CO129-622-5 Public Utility Companies 16-11-1948 - 16-11-1948 — Page 5

CONFIDENTIAL.

4

PUBLIC UTILITY COMPANIES.

PROPOSED REVISION OF CHARGES.

A survey of the working results of the public utility companies has recently been carried out with a view to ascertaining whether there are reasonable grounds for expecting reductions in the present charges made by

them. The companies have cooperated most helpfully enabling a summary of their estimated net profits to be prepared which is attached as Appendix 1.

2.

In their last financial year the companies made further progress in the rehabilitation of their undertakings and it will be seen that in general

they earned good profits enabling them to make generous distributions of

dividends, augmented in some cases by capital bonuses. Not revenue for the

current year continues to be on an upward scale and all the companies will

earn substantial net profits this year.

3.

Appendix II sets out suggested reductions in present charges and

shows the margin of profit which would be left for distribution to the

shareholders. The bus companies and the China Light & Power Co. are believed

to have reductions in prospect already; the bus companies by introducing

second class fares, and the China Light & Power Co. by a small reduction in

the charge for lighting.

4.

Among the more important points made by the companies which have

to be carefully considered before reductions could be asked for are:-

E..

charges for depreciation in respect of now plent will be heavier and

will reduce the operating profit;

b.

in order to finance further rehabilitation additional capital will

have to be raised thereby increasing the potential "provision" for

dividends;

C.

revenue is at an unusually high peak and may recede in the event

of a trade depression, in which circumstances it would be impracticable

to increase charges back to their present level;

d. it might be preferable to wait until all new plant has been installed

and operating costs stabilised at a reduced level before reducing charges.

e.

change difficulties which necessitate fixing fares as a multiple of

five cents make it impracticable to reduce fares;