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\Sum to Be Separated in t Provincial -- Books -- as | New Financial Rela-- _ tions Set Up Hydro Assumes $185,000,000 Of Ontario Debt A {far--reaching change in the rela-- tions boetween the Ontario Government and the Ontario Hydro Commission was submitted to the Legislature yes-- terday by Chairman T. Stewart Lyon in the twenty--sighth annual report of the Hydro Commission. Until now the CGovernment has act-- ed as banker for the Hydro, but under th new plan the Commission be-- comes responsible, on behalf of the !'municipalities, for the direct issuing and reissuing of capital required by tho Commission in the carrying on of its business. $185,000,000 Separated. The sum of $185,000.000--represent-- ing money advanced by the Province for Hydro Commission purposes--is to be separated from the general debi statistics of the Province. The statement regarding the new financial relations says: "During the vyoar under review arrangements were made with the Treasury Department of the Government by which require-- ments of new capital and refunding of Provincial loans issued originally for the purpose of financing con-- struction works of the Hydro--Electric Power Commission will in future be financed by bonds of the Commission guaranteed by the Province, instead of as heretofore by bonds shown in the Public Accounts as a direct liability of the Province. "The chief advantage of this change in the nisthod of financing new con-- struction, and refunding of existing issues, is the scparation of debt for revenuo--producing assets to the ex-- tent of $185,000,000 -- representing money advanced by the Province for Hydro--Electric . Power Commission purposes--from other liabilities of the Province. Not Properly ~»Debt." "The word 'dobt' is nolt properly applicable to these great sums, here-- tofore adgvanced by the Province for the Commission capital expenditures. Th# form in reality capital advances which earn not only interest and r¢-- newal reserves but sinking fund suf-- fictent to liquidate the entire capital investment of the Hydro Commission within a maximum period of forty years from the time the capital was invested. 4 "The anfortization period is as low as ten years in the case of recent in-- vestments in power developments for mining purposes in the extreme northwestern part of the Provinc:. | Not one dolilar has come from the tax-- payers of the Province to meet any expenditure for interest or other capi-- tal charges upon the money advanced by the Province to the Hydro Com-- mission on account of the cos:--con-- tract municipalities. o f "It is, therefore, sound public policy to remove the report of this part of the debt of the Province from the general dobt statistics, and to indi-- cate that, while the capital invested for HMHydro--Electric service is an in-- direct liability of the Province, there is no likelihood of the taxpayers of Ontario being called upon to meet any part, at any time, of the capital charges or of the moneys required to repay the advances made to the Hydro 'Conumsslon. "These remarks apply to the four groups of municipalities embraced in the Niagara, Georgian Bay, Eastern Ontarieo and Thunder Bay Systems. !They are, in part, applicable also to the Northern Ontario properties. In respect to the power developments in that part of the Province north of the French River and Lake Nipissing, the Commission bolieves that these properties will not only shortly carry 't-hclr own capital charges but will {prov!de surplus revenues for necessary extensions and improvements without tcost to the Provincial Treasury. Cites Niagara System. Early in the statement Mr. Lyon says:* 2 y "It will be seen, for example, that the capital investment in the Niagara system, which was $168,004,159 in 1929, has grown through the acquisi-- tion of privately owned power plants and new construction, particularly of the Chats Falls development and of rural lines, to $210,332%,868 in 1935. This increase of capital has been ac-- companied, since 1932, by a decrease in the annual interest charges and payments on exchange, upon capital advanced by investors in charges and payments on exchange, upon capital advanced by investors in the United States and the United Kingdom. The net interest and exchange charge of 1932 upon the then total capital in-- vestment in the Niagara System of $207.977 388, totalled $10,691,491. Dur-- ing the past year the net interest and exchange upon $210,332,868 total-- led $9.891,871. There were only nomi-- nal payments under the heading. 'exchange.' i Operation Costs Reduced. "Continuous efforts have been made ,t.hroughout the year to reduce running expenses. The result is that for opera-- tion, maintenance and administration | in the Niagara System the cost 1astl year was the lowest since 1929. The} total outlay under these headings was | $4,378,.261 in 1935, which compares | |\very favorably with $4,711,607 spent| on operation, maintenance and ad--. ministration in 1929, when the powe! irevenue totalled $21,664,808. In 1935; the Niagara System revenue totalled | |$23,292,490. The highest annual cost | 'of pperation, maintenance and ad-i lmlnistmuon shown in the tables ac-- | icampa.nylng this report was in 1931, when $5,653.006 was spent undeor that head. It will thus be seen that in the | four intervening years operation, | maintenance and administration costs | have beer reduced to the extent of $1,274,745; a reduction accomplished | without any sacrifice in the efficiency | of the Commission's plants in the| Niagara System. "In the Goorgian Bay System the lopemuon. maintenance and adminis--. 1tration costs during 1935 were $384,-- 446. As recently as 1932 they had been $483.137. In this case the re-- duction was over 20 per cent. as com-- pared with the cost in 1'932.' en n 00 en CAE mc nare ~A4% / ATMAW T s wl\-\. PFEUET PEFD PF I ' "@orresponding reductions in opera-- tion, maintenance and administration costs have been made in other sySs-- tems, particularly Bastern Ontario, where the aggregate under these head-- ings had risen in 1931 to $981.514, but was reduced during the year end-- ing Oct. 31, 1935, to $719,353, which reduction is equal to almost 10 p°r cent. of the total cost of power to the Eastern Ontario system--including all capital charges--for 1935. In the Thunder Bay System during 1935 the operation, maintenancse and adminis-- tration costs showed a slight increase, but totalled almost the same as those of 1930, before the depression had re-- duced the volume of power sales. Expansion in North. "Figures are presented in the fol-- lowing tables showing the distribution of primary and secondary power in all systems. The most marked changt in recent years continues to be ths rapid increase in the use of electrica L »rrein tm e r LR P vP y § { 2C 00200 oc t o5 Cl s e Nn Aretrdiiinnn t ag» GOR V V energy in the gold fielas of Northern AP\'I\ A-- ave presented in the fol-- es showing the distribution and secondary power in . The most marked change years continues to be the ase in the use of electrical uring 1935 the and adminis-- slight increase, same as those '\Onta.rio. The chicf expenditure of | capital during the coming year will be for the extonsion of transmission lines in the Abitibi--Sudbury region, and for the addition of a generating unit to the Rat Rapids plant in Northwost«rn Ontaric. These expen-- ditures arse so financed that amorti-- zation of the capital invested will be completed woll within the estimated life of the minss served. "It will be observed from the table showing the distribution of primary power to all systems in the period 1929--1935. especially in the old estab-- lished Niagara system, that progress out of the d@spression is somewhat slow, but has procseded steadily since 1931. The Docember peak load in 1925 was 932.708 horsepowsr. as com-- pared with the lowest point of the depression -- Decoember, 1931----when the load was 828,200 horsepower, At the peak of the industrial expansion | in 1929. the Docember load was 969,-- | 123 horsepower in the Niagara Sys--| tem, so that in the intervening six] years the system has not quite reached | the maximum of power consumption befors the breaking of the boom. This slow recovery of the power load has had a very serious effect unOn the Niazara System's financial position. | Sinking Fund Maintained. "The addition to the sinking fund during the past year, including in-- terest carmned, totalled $3,074.571. The Niagara System sinking fund -- now 'sta.nds at $30,613.933. The renewals fund totals $23.274.339; the addition €uring the year having been $2.310,-- \414. including $838.469 of interest earned on invested renewals reserve. "The other systems--Eastern On-- tario, Georgian Bay and Thunder Bay --are in excellent financial condition. Almost invariably the thirteenth bill to the municipalities in these systems has shown credits, and rebates have been made totalling substantial sums. The net credit balance to the munici-- palities of the Georgian Bay Systom for the year ending Oct. 31. 1935, was $95,423; the largest total during the past seven years. In the Eastern On-- tario System, the net credit balance to the municipalities in 1935 was $244,223, as compared with $2,249 in 1933. In the Thunder Bay System,. the net credit balance on the year's cperations was $2.770. Thore had been n~ prior net credit since 1930, and in 1932 the large amount of $126.686 was chnarged against the municipalities of that system, over and above the amount of the interim monthly power bills. Declining Interest Payments. "May I direct your Honor's atten-- tion to the important factor of de-- ciining interest payments in the re-- duction of the cost of power to the people of the Niagara and other sys-- tems. The bulk cof the. capital in-- vested in the Qusenston--Chippawa plant, totalling more than $76,000,000, . will fall due within the next seven | years. The major part of the loans | issued by the Province on the Com-- | nmussion's requisitions for this plant bear interest at the rate of 6 per cent. It is estimated that, up to 1943, $60,-- | 000,.000 of these loans will have fallen | due, and it is expected that the aver-- | age rate of interest on the refunding issues will be considerably reduced. "since the inauguration Oof the movement for the extsnsion of the ssrvices of the Commission into the townships and hamlets of the Provincse, l not includsod among the cost contract municipalities, the Legislative As-- 'sembly has authorizsd the making of | grants for the construction of primary and secondary lines to serve the popu-- ' lation of the hamlets and farms. These grants--uniformly half the first cost of primary and secondary rural lines---- are the only moneys provided by the Province at the general cost of the tax--