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XCR(77) 192
(a)
(b)
Note
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there are some public utility sites, particularly in the older parts of the urban area, which are un- necessarily under-developed;
financial schemes of control (see Note below), which affect four of the public utility companies, may result in the costs of high premium and low utilisation of sites granted for utility undertakings becoming an additional burden to the consumer without restricting the company's profits.
Financial control schemes provide that:
(a) the company's scale of charges shall be
subject to Government approval;
(b)
(c)
each year the company shall be entitled to a permitted return (i. e. an agreed level of profit expressed as a percentage of an agreed base such as net fixed assets or shareholder's funds); and
any shortfall below, or excess profits above, the permitted return shall be debited from or credited to a development fund.
It is therefore apparent that where a public utility company is operating under a financial scheme of control, application of the restrictions arising from the private treaty grant policy may distort the company's accounts to the advantage of the company and the disadvantage of the consumer. This would be so if the value of the company's net fixed assets were inflated by the payment of full market value for sites, and its potential returns were diminished by its inability to realise the full value of its land assets. On the one hand, therefore, permitted return (if expressed as a percentage of net fixed assets) would be inordinately high and, on the other, either the shortfall in profits would be unrealistically large or excess profits small.
Proposed New Policy
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Generally speaking, in the New Towns and other modern layouts, appropriate sites are planned for public utilities after con- sultation with the utility company concerned. Planning is based on the site being used only for the purposes of the utility and, bearing in mind the undesirability of public utilities using land granted 'for operational purposes to compete in the real estate development market, it is