O

JANUARY 113238

New E

lectric

Rates Analyzed

(ContinugdMffPlIL i3ase_1_)

p. (lie interests of the Maritime lllcciric Co. Ltd.. and accepted the joint representation to be taken under consideration. The repres- niiaiion referred to read as fol-

ioivs: .

INION OF CANADA gggl/INCE OF‘ PRINCE EDWARD

ISLAND:

In the matter of the Public Utilities Act and the Inquiry into the rates and charges of the Maritime Electric Company Limited.

1'0 the Board of Commissioners of Public Utilities sitting in inquiry as above!-

The Complainant City oi Char- lottetown and the Maritime Elec- iric Company Limited, having wry-rally examined the matter of complaint in the light of inform- ation procured and supplied by (lie Board and having entered into joint. discussion thereon, respect- fully represent hereby that the following teams I uQACQIIODt in i-(untlude all matters of difference have been arrived at and are sub- niiiicd for the examination and approval of the Board:-

I. New reduced rate schedule as annexed hereto to become effect- ive as at February 1st, 1938, if p vioilsly approved.

L’. Reproduction cost as estab- ll>llCd by report of Engineering son-ice Company Ltd. procured by iiic Board, and now filed to be ii-ccpted to constitute together \\'ili1 $30,000.00 allowance for post- roiisiruction costs, left undeterm- iin-ll in such report as "going vai- in" a rate biise of $987,791.00 as hi Jiiiy 31st, i936, to be varied by all subsequent proper additions and retirements. ‘

3. Limit of permitted return on sin-ii rate base to include net earnings and all depreciation, to be 6W1; on all property in such rain base ordinarily regarded as iiuii-depreciable and 911% on all appreciable property therein.

4. Failure to reach or approach such limit under agreed rate schedule not intended to be urged iv Company to secure increased lniCS, unless .in case of abnormal i atrial or financial conditions rffccting country generally.

h. Wliriic costs of investigation and hearing incurred by Board, as ronciuded in ordinary course by liiese submissions to be paid by tile Company.

6. All foregoing terms to be mutually interdependent.

Respectfully submitted this 6th day of January, 1938.

K. M. MARTIN Counsel for complainant City. G. J. TWEEDY Counsel for Company.

Rate “chedulea

The rate schedules submitted with the joint representation, and inter approved by the Board are is follows»- llc-mcstii: Service 1st l0 KWI-lrs. or less- $1.00 per KWHr. or less- 4léc per KWHr. or less-

2'=c pcr KWI-Ir. llrvss - 2 c per KWHr. (iimniercial Light: llrniaiid Charge: 10c per 100 watts i-Incrgy Charge:

1:! 100 KWHrs. - 6c per KWHr. Next 200 KWHrs.— 4c per KWHr. Fxvess — — - — 3c per KWHr. Power Rate:

‘To renioin unchanged.

Street Lighting:

An additional 10% for the some

rcvrnue as at present. (‘mil (Yluusc:

Provided that when the price of (‘cal delivered at Charlottetown increases, or decreases from m‘ age price paid in 1937 the iirice per K.W.f-l. may be increased oi dxcrcascd by 1-10 of 1 poi- cent for cach 65c per ton increase or ll(‘('l'f‘l1.‘.(.‘.

Tiicsc schedulcs opinion of 1ll('l()i‘_\',

Next 33 KWHrs. Ncxi 160 KWI-irs.

are, in the your Committee. satis- bccause so far as we have been able to learn from a careful @1110)‘ of the result of the apprais- lil aiiil oi the audit of the operat- luiz costs of the Company, they N" iiroduce. with the present “ml-‘lilllliiion oi energy, u gross TPVDllllE certainly no greater than ‘“’f'i‘*-“l\l',\' to provide a reasonable !‘i‘iill'li upon the money invested. m‘ alternatively, upon the sum it would be necessary to invest to construct a plant. and distribution llf-lieln capable of performing effi- "Plllly the service now performed by tlio luaritime Electric C0..Lt,d, ‘our Committee quite realizes iliiit it would be presumption: to 511158951. that it could have acquir- eii a sufficient knowledge of pub- llf‘. utility Operation in the two lvlus ii. hna been functioning to "lflkc such _a statement, and ex- port Your Worship and this Coun- cil» 0r anyone interested, to ac- "ilt it as having any more weight u a mere opinion expressed by

a Committee of laymen, not pos- "$51118 the technical knowledge “(Tit-WIN to eliminate the possi- bility that the experts (employed l "is Conway might have “Dill. smlmullllB over." With that thought _ "Find we would respectfully point out that the schedule of "1"" worried by your Committee P“ approved by the Board of iihlic Utilities. who had at their dl-‘Dusal the advice or the belt technicians and auditors whocould

bl‘ obtained. regardless oi cost. That the

flint they

represent a considatablu ri-iiuction

m from those in force at P-l"! "Im- ‘of filing of’ the com- u)‘ '11‘ llariiculai-ly in the domes- i late wc ciin allow by the com- ilmlu-ruiis which appear a little later " "l" report. Before bringing lliese comparative figures to your “mum. we would like to submit

rates are equitable, and‘

a few figures relative w m. con- sumption oi energy in Charlotte- town b11937, as we believe they may assist you in making the cor- rect deductions from the compari- son which follows:-

Domest’ Consumption (Charlotte- town only) 1937

Total K.W.H. consumed in 11 months of 1937-1409302. Estimated consumption months 1937-1660000. Total domestic consumers (Oct. 1937)—2529. Average K.W.H. consumption per month per customer-M. Number of customers using i0 KWI-I per month or less-ZN. Number of customers using 11- 43 KWH per month or less-lam Number of customers using 44- %)’! KWH per month or less-BM. Number of customers using 204- 300 KWI-I per month or less-BO. Number of customers using over 300 KWH per month or leas—55. The historical comparison on which we base our contention that the rates have been materially reduced uses first the year 1928 (only for the reason that this dale happens to be ten years s89. ano serves to illustrate the reduction in cost over that period) secondly and more relevantly to this report the year 1936 when the complaint was flied, and finally the rate now approved by the Board:- Hisiorical Comparison Cost of 10 KWH per month- 1928-155; 1935-130; 1938-100 Cost oi 40 KWI-I per month- 1928—5.46,' 1935-298; 1938-235 Cost of 100 KWl-l per month- 1928-1326; 1935-508; 1938-4192. Cost of 200 KWH per month- 1928--i)6.25; 1935-858; 1038-4141 Cost of 300 KWH per month- 1928—39.25; 1935—12.08; 11138-849 The comparison with rates charged in other cities compar- able in size to Charlottetown, us- ing " energy from coal-burning plants follows. In respect to this comparison, it is necessary to bear in mind that there is a pos- sibility of it leading to some very erroneous conclusions. because the rate structures in all these cities vary as to the amount consumed. and, whereas the rates in one city might be considerably lower for a .40 KWI-i consumption than in an- other city simiiariy situated the reverse might easily be true if a consumption of 300 KWH were considered. depending upon the rate of reduction made for in- creased consumption. In Char- lottetown, while the average monthly consumption is 54 KWH. there are by far a. greater number of customers burning 40 KWH or a little lees. Therefore, believing that the figure which aflects the greater number of our citizens might well be the correct figure upon which to base a comparison oi this nature, we selected this figure and the figures which fol- low show the cost of this amount of electrical energy in the differ- ent cities listed.

Co , iron of Domestic Bill For

40 K.W.H. With Other Cities

Comparable in Size Using En- ergy From Coal Burning

for 12

Plants . Charlottetown 2.35 (1038 rate) Sydney 2.48 Sydney Mines 2.48 Glace Bay 2.48 Medicine Hat 2.40 Moose Jaw 2.39 Amherst 2.08 Iiethbridge 2.61 Swift Current 4.00 Springhill 2.88 Weyburn 4.28 Saskatoon 2.50

With due caution against being led into a fallacy by an incom- plete comparison it would seem to be evident that our citizens who burn in the. vicinity of 40 K.W.H. per month (and they comprise over 50".? of the total users) are not being required to pay more for electric energy than those oi other cities where, through lack oi water power, energy must be de- velopcd by coal burning steam plants. We have been told that energy ciui be produced at a lower cost by oil-burning Dciscl engines, but have had this opinion contra- dicted by other experts. and can find little evidence to substantiate the suglgestimi.

Commercial Schedules

To consider now the new com- mercial schedule. In the matter of this item. we found it much more difficult to arrive at a posi- tive conclusion as to whether or not the present rate is equitable. It is impossible, in the case of commercial light rates to compare those in eflect in Charlottetown with those in any other city be- cause of the different demand

duce a table showing the compar- ative costs the energy consumed for the 111011 li of October, 1037, if Paid for in i028, and a-sjlt WOHId ,cost if burned under the new rates

Consumption oi October 1937 Showing the Cost if Paid For "A" in 1928 and “B" in 1938

The consumptions oi energy pro-

‘ ducing the following costs are

taking from actual bills render-

ed for October, 1937.

"A" (1928)

(1) A Hardware Store 31.94

(2) A Dry Goods Store 335.65 (3) A Departmental Store {£22.65 1(4) A Drug Store 26.12 (5) A Book Store‘ 19.75 (6) A Barber Shop 8.70 "8" (1938:

(1) A Hardware Store l4.47' (2) A Dry Goods Store 100.40 (3) A Departmental Store 07.40 (4) A Drug Store 11.00 (5) A Book Store 11.00 (6) A Barber Shop 4.25

This table is submitted only to show that the charges for com- merciai lighting have already been very materially reduced in the last -ten years, and as some justificat- ion for our acceptance of the ad- lvice that they are not now exces- live.

Power Rates

We next come to the Power Rate Schedule which remains unchang- ed. In the matter of this rate. it (was the contention oi the Com- pany that the use of power iii [Charlottetown had not yet reach- ed a point where the consumption was sufficient to justify any re- lduction in the rates now being charged. This view was accepted by your Committee after consid- erable discussion. One of the reasons which impelled us to do so was the fact. that of all the ser- vices which the Maritime Electric Co. Ltd. has w sell the public. power alone is subject to price ad- justrnent brought about by compe- tition. In the matter of the sale of power the Company must, if it wants the business, meet compet- itive producers of power, such as Deisei or gasoline engines and supply this power as cheaply as these competitors can. or, as it has on more than one omasion, lose the business. The Company is fully aware of this, and we have hopes that as it enlarges its plant. and finds itself with a capacity to produce energy for which it has lno market, an attempt will be made to dispose of this surplus energy to power users, wiiom it will hope to secure as customers by the best of all sales ltrgiunents: “We can give you the power you require cheaper than anyone else.” We have distinct hopes of seeing a substantial reduction in power rates in the not too distant flit- ure.

Street Lighting

We have arrived now, Your Wor- ship. at the final item of the rate schedule-street lighting.

The joint representation to the Board provided for an additional 10% street lighting at no addit- ional cost to the City. In respect to this, we would remind Your Worship that. since the complaint was flied. we have already receiv- ed an additional $1215.00 worth of street lighting free of charge. This additional 10% will amount to ap- proximately the same sum and give the City,'foi- the same $10,- 000.00 which we have paid for some years. an amount of lighting which would have cost. it $12,400.00 in 1935. Your Committee feels that this additional lighting. and considerably more, can be used to advantage in Charlottetown, as our

‘ City. though improved, is yet far

from being as well lighted as we could wish.

The Coal Clause which conclud- ed the rate schedule is self ex- planatory, and is not likely to be of any consequence as it would require a very considerable rise in the price of coal to make it. nec- essary or even advantageous for the Company to invoke this clause and alter the present accepted rate structure. This, Your Worship. concludes the section oi our rc- port dealing with item (i) of the joint representation. Fortunately we can cover the remaining items very niucli more briefly.

Rate Base

Item num-bcr (2) deals with the establishment by (he Board of a “Rate Basic". This is tiic placing upon the records of the Board of a certain valuation in (iollars of the properties and assets of a pub- lic utility to be used as a base in determining the earnings which the Company should be allowed to make. There are several methods of arriving at a rate base. The only four in any degree of com- mon uile are:

(1) The original cost.

(2) The original, cost loss de-

preciation.

(3) Reprcduclion cost.

(4) Reproduction cost less esti-

mated depreciation.

Tilers seems to be no greatdif-

chin-gee based on connected load. demand meters. measured floor spaces etc.. so. in ‘this case, we were compelled to rely on the beet expert advice we could set. 8nd this was to the eflect that the rate nccepted by your Committee. and approved by the Board. was reas- onable and not excessive. You will notice we succeeded in havluil 11,16 denmnd charge reduced from PM! .pci- 100 watts for the first 5000 putts to 10c per 100 watts regard- qu, of the total demand. This means l Inall reduction to all icommeiciai users. amountin! l° e190 per month w all with a dc- mand of 5000 watts or greater. we especially urged that this re- duction take the form of some change in the demand charge bc- cause that charge was the subloc! of much more complaint than the enefgy charge which followed it. As we stated above. it was impos- ible to make any‘ wmmrlml‘ "f 4 commercial rates with than: m" gm elsewhere. but with Y0"? “mm caption we would like to intro-

ference in which of the four is selected, provided the correct mul- tipiier is used to determine the earnings that should be allowed. After considerable discussion your Committee and the representativ- ea of the Company agreed that the base easiest checked at any [time and least likely to lead into {any error by reason oi greater. or lesser depreciation because of wear and tear. or obsolescence. or by new and more economical inven- tions, was the one iisicd third above "Reproduction Cost" and n- greed to Jointly recommend w (he Board that the “Reproduction t Coatl as__ahawn_ fn__tlie “report of Itching Ind bullying of pimEleg, rashes, eczema re ieveirby

[A Ill/U’ .in

itlw if)’

fr};

the Engineering Service Co. Ltd. be adopted by the Board as a rate base. This provides a rate base which can be kept up to dale in ail times by adding any proper additions at their invoice price. and by writing off any retirements again at their original cost. This method seems to be the simplest and the one which places the or- dinary layman at the least dis- advantage when dcaiing with the skilled engineers in that he is not at. their mercy in the matter of estimating depreciation on mach- inery etc. about which he is neces- sarily not well informed. Each of the four methods of arriving at a rate base would appear to have certain minor disadvantages, but. unless the City were prepared to retain a public utility expert. for consultation at any time the method agreed upon would seem to be the most desirable. The re- turn which the Company would be allowed is approximately the same whichever method is adopted.

Company Earnings

Paragraph (3) of the joint rep- resentation reads: "Limit of per- mitted return on such rate base lo include all not earnings and all depreciation to be 6‘.£-';';i on all property in such rate base ordin- arily regarded as_ non-depreciable,

erty therein."

Company be allowed to earn as a maximum 8'3‘. on all money in- vested in real estate or non-physi- ‘cal assets, or supplied as working lvfliiilal. and 9H"? on all depreci- ' able assets such as plant and dis-

tribution lincs. necessary motoi cars. and other equipment subject l to depreciation. This 9'1"! must fake care of aul depreciation re- serves as wcil as provide interest on the capital invested or, as in this case the capital it would be necessary to invest to proviiic an equally efficient sc ' .. The re- port 0f the Engineering Service Co. Lid. plhCPd i114‘ raie 01' de- preciation at 3 1-3'Z. Accepiiiig this figure it leaves ilic Company" in the position of being alloivcrl to earn. if they can, a maximum of the 6'20’. on nnn-dcprcciahlo pro- pcrty, and 5 11-12’; on their dc- prcciable property after an al- lowance for depreciation equal to that arrived at. by the engineers employed by the Board of Public Utilities. I might. Ilefllflps stress the fact that this is the maximum amount allowed to be earned, and should the Company fall short of it in any one year it would not. ho allowed ‘lo corn any additional sum, over the permitted rate of return in the years following to make up any shortage incurred in any previous your. Nor is the Company guaranteed this earning by anyone. It is merely the max- imum sum it may be permitted to earn, if possible. The next para- graph makes further reference to this aspect of the agreement. and was especially insisted upon by your Committee because oi our belief that the present, and reas- onably anticipated earnings of the Company do. and will for some time, fail short of the limit imposed by the approved rate base. The paragraph reads: “Failure to reach or approach such limit un- der agreed rate schedule not. 1n- tended to be urged by the Com- pany to secure increased rates. un- less in case of abnormal indust- rial or financial conditions aflcot- ing the country generally.” This provides. in effect. that the Conipainy must attempt to ap- proach its limit of earning by en- couraging the increased consump- tion of energy, by a popular ad- ministration and by rural expan- sion, and may not plead failure to do so as a justification for any increase from the present approv- edraie schedules.

Enquiry Costs

Clause 5 reads: “Whole cost of investigation and hearing incurred by the Board. as concluded in or- dinary course by those submis- sions, to be paid by the Company." This ruling is gratifying indeed as it places the Board in a position to rcturn to the City treasury the monies advanced it for the pur- pose of paying the current. cxpcn- ses of the investigation. and re- iieves the City from any filrthcr financial obligation. In this ro- spcct we wish to point out that this ruling was fully anticipated by yoiu" Coinniitice. and appears to provide fiill justification for the paragraph in the preamble of the resolution authorizing the finance committee to provide the money. ’I'iiis resolution was moved by our chairman at. the regular monthly meeting of May 11th. 193G, and the paragraph referred to reads:

"And Whereas the accepted practice in conducting public util- ity investigations in other provin- ces has been. except wlicu a coin- piaint has been shown to be ut- terly frivolous, and of such a plainly apparent unfounded nature as to cause the Board to decide that the filing of the complaint was unwarranted and mischievous. to assess the costs of the investi- gation against the public utility concerned.”

The acceptance of this report by Your Worship and this Council will bring to a conclusion a very unsatisfactory condition which has existed for a, number of years. in fact since the use oi electricity became general 1n Charlottetown. During this period our ritl7ens at certain times paid a Rival dfflltw much-for energy. and ve now be- lieve that at ccrtain cihcr times paid only what might be consid- ered a ]‘p’“!§|]al)l[‘ pricc when compared wiih thc contempflibfl’ consumption. Ill-feeling and inis- trust marred thc rclutl0ll8_ Q61???" the consumer and ihc cizrnilflhy- Most. of the friction might have been prevented had (liv Company‘ in lllf.‘ lrast nriclllfll F " i’ c-‘l’ clllulozj/ lllltlii“). “mil had n mciiiuJ basil nvntliilifi- unmcll)‘ '1 Bpnrd (‘f Pilili: "l.»'.ii~"iri could n“; ‘y, ympvrl \\' ‘ii r. tsoniibi? accuracy wiiealier or nil the TN

in force were lair and reasonable

‘ a number

and 91/100 on all depreclable prop-.

This in cflert means that the,

crinizixirrigjfliivuv nii/(uni/xw ,_

Waterfront Review

The following is a brief silmmury of the port for this winter as ii now stands. 'lh2re are very fc-iv vessels or steamer layups here in comparison with previous wmier... The C. G. S. Brant, which has always remained here Ls‘ now stal- ioned in Halifax, 10.8. . it being the intention to have her placed on the slip thereand a plate placed on he: bow to enable her to break ice this winter at Sheet Harbor, N.S.. a pulp shipping centre. Charlotte- town has the following laid up: Hydrographic steamer ‘Cartier,’ D. P. W. Dredge No. 9. Tug Alma Tug Bally, Schr. Geneva Ethel schr. Eliza Gorohaiii. R.C.M.P. Gutter, "Islander. D.P.W. Launch. Aiixilary echr. Mahone, and a num- ber of small motor sioops,