D.—l

Bulk Supply Charges. I indicated in my Statement of last year that the question of the Government charges for power supplied in bulk had been given a great deal of consideration and that the various requests for reductions received indicated that some at least of the supply authorities making the requests were not fully acquainted with all the factors bearing on this important matter. During the year just completed the matter again received a good deal of attention, and the Power Boards and Electric Supply Authorities Association at its annual conference in 1934, recognizing that the matter was one that required very careful consideration by men acquainted with all aspects of the matter, set up a committee composed of engineers and secretaries to draw up a report on the question for consideration at the 1935 conference. This report was considered and adopted by the Supply Authorities Conference recently held in Wellington, and no doubt will be submitted for the Government's consideration. In general, I think it may well be claimed that the report is a general endorsement of the policy of the Government in its handling of the electric-supply business. There are, of course, several points on which modifications are suggested, but it supports the Government policy on practically all major points on which previous discussions have arisen. It recognizes that for the present, at least, the financial position of the Government's Electric Supply Account is such that it cannot afford to make any reductions in charges which would result in reduced revenue. It recognizes the Government claim that some graduation in charges is necessary to meet variation in the amount of power taken by various authorities. It recognizes and approves the basic principle of charging on the maximum-demand system, and of granting a certain amount of subsidy to local authorities owning standby plants which can be made of advantage to the system generally. It makes suggestions for modifications in the Government tariff which would result in reduced charges for supply authorities. Though there is nothing particularly new or novel in these suggestions, they will all serve a useful purpose in indicating the direction in which the various distributing authorities are of opinion that reductions should be made when the financial position of the Electric Supply Account justifies such reduction. The preparation and publication of the report has certainly done a great deal of good in making people associated with the various electrical supply authorities more familiar with some of the problems which have to be faced by the Government in dealing with this particular utility. It is not clear, however, that the report does anything to actually reduce the cost of generating and supplying electricity. It makes suggestions for alterations in the method of setting out the accounts which might indicate some change in the cost, but which do not affect the real cost at all. It makes various suggestions for rearrangements of the total cost as between the supply authorities and the Government, but again these suggestions only alter the distribution but do not really reduce the cost. In fact, some of the suggestions in respect of more extended use of auxiliary generating-plants actually increase the total cost. It is indeed questionable if we have not been contributing by way of rebate on ordinary charges too much towards the cost of these standby stations. As pointed out previously, it is recognized that the owner of such a plant, even when not operated, has to pay capital charges in respect to its original cost in addition to whatever he may have to pay to the Government for power purchased in bulk. It will, however, be found in all cases that the amount paid for power purchased is less than would have been the net operating cost (exclusive of capital charges) if the same amount of power had been generated in the stations replaced by Government supply. It is recognized that such plants have some value as an insurance against interruption, but that insurance is of a special value to the owner much in excess of its value to the system as a whole. In the North Island system, for example, the value of allowances made for these plants plus the cost of maintaining the Department's own standby amounts to about £80,000 per annum, a sum which is more than twice the total annual operating cost of the whole of the Government's own main generating plants in the same area. Electric supply has become such an important factor in the everyday life of the community that interruptions to supply certainly cause a great deal of inconvenience. An examination of all interruptions over a period of years indicates that power was not available when required for about one ten-thousandth part of

XI