QUALITY OF GAS

Waikato Times, Volume 127, Issue 21192, 15 August 1940, Page 10

QUALITY OF GAS

HAMILTON DIFFICULTIES PRICE TRIBUNAL’S RULING REDUCING COST TO CONSUMER The difficulties being encountered at the Hamilton gas works to produce a uniform make of gas of a calorific value of 460 B.T.U. were revealed at the meeting of the Hamilton Borough Council last night, when a reply to the council’s request for a reduction in the calorific value of the gas was received from the Price Investigation Tribunal. In request of information from the Price Tribunal the following letter was sent to the Tribunal by the town clerk, Mr W. L. Waddel:— “I am somewhat at a loss to know just what information you require, for I presume you are already in possession of a fairly comprehensive report from the Officer in Charge of the Department of Industries and Commerce, Auckland, who investigated our costs over the last few 7 years and obtained copies of the balance sheets, etc. If you have not received this, or the recommendations are not favourable, will you kindly let me know. “As it was not available when the foregoing was supplied to the Department, I forward herewith copy of our Estimates, prepared early in June, of receipts and payments for the current year. There are only a few items which appear to call for comment. We have had, and are experiencing, the greatest difficulty in obtaining supplies of West Coast coal and consequently have had to practically cut out sales of coke, as a suitable article cannot be made from Waikato coal. Waikato coal also will not make the same quantity or quality of gas, price for price, as can be obtained from a mixture of West Coast and Waikato coals, and the tar residual is of exceeding poor quality. Moreover, shortages of supplies of Waikato slack are compelling us to purchase greater quantities of ‘run of mine’ coal, which increases the price. These factors are responsible for the estimated drop in sales of residuals and the increased coal costs. Important Works Deferred “The item renewals of main services and meters has been placed at £2OOO, a reduction of £1904 on last year’s figure. This reduction was made, not because the necessity for such expenditure has decreased, but to enable us to balance the accounts. Some eighteen months ago we obtained expert advice on the condition of the plant, mains, etc., and were recommended to spend some £46,625 in new plant and some £14,510 in new and larger mains, but due to the war and the difficutlies in obtaining supplies from abroad, the council determined to as far as possible find other ways of meeting the position, and nearly all the works have been deferred indefinitely. We have, however, been compelled to send out gas under pressure and this in turn necessitates

the replacement of our wet meters. There are still some 1100 of these in use and as they must be replaced as fast as funds are available any surplus of receipts over payments is to be used for this purpose. “The gas engineer has informed the council that to maintain the calorific value at 460 with the plant and the coal at present available will be more expensive to the consumers, who must eventually bear the cost, than any loss they will suffer by reason of the proposed reduction. Cause of Complaints “Gas suppliers, naturally, prefer to supply gas of a calorific value which they can manufacture and distribute at the cheapest rate per therm. When the calorific value chosen is too low, the costs of distribution are increased because the distribution system must carry a greater volume, and when the calorific value chosen is too high the costs of manufacture are increased by reason of increased cost of raw materials and in many cases over-supply of the market for residuals. These facts have been recognised by Legislatures since 1920. Gas suppliers are permitted to declare in each case the calorific value which they intend to supply and they invariably declare that which they think will enable them to sell the cheapest therms. In doing so they act in the interest of the consumer quite as much as in their own interest, and all that matters to the consumer is that the calorific value should be uniform so that his apparatus will function satisfactorily and efficiently. This desideratum is also of great importance to the gas supplier. “Complaints of bad gas received from consumers are almost entirely due to faults of pressure (generally too low, but sometimes too high) but if calorific value should be the cause, it is because of variations. Mains of insufficient size, naphthalene stoppages, defective meters causing poor pressures or variations in pressure, are all the cause of what consumers call ‘ bad gas.’ There is far more variation in pressures than in calorific value and uniform pressures are almost as important as uniform calorific value. The matter of pressures in the area of supply will be dealt with in the subsequent report on street mains and reticulation. Many municipal gas works in Britain supply gas of less calorific value than 460.” “Adjustment Not Justified” The Price Tribunal’s reply stated that the district officer’s report gave full details of working costs during the past three financial years, and these figures were considered in conjunction with other information in the Tribunal’s possession. It was found, however, that at no time had the council stated its reasons for desiring to make the proposed adjustment in the declared calorific value of its gas. It was anticipated that the council’s application would be based on increased costs of production, but in the absence of a definite statement to this effect, it was decided to ask the council to state the reasons actuating it in making application to the Minister. “It is now apparent that a further reason is the difficulty of maintaining the calorific value at 460 B.T.U.’s with the plant and coal at present available, and that you are experiencing the greatest difficulty in obtaining supplies of West Coast coal,” continues the letter.

“The Tribunal fully appreciates your council’s difficulties, but after due consideration of the evidence submitted, feels that the proposed adjustment cannot be justified purely on the grounds of increased costs. It is considered, therefore, that if a reduction in the calorific value is approved by the Minister, the council should make a corresponding reduction in the rates charged to consumers.

“The Tribunal is prepared, with the concurrence of the gas referees, to recommend the Minister to authorise a reduction in the declared calorific value of your gas from 460 to 450 B.T.U. It is considered, However, that if this reduction is approved, your prices should be reduced commensurately. In view of the foregoing, I shall be pleased to learn what proposals your council has to make, with a view to passing on tojthe consumer the savings which would be effected by the proposed, reduction.” Difficulties Encountered The council in February last, in accordance with the Board of Trade Gas Regulations, made application to the Minister of Supply for authority to alter the declared calorific value from 460 to 440 British Thermai Units, said the Mayor, Mr H. D. Caro. The principal reason for this application was the difficulty with the plant and the coal available to produce a gas of uniform value as high as 460 B.T.U.’s The gas-mak-ing quality of the coal the council had been able to obtain over the last lew years had varied and deterior-

ated considerably, and it had only been by using various aids, the most effective of which was not now available, that the council had been able to maintain 460. At the date of the application for authority to amend the values the council was in a somewhat better position than more recently. Two months after the application was made a request was made for conies of the last three balance sheets and certain other information. which was supplied early in May. Later in that month an officer of the Department of Industries and Commerce called and made a personal investigation. No more was heard about the matter until July 23 when, in response to a further letter to the Department of Industries and Commerce, the council was advised the matter had been handed over to the Price Tribunal. During this interval, the difficulties in maintaining a value of 460 B.T.U.’s, had increased considerably and financially the position had also depreciated. Waikato coal was difficult to obtain, West Coast coal was unprocurable, and the estimates clearly indicated that the council was going to experience some difficulty in balancing its accounts at the end of the year. Situation Not Met Without details of the contents of the report from the Department of Industries and Commerce or the other information in the possession of the Tribunal, the Council had no means of ascertaining why the Tribunal was not prepared to recommend a reduction without some reduction in price. Despite the statement that the Tribunal fully appreciated the council’s difficulties, it was apparent that the contrary was the case. The feeling that the pro-

posed adjustment could not be justified purely on the grounds of increased costs was supported to a limited extent by the financial results to March 31 last, but was today, in liis opinion, without justification, and the council would have to do without many urgent replacements which should and would ordinarily be made from revenues. “I have come to the conclusion that without the evidence the Tribunal has, we can only hope that perhaps the Minister of Mines and his colleagues will be able to let us have sufficient West Coast coal to maintain the quality,” concluded the Mayor. “If we cannot get. the materials, a reduction of 10 B.T.U.’s in value will not help us, and we cannot cut the price of gas by 2£ per cent overall and be in position to meet our costs. The Price Tribunal’s proposals do not meet the situation, • and in my opinion we would not be acting in the interests of the consumers to accept them. bul. perhaps some way out may be found and I will therefore move that the letter be referred to the trading and finance committee for further consideration.” Mr C. Lafferty stated that he was not satisfied with conditions at the gasworks and thought that a thorough investigation into the whole matter should be made. He was not in favour of the calorific value of the gas being reduced. Mr Lafferty was the only dissentient when the Mayor’s motion was put to the meeting.