should keep control of so important an undertaking and take power in bulk from the Power Board with or without Gonvillc and Castlecliff, but preferable with the two latter bodies. Should the Council decide to accept the Power Board’s offer then I would asck for the following conditions: (a) —Power for trams, street lighting, and other municipal requirements in the and any extension thereof must be supplied to us on a unit basis, and the price must not exceed Jd per unit, provided that in the event of any rise or fall in the Government standard rates charged to the Pow*er Board, this price shall be increased or decreased in the same proportion. (b) —That the prices for electricity supply to the borough or to any extension thereof shall not exceed rates quoted in the Board’s pamphbt recently published. (e). —The borough : hall reserve the right to supply all D.C. elevators from tramwav mains.

(d). —The tramway system and municipal services must have first call on the plant, and power muse be m~de available for these purposes at all times.

(e) The Power Board shall provide a sufficient sum of money for the croc tion of a suitable brick building as a sub-station for tramway and street lighting purposes, and the removal and the reinstallation of the existing tramway plant, switchboards, mains, etc., to suit the requirements of the Borough. (f) The Power Board Act gives the Governor-General power to fix the number of representatives from each constituent district from time to time. As the number of consumers in the Borough will be the in the Power Board area, I would suggest that the representation should be in equal proportion. (g) I would also suggest that the Power Board indication of its policy in rcfnrd to methods of rating, i.e., whether it is intended to make a uniform rate over the whole district, or whether it is proposed to levy separate rates over different portions of the district. If the Board takes over the power plant and reticulation, the charges on the old plant will have to be borne entirely by the tramways. In addition, the capital charges of the Gonvillc and Castlecliff lines will also have to be added to the annual charges of the tramways with no compensating results.

The electricity for electric light and power supply can be generated at little above the cost of fuel, when the supply for trams has to be generated and the returns from sale of electricity are therefore very profitable. So far the tramways have borne the brunt of the losses due to power troubles, and should now’ receive the assistance of the profit from the sale of electricity. Extensions to the tramway system, which of necessity must prove unprofitable for some years to come, were authorised under the assumption tjjat this assistance would be forthcoming. Further, the new Government regulations will require further expenditure on rolling stock, or as an alternative restrictions will be placed on our earning capacity, either of which will have an adverse effect on the financial position of the trams. The permanent way will also require greater expenditure each year as the track gets older and heavier duty is imposed on it by the increased traffic conditions. As no depreciation fund exists this expenditure will have to be met out of revenue. To make the position more clear, I have prepared a statement of income and expenditure showing the present position in the event of us selling the electrical undertaking and receiving our power for trams at say Jd per unit. It will be noticed from this statement that a fairly heavy annual loss would be unavoidable. In a nutshell the position would be that we would part with our profit-earning side of the system; would continue to be rated for the tramways, and in addition would be, rated by the Power Board at the expiry of seven years, when under present circumstances we should be making a large profit. Estimated Statement of Receipts and Expenditure for Tramways, less Revenue and Expenses Electricity Dept.— Fares, £40,000; sundry receipts, £lOOO. Total £41,000. Expenses.—Power, 1,250,000 units at 3d, £3900; operation converter station, say, £600; traffic, £16,250; general say, £3150; repairs and maintenance, say £10,000; capital charges, £13,990. Total, £47,890. Deficiency, £6890. Add charges on Gonvillc and Castlecliff loan, £2520. Total £9410.