PETONE-HUTT GAS DISPUTE

Dominion, Volume 13, Issue 59, 3 December 1919, Page 12

PETONE-HUTT GAS DISPUTE

4 j PETONE OFFICIALS OPINIONS' i THE MAYOR, TOWN CLERK & GAS MANAGER REPORT Tlio Mayo: of Petono (Mr. J. W. M'Ewan) referring to the gas dispute at last night's meeting of the council said that ho proposed to deal with some aspects of the reports on the management of tho Petono gas works. Air. Uardner, Town Clerk, and Mr. Appleyard, gas works manager, would deal in special reports with several matters that ought not to have appeared in Mr. Kennedy's report without explanations. Mr. Kennedy's report had nothing but praise for tho works and its management. He said "that tho plant is not--only adequate to provide for present requirements, but is of sufficient capacity to meet demands for sumo years." That "it is built in a substantial manner, and is of modern design and well kept. The methods of working are economical and efficient. Carbonising costs iro low. Tlio works are not overstuffed. A works of tho producing powers of Petono is without precedent in the Dominion. The interest charges are the lowest in the Dominion," These comments were strong endorsement of the management- and tlio policy that had been pursued for so many years. With regard to Mr. Ward's icport ho pointed out that when he submitted figures to the Jlutt Council at a recent conference lie stated that tho figures submitted might be varied to the extent of ikwj.-.iic i.uiei way ;i ume were given for.a much closer investigation, which ho invin-ii _i ixl' ,'iutt iu assist in making. That offer was not entertained. As tne Audit officer 'had cut the sinking .fund payments <\ut of his costings, ho pointed out that when this was conceded they could lairly oll'-sct th.s by making a iM.i.ji- iui iiiin'i iiMii at Hie works, the cast of which was .A'loo per annum. lie contended that the works should bear a proportion of the' cost, of repairs to the roads leading lo the ga.,wo.l;s. If this were done tne costings for the one y-.'ar which audited accounts were dealt wiu.i, 1917-18, would show an cxact agreement between tho Town Clerk's figuivs and tho Audit Inspectors. Tihe real po-ition was that the contract between the councils was entered into in 1913, on/ year beioro the war, Ingan. On their part the basis upon which the price to be paid by the ltutt was the cost of manufacture, which at that time wtis 3s. sd. per lflUtf cubic licet, ,'lliey took into consideration as well tlio average annual increase in consumption of gas, which wr.s 10 per cent.; the small increases iu the pi \o of coal from time to timo on the yean past; tiic increases in wages dining tlio past years of operations at the works. ■Balancing up all the factors, they fixed a price tinat would show a profit of approximately 10 per cent, oil the tales—a not unreasonable return considering tlio risks ol tlie business. The Hutt was entitled to all the benefit it could get out of the contract, but on the other hand I clone also were entitled to all the benefit possible under t,he contract. The llutt had received all the.anticipated benc-fils ami letone had not. No one foresaw the tremendous consequences that had resulted from the war that started ono year after tlio contract was in operation. Hie only causo of the .contract being unprofitable to them was tho great war. •the principle ol equity therefore should be brought to bear on this contract, Other councils had treated contracts' iu this way, and l'etone Council jiaid charges over and above tho contract prieg on the liew holder. He was of opinion that Petono were entitled to 'receive their exacted profit of 10 per cent, from gas saies to the llutt, plus the amount shown to liavo been sold to the Hutt below the cost as per the auditor's figures ;mu the sum of X&O per annum referred to by Mr. Kennedy in his report. The amount was: Loss of profit (three vears), A'G/aj amount sold below cost, Mr. Ward's figures;-.£'77,1; -tar and ebko. concession (threo- years), JE7SO, making a • total of &2195; Potone thus, instead of the "reasonable anticipated profit, sustained a considerable loss. Tho benefits the-Hutt had derived from the contract were:— 1 routs as per llutt balance-sheets for three years 1917-19, .£1035;. concession re tar and coke, as per Mr. Kennedy's report, ,U7o0; sinking fund payments £U2 10s.; concessions of ad. per 1000 ft. to-con-sumers during ijio war period, . viz., August, . 1915, to July, 1917, approximately, .£1830; total, .£3757 10s. lucre was ono camouflaged item in tho Hutt "Meters and repairs" icy threo years, «£B3o—-whatever was paid for new" meters was capital, expenditure ami pmSt. -Probably A'soo of profit was hidden m this item. - Sinking funds wcro not,shown for 1919. Tho amount varied ;!i oni & year - ? u 1917 it: as 10s., .1918 ~£95, .1919. nil. Tha .small amount of profit for tho threo years which Petono had made was - j£B3B. to earn which Potono had increased tho lirico of gas by Is. Bil. per thousand, uhereas Lower Hutt had reduced tho prico of gas by 10(1. per thousand. -110 was prepared to allow the people of tho Hutt lo say whether in their judgment -upon tlio facts here sot forth- Petono was getting a square deal from the contract entered into in 1913.

Town Clerk's Report. Mr. Gardner (Town Clerk) dealt with points of the reports. Mr. Kennedy's refercnco to stocks must have been, general and not with particular reference to Petono works, becauso there was no confusion as far as stocks were concerned. It was quite truo that no proiit and loss account luid been issued (that was to say, published with tho annual balanco-sheet), but 6ince April 1, 1910, oil account had been prepared for each year. In the report it was shown that no made tho loss on Lower Hutt to bo JJ1179 for three years. This was not so, for tho rftison that ho prepared no' ■ figures for 1917. As shown' in .the report, the years'dealt with by him were 1918, 1919 and tho current year 1920, and it must be pointed out that the figures for 1920 - were based on tho estimates alone, and tho actual cost of manufacture could not bo obtained until after March 31, 1920. Concerning the loss for tho two years 1918 and 1919, tlio figures givon by him were ,£1179, by tho audit inspector a difference of JC4OC. Tho audit inspector had disallowed tho sinking fund of J3ISO a year and reduced the depreciation by .£l7 in ono year and in tho other, and had also increased tlio receipts a littlo, thus accounting for tho difference. Tho audit inspector made a most exhaiistivo inquiry into tho mattor whereas ho had to tako tho figures for 1918-19 prior to their being audited, and tho audit had only just been' completed. Tho actual differenco in tho accounts between tho audit officer , and himsolfover the three years was ,£2 75., tho audit officer making the net profit from April, 1916, to Atarch 81, 1919, .£2 7s. loss than what lie did. At the present timo manufacture was charged with interest at (ho rato of •£} per cent, per annum on a loan of .£IB,OOO, being tho amount of tho loau applicable to- tho works—excluding- .reticulations, ' etc.—at tho end of a period of years tho , sinking fund would be sufficient to wipo off tha lean, ami therefore tho interest charged against manufacture would disappear. Therefore ho submitted that if tho Hutt did not contribute, towards the redemption of tho loan it would bo participating in a benefit which'had boen derived out of the pockets of the Petono consumers. On the other hand, if it were held that tho sinking fund was proporly disallowed, then instead of'a charge of 1} per cent, on ,£IB,OOO being mado against manufacture, a charge of ]ter cent, on .G2-t,BIS should 1m made, being the valuo of the works according to Mr. Kennedy. This would have the effect of increasing the cost of manufacture as fixed by tlio Audit Inspector bv the sum of .£259, being mado up as follows:—lnterest on .£24.800 at 4 I'er cent. ~£lo M; interest on ,£IB,OOO, at -1J per cent., .C 705; a difference of ,£2S9.

Gas Manager's Report, Referring to certain statements made bv Mr. Kennedy, in his report, Mr. Appleyard (gas. manager) said that whatever had been t lie "unaccounted for cas" it had no bearing what ever upon (.ho nuestion of the dispuM between Polone and Lower llutt. The lass had to be borno bv Petono "distribution," and not bv "manufacture." Mr. Kennedv had averara! the "unaccounted for gas I ', for. ii ueriud of threo years,' and mauo' it

appear that 15 per cent. is tiic norma! Hereon I This was not correct. Durinc tlio time the sowerage works were in Clio course of progress the "unaccountea! for" was abnormal, owing to the broken mains'and other' interference' witlr the ens mains, 'i'his fact was reported to tlio council from timo to time, and also anoearcd in the I'ross, niul bearing on this point the following percentages aro interesting:— 1910-17. »er centage of "unaccounted for" oil total make of gas, 12.12; on gas' takeir hv Petono only, 10.30. 1017-18. 11.11; 18.81. 1918-tM. 5.05; 9.10. Half-year ended September DO, 11)19, 1.91:'8,1(1.. , , , Mr. Kennedy had. based his percentages on-the gas used by Petono only, and not on did whole make. Miv Kennedy also inferred that. G per cent, was the average "unaccounted for gas" usually experienced in works, but: authorities thereon all i| noted 7 per cent, to 8 per cent. This ell'ectually disposed of tlio sucreestion that in the ease of Petono the unaccounted for gas was abnormally hitrh. and moreover it' was lower than the "unaccounted for gas" at Lower Hull. the Lower JLutt figures being:— 1910-11.'1.1.0!) rnr cent.; 1911-12, 10.S-1- per cent.- 1912-13, 11-31 per cent.; 1913-11, 8.60 per cent.; 19U-15, 11.07 per cent; IDI.VIG. 12.50 per cent.: 191G-17, 10.&1 per cent..: 1017-18, 10.-19 per co;it.; 1918-19, no information. • In reference to the Hutt meter he said that - the legal, percentnw of variation (as allowed by tlio British Board of Trade) was 2 per cent, fast (in favour of (lie seller) and 3 per cent, slow (in favour of the purchaser)., With regard to the meter registering 2 per cent. fast, the inference hero was that 111 is had been in-operation for all time. This was not so. In September, 1918,' Mr. fingers, meter expert, of Messrs. Griffiths and Kogers, of Wellington, at. his request, made a test of tlio motor, and ho found ?i slight leak tlio drum of tho meter, causing it. to register between 1 per cent, ami U per cent, slow. The water line was increased 10. counteract the deficicncy. As the lcalc was so small it was not thought* nccessarv by the expert to go to tlm expense of dismantling the meter to Topair tlio leakage in the drum. Another factor to lie taken into account was that the test took place on the small consumption, and no doubt if a test could be niado durin" the hours of peak loads it would bn found that owing to the large draw off the 2 per cent, fast would bo icduced to a ner eentage slow. . Tt was decided to call a special meeting - of "the council to consider theso reports.