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APPENDICES APPENDIX A—ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31ST MARCH, 1950 The General Manager to the Honourable Minister in Charge. Wellington, 23rd May, 1950. Sir, Pursuant to section 15 of the State Supply of Electrical Energy Act, 1917, I have the honour to present herewith my annual report on all operations of the State Hydro-electric Department for the year ended 31st March, 1950. Details of the progress of civil engineering works carried out by the Ministry of Works •on behalf of this Department will again appear in the Commissioner of Works' report to you and therefore are not specifically commented upon in this report. The hydraulic conditions were very good for the first six months of the year but 'thereafter they changed very rapidly, and the period from September, 1949, onwards was very difficult from an operating point of view. This subject is covered in some detail below under the heading " Electricity Control." In spite of the conditions, however, the generation of electric power reached a new high level which is clearly shown in the graph on page 12. Notwithstanding the reduction in revenue caused by electricity control measures and the costs associated with the necessity for the continued use of auxiliary stations, gross revenue rose from £3,661,405 in 1949 to £3,951,558 this year and the net surplus earned from £11,148 to £135,756. The surpluses from the last two years' operations have been transferred to General Reserve Account which now stands at £146,904. Increased costs for labour and materials are adding considerably to the costs of works under construction. When the new stations and transmission-lines come into operation from 1951 onwards, interest and other charges on works under construction, which up to that stage are capitalized but which then become payable out of revenue, will be proportionately increased. It had been anticipated, when the new bulk tariff was applied to the power-supply contracts expiring in 1953, that the resultant increase in revenue would, with the aid of surpluses accumulated in General Reserve Account, enable us to carry these increased capital charges and operating-costs until 1953 when a further adjustment in our tariff would become necessary. Now the unforeseen increase in the price of coal makes it abundantly clear we will not be able to achieve that desirable equilibrium in 1953. Even if steam running remains at the same 'level as for last year, the extra cost of coal for steam generation will exceed £lOO,OOO this year and a proportionately greater sum for any increase on last year's .-steam running. Estimates of the. financial position for the years 1950-51, 1951-52, and 1952-53 under the conditions now obtaining disclose that we must expect a series of -deficiencies for all of these years. It was clear before that in any case an increase in charges for bulk supply of power would be required from 1953 onwards, but now it would appear that some steps will require to be taken at an earlier date if our finances are to be maintained in a healthy position. It has frequently and truly been said that electricity is one of the cheapest commodities in New Zealand. Until the recent increase in bulk supply of power charges, -estimated to give the Department an increase of 7| per cent, in its revenue, New Zealanders were in the fortunate position that Over all there had been a downward trend in the cost of electricity to the consumer, and that even with other increases in distribution costs few Supply Authorities had found it necessary to increase their retail tariffs because of the adjustment in the bulk-supply tariff. Compare this with consumers of the State Electricity Commission of Victoria who, in the past tw*o years, have had tariff increases of 12 per cent, in July, 1948, 9 per cent, in October, 1949, and 6| per cent, in July, 1950 — a total of 27per cent. I mention this to give point to the fact that when our charges for bulk supply are adjusted to ensure and maintain financial stability, the increase may be substantially greater than our first increase and will, I think, inevitably call for an .adjustment of retail as well as bulk-supply tariffs.

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