POWER BOARD YEAR.

Shannon News, 24 April 1928, Page 4

POWER BOARD YEAR.

A SATISFACTORY REPORT. PROFIT EQUIVALENT TO SIX PER CENT. A very comprehensive report on the, year’s working of the Horowhenua Power Board was submitted, together with the balance-sheet, by the secretary and treasurer (Mr. P. W. Goldsmith), at the monthly meeting of the Board on Tuesday. The report, which is the sixth'annual one, is as under:— New Legislation. By the parsing of “The Electric Power Boards’’ Amendment Act, 1927,’’ important changes have been made in, ■the law with regard to the security of Power Boards in respect to service: lines and installations erected upon? property w\hich became a charge upon the land and were recoverable as rates are recoverable. By the amending ofj the Act last session, lines and installations are no longer a charge upon: the land, unless the owner and also thei mortgagee or mortgagees (where there; are mortgagees) consent in writing to the erection of lines and installations prior to the work being done. Another important matter in the new Amending Act relates to depreciation. It is now provided that all Power Boards must make and establish depreciation funds against depreciable assets, the amount of such funds to be determined by the Audit Department, unless an appeal is made to the Minister for Public Works. The secretaries of the various Power Boards have now received advice of the percentage of depreciation of the ! various assets of the Board which "will satisfy the Audit Department. . A list of these assets, with the respective percentages required, has been prepared for the information of the members and is available with this report. Provision is made in the Act that Boards are not compelled to invest the depreciation funds for a considerable period, but all Boards as from the Ist April, 1928, must establish the fund on the lines laid down. Income and Expenditure. Total income, £41,352 19s 6d. Total expenditure, power £16,113 7s 8d; working expenses, £9750 17s; depreciation, £2784; capital charges —interest, sinking fund and principal repayments, £12,165 3s Id; total, £40,813 7s 9d. Balance, being net credit for the year, £539 11s 9d. ; Particulars Concerning Income, i Electricity sales—lighting, £13618 Is sd; heating and cooking, £5182 19s 4d; power, £15675 12s 7d; water-heaters, £2805 14s; street lighting, £llß2 8s 2d; total, £38,464 15s 6d. Other items sh,own are meter rents £lO9l 2s lOd; penalties £262 13s 3d, cottage rents £270 12s 3d; supervision, recoveries and .Sundries £llß Is lOd; gross profit from trading account £386 14s 2d; interest on installation accounts and deposits, £758 19s Bd. particulars' Concerning Expenditure. Power purchased from Mangahao, £16,113 7s 8d; main substations and distribution charges, wages, renewals, etc., £3451 7s lid; salaries, £2717 17s 6dj transport, £B4O 4s 4d; chairman and members £412 5s lOd; meter reading £339 18s lid; accounts written off (5 years), £3Ol 19s payment to Shannon Dairy Co. (non-recurring), £300; insurances, £296 8s 9d; office rent and cleaning £199 Os 4d; telephone and postages, £167 4s lid; printing and advertising, £143 15s lid; outside collectors, £llO 14s 3d. The balance on the expenditure side is made up of rates, street lamp renewals, motor registration, stationery and many sundries. Comparisons of Income.

Comparisons of Expenditure. Power purchased

Trading Account. With the cessation of installation work the trading account only assumes .small ..'comjpa4dd 'with former times. We commenced this year with stock in hand valued at i £540 15s 9d, and at the close of 'the I year the value is put down at £429 8s od. Purchases came to £IOB7 12s 6d, and sales to £1599 14s. The gross profit of £386 14s 2d appears in the income and expenditure statement. Nett Revenue Account. A perusal ®f this account will show that for the year under review we have £731, insulators £l7l. The balance is about fairly held our own. Interest on loans and sinking fund has been provided to the extent of about £12165, and the amount set aside for depreciation is £2784. This leaves a modest credit balance on the year’s working of £539 11s 9d. It will also be seen that the interest on advances to consumers produced £621 4s 6d and that i the money on fixed deposits at the Bank earned £137 15s 2d. The amount carried to the balance-sheet is £7170 3s Id, which is the amount brought down from the previous year, plus the

credit balance of £539 11s 9d as aforesaid. . Depreciation, 1928. The accountant, Mr. Ramsay, has prepared a table showing how the amount reserved for depreciation is made up. Capital Rate Amt, outlay 31/3/1927. £ £

General Balance-Sheet. Coming to the general balanee-sheet the following matters prove of interest: Reserves. —Debenture redemption reserve represents the repayment of loan money out of revenue in connection with the table-mortgage loans from the Government Life Insurance Department. The amount already paid is nearly £2OOO, to be exact, £1998 10s 3d. Sinking Fund Reserve in connection with the £BO,OOO loan from the A.M.P. Soeiety now stands at £44t>9 9s 9d. This money is invested with the Public Trustee. Interest Reserve: This reserve of £BOOO, established in 1920, is si ill in the Board’s biH’ness *nd has not been separately invested. Fortunately the finances of the Board have so far been strong enough to carry ou without drawing upon this reserve. Depreciation Reserve: This has already been dealt-with in this report so .far as the present year is concerned. It will be remembered that last year the sum of £2OOO was set aside for this purpose, consequently we have now £4784 in this reserve. It seems that, although the Board is not compelled to invest this money for some time to some if it so desires, yet on the other hand, as the money is now available, it might be the wisest policy to, make the investment forthwith.

- Sundry debtors. —The total amount ,under this head is £1,4187 16s Bd, a 3 against £19,905 15s 5d last year and £22,647 8s 3d in 1926. The amount outstanding for installations and service lines included in the above total is £8596 8s 6d, as against £13,726 19s 10d in the previous year. As previously pointed out, as the quarterly accounts for March are mostly outstanding on the 31st of that month (the close of the financial year), the outstanding accounts for electricity will always be fairly high on that date in every year. Last year there was outstanding for electricity £6178 15s 7d. This year the amount is down to £5591 8s 2d. The effect of this is that the cash receipts for the year for electricity exceed somewhat the revenue for the year. It may be noted that the amount paid for installations and service line counts during the year amounted to £8312 11s. - Cash at Bank.—lt will be seen that the cash at ,Bank amounts to £12,514 19s 8d in the power fund or revenue ac count and £2115 4s 5d in the loan ac- 1 count. Of these amounts, sums on deposit and earning interest are as follows:—Power fund account, £8037 10s; loan account, £1605 12s 6d. Loans. During the year a further loan of £IO,OOO was raised from the Public Trust Office, the term being for 20 years, the rate of interest 6 per cent, and an annual sinking fund of 2 per cent. The loan money was paid in instalments and up to the end of the year £BOOO out of the £IO,OOO had been received. The statement of accounts shows that at the 31st March the,loan money received to date amounted to £IBB,OOO and the amount expended on works was £181,374 13s. The expenditure for the year amounted to £9637 10s Bd, bud for service lines, etc., there is an amount of £991 15s' 5d recoverable, which > makes the nett expenditure for the year £8645 15s 3d. The stocks of material and goods on hand i paid for from loan account stand at £4263 19s sd. • The principal items making this amount are transformers £1219, copper-wire £896, poles law, but there was provision for an made up Avith the cost of various line materials, bolts and sundries. It will be remembered l ' by the Board that it is the usual custom to pay the first year's interest , and sinking fund out of loan money. With regard to the last loan of £IO,OOO from the public Trustee, it is proposed to pay tile interest and sinking fund from the start out of revenue, which means that a sum of £BOO will be saved to the loan for use in further reticulation and development of the district.

The Board will understand that the bulk of reticulation work is completed and the reserve and unexpended loan moneys has come down to a few thousands. It would be a good policy for the Board to decide what further roads 1 are to be reticulated and to get the work done with little or no delay. It would also be very advisable to retain a moderate amount of loan money to meet any small extensions which may be required, say, within the next three or four years. It is hardly to be ex pected that during such a period the revenue account will be able to bear the cost of extensions which should be paid out of capital. A small reserve of loan money for the purpose would be very handy. General.

The shortage of power on account of a diminished rainfall and water short-

age at Mangahao has adversely affeet- i ed the Board's work and consequently the revenue for the year. Undoubtedly the position Avas most unusual and was not only handled by the Public Works Department Avith skill and judgment, but the public generally took; the curtailments and disadvantages in a good and helpful spirit. The fact,: 1 hoAvever, is very patent to all Avilling to obserAm, that the Board's revenue lias, been considerably reduced, the actual loss being in theneighbourhood of some; £7OO or *#o, and the losses in other; ways would lessen the revenue for the. year Avell up to the four figures. The; Public Works Department has, how-i ever, met the Board in a reasonable; way over the charge for electricity for the quarter. The Department divide a the quarter into tivo periods and| charged for the first period on the peak; when the load Avas unrestricted and for the second period on the peak of the restricted load. The result is that the Board’s bill for the quarter is ,£3820, AA r hereas, if the account had been made! up in the ordinary Avay and on the highest peak of the quarter, the amount Avould have been £4350. A reduction ol ; £530 in the account seems to be quite! fair. Although the Board’s loss of re-1 venue is certainly much in excess of ; the concession made by the Department, yet undoubtedly all should take their share in a loss brought about by very unusual and certainly unforeseen circumstances. * As members of the Board are aware, the Summer-time Act has been in operation for four months of the year under review’. It is not possible to give any definite figures as to the lessened consumption of electricity as the result of the operations of the Act, and even an estimate might not be very reliable. It is, however, safe to shy that from the electricity receipts the diminished revenue was not a \mry serious one. . Every summer many of our. consumers do not use the minimum allowed for 5s per month, and doubtless this season, with the Summer-time Act in force, there were no more consumers A\ r ho did not reach the minimum. Conclusion. On the whole I think, considering the times, and the difficulties encountered there is reason for satisfaction at the state of the Board's affairs. No doubt, if there had been larger profits, a reduction in some of the rates charged to consumers could have been made in the coming year, but as the matter noAV stands the Board would have to give A r ery careful consideration indeed to the general financial position and outlook before reducing; any of our rates at the present time. When the finances Avarrant a reduction, I should place the milking poAver rate at 4d instead of 4id per unit, as the first to receive consideration; then commercial lighting rates and a revision of the

minimum charges should receive consid eration in the order named.

All connected with the Board, I believe, arc alert ancl anxious for new openings for the use of electricity. Developments in divers ways show that electricity is a wonderful servant, and only the beginning of its usefulness has so far been found out. New sources of reAmnue must be looked foi so that an increased consumption may herald lower rates. The year has passed without '"friction of any kind. x I think, I may safely say that the engineering and outside staff, the office staff, finance committee, and the Board itself have worked for* the good of the undertaking and the benefit of consumers of the Horowhenua Electric Power Board district. The Chairman’s Comments. The chairman stated that he had not been able to go carefully into the balaneQrsheet, as it had not been possible to complete it until Monday, as the see•t«tary had not known AA T hat the Public Works account was going to be. The secretary said the Board would need to decide Avkat amount of depreciation fund it would provide. The rates Avere by the auditor, under appeal to the 1 Minister in case of dispute. The Board had to provide for depreciation on £141,000.

The chairman said it would'be hardly fair to ,gsk the B.oard to go into a general discussion on the report and balance-sheet at this meeting. He suggested that the best time-for a general discussion of affairs as low revealed would be - when the estimates “were bo fore them, at the' next monthly meeting. He felt that he could not allow the occasion to pass without making some comments on the position. He would like to express appreciation oi the way in which the secretary and staff had worked to get out the balance sheet and the report. Coming to the year’s actual working, it revealed that the Board had made a profit, though not a very large one. When they looked around the district and noted their industries and consumers generally, he thought they must have a feeling that probably the district, as it is at pre sent existed, had nearly reached the saturation stage as far as electricity was concerned. It appeared to him that any big profits that this Board might contemplate making in the future must come through some other avenue —the use of' electricity by some other industry. Probably the domestic load could be extended, but they had the fear that the flaxmllls’ load might not keep up to the high standard of consumption of to-day. "While this was not the most profitable load which the Board had, it was an assured revenue and one that had been very helpful to the Board. Ho hoped that the mills would continuo to exist, and even increase their activities. It had occurred to him that it was possible for other industries to spring up in connection with this, and use more power. The Board had reached a stage where the biggest portion of the district was reticulated and the use of electricity was pretty general.' While the Board had made a profit, it had not allowed a very big margin. Any alteration, from the present method of working must be towards economy if the Board was going to make a reduction in its charges. Taking the report and balance-sheet as compared with the estimates, one

factor was apparent, and that Avas that the cost of their electricity for the year had been greater than, they had estimated; and, compared with many other places dealing in electricity, their bill for current was probably a little higher in proportion as compared with their rei’enue. The Board appeared to haAMj to purchase its cutrent more on the peak load than some other authorities did Avho were able to spread their load a little mote; The Board could take credit for the fact that the capital expenditure J. or reticulation of its district Avas comparatively low. The amount AA’hich they had to find for depreciation, under the neAV legislation, was therefore lessened. The huge -capital expenditure in some areas meant that a much higher amoxint had to be found for depreciation. Coming to their sources of revenue, the chairman continued, they found that there Avas a general increase all round, except in certain cases. They had not expected the street lighting to' increase much — it Avas dOAvn Giving to the curtailment of electricity during the drought. The trading account was dojvn, as they had expected, and it Avould probably not show niuqh. profit in future. Meter rents wefre alfeo loAvey, and now they had gone completely. The Board might receive a.little out of community lighting. In the general expenses, one matter Avhich might liaise struck members was that which eame under.the head of management find general. For 1928 this cost \\>as £5636, as compared with £3905 in and £2567 in 1926. This did not mean that there had been a heavy increase. The explanation was that very little ivas now being charged to loan account,, and more to general account. The " Board had in hand an interest reserve fund of £BOOO. That was the first amount of money that they had put aside. Though that money was actually made from the Board’s revenue, they had been able to put it aside when paying interest. And sinking-fund iOut of jjoan. It'?? i would be as Avell to leave it there for a | few years, because they never knew when the Board might fall on evil times and Avant a sum Avith which to pay interest. An important question had been h.ow the legislation . passed regarding a depreciation reserve was .going to effect the Board. The tabic worked out by the accountant showed the position very well. Though they were below the mark last year, the amount for depreciation , this year workgd out at £2785. As far as he ■could see, in going through the amounts ;set aside for depreciation, they, appeared fairly reasonable. The sum of 18 per cent for trucks, tools and equipment seemed high for this Board, because they did endeaimur, with an [efficient workshop staff, to keep the trucks and cars up to a fairly high istandard. A- question which members should take into consideration was the investing of the depreciation reserve. Boeing that the Board actually had the money, Avhich would earn a few pounds bn fixed deposit, he : thought it would be better if it was properly invested, so as to earn the full rate of interest, and to accumniulate. The Board would have a letter opportunity to discuss the matter fully. ■ i | The chairman added that he would like members to give consideration to the question of further reductions in the Board’s charges. If possible they should, this year, reduce the charge to dairy farmers from 4Jd to 4d for the first hundred units supplied. Apparently there was no good reason why farmers should be charged as against other users at 4d. Tfc had been pointed out to him that if the Board was a private concern, it would be expected to pay a dividend. If they took the amount which the Board in interest for the year and added its profit to that, it'would work out at about 6 per cent on the? capital invested in the concern. The chairman moved that the report be adopted. He remarked that- it was one for which they had to express appreciation, in consideration of the full manner in Avhich the secretary had. handled the subject. The year’s working, from the Board’s point of view, was satisfactory. Although it left some food for reflection in the future, he had no doubt that the Board would come out on the right side of the ledger. The Board would have had to use £6OOO held by it, to tide it over, if the position had worked out according to the estimates. Mr. Seifert seconded the motion. He remarked that the year had been extremely satisfactory to the Board. From AAdiat he had seen of the accounts, the members of the Board and the ratepayers had every reason to be satisfied. He took the opportunity of congratulating the engineering staff and the accountancy department for the AAAay in which the statements had been put before the Board. The Board appeared to be rapidly ivorldng into a very good position. Owing to the sinking fund; the Board would in time be able to carry on Avithout any liabilities. He thought also, with the chairman, that the district was approaching, more or less, the saturation point, unless something unforeseen occurred, so they must look to see where 1 economies could be effected in the future. That was a question which the Board would have to go into very carefully. • ■ . , The motion was then carried.

1926 1927 1928 £ ; £ £ Lighting and .. Heating 11260 12193 3747 13628 5183 Power 11864 14548 15676 Water-heaters 2173 2S06 Street Lighting 1153 1228 1182 Totals .... £24277 £33889 £38465 Meter Rent . 1083 1697 1091 124 262 Cottage Rents . 175 218 271 10 16S 118 Gross profit on trading account 1478 648 386 £27106 £36744 £40593

from Mangahao 9300 Main substations 14020 16113 and distribution charges, including meter reading and transport 1872 4132 4632 Public -lighting .. 11-2 Management and 140 83 5036 general .... 2567 . 3905 £13851 £22197 £25864 Capital charges and depreciation .. 11319 11229 14949 Totals .... £25170 £33426 £40813

Primary lines .... 48181 2p.c. 96 Secondary lines .. Main substation 48055 3p.c. 1442 (indoor) £5169 Less for building Shannon spb. £795 Distribution substa4374 . 3p.c. 131 tions (outdoor) 12806 4gp.c. 60S. Public lighting Trucks, motor cars, 1477 4fp.c. 70 tools, equipment 7044 18p.c. 1268 Meters, instruments, office furniture Buildings (concrete] 9S86 3p.c. 297 £8313, add for Shannon sub 795 9108 ip.c. 23 Totals £140,931 £4S03 Deductions: — £ s d Sinking fund instalments . 800 0 0 Principal repayments .... .. 864 18 2 Renewals . 353 6 0 £2018 4 2