D.—l

The State Supply of Electrical Energy Act requires that each scheme, after paying net working-expenses, shall be charged with interest on the capital in operation and with depreciation at the rate of 2 per cent, on the capital invested in depreciable assets. It also requires that out of profits remaining the schemes shall pay 1 per cent, to a sinking fund and any further balance to a general reserve fund. As a result of the amalgamations previously outlined, the statutory depreciation charge of 2 per cent, is now payable on the combined assets, and, as a consequence, this year's annual depreciation charges for each Island show a substantial increase over those of previous years. For some time prior to the amalgamations two of the individual schemes namely, Mangahao-Waikaremoana and Lake Coleridge —had each reached the 12J, per cent, statutory limitation payments into their respective depreciation funds, but the combinations which have now been effected have created a new set of conditions on which the depreciation charge has to be computed. The general position to date is that the Electric Supply Account has been able to meet all operating and interest charges, has provided £695,837 towards the statutory requirements of £1,282,086 for depreciation, and, in addition, has provided £326,484 to sinking fund and £241,419 to general reserve from profits made from time'to time on Lake Coleridge and Horahora Systems. In other words, the Electric Supply System as a whole has paid interest and operating charges and provided £1,263,740 in reserves, of which £308,145 has already been utilized by Treasury for the paying-off of loans which formed part of the original capital. Electric-supply Operating Accounts. * North Island Electric-power System. The Arapuni -Mangahao-Waikaremoana plants have operated satisfactorily throughout the past year, and the revenue shows an increase of £30,887 over that of the previous year. The result of the year's operations was as follows : — £ Capital investment at end of year .. • ■ 8,505,539 Revenue .. . . • • • ■ 712,766 Operating-expenses .. 120,927 Balance .. .. •• £591,839 This balance has been used in paying interest charges, £414,042 and £37,687, as the Department's share of the capital charges on the King's Wharf generatmgplant of the Auckland Electric-power Board, but is £10,428 short of being able to provide the full statutory contribution to depreciation. Accumulated losses" to date amount to £586,849, but the Reserve Accounts established in connection with, this system show that £959,086 has been credited to depreciation and £55,930 to sinking fund, which latter amount has been utilized m the redemption of loans. South Island Electric Supply System. The Lake Coleridge - Waitaki plants have operated satisfactorily during the past year, and the revenue shows an increase of £8,605 over that of the previous year. The year's operations resulted as under :• X/ Capital investment at end of year . . • • 4,397,871 £ Revenue . . •• • • • • ,097 Operating-expenses . . • • 35,083 Balance .. •• .. £193,014 The balance has been used in payment of interest £97,792, £78,552 has been paid to depreciation, and the remaining £16,670 to sinking fund.

X