NEW ZEALAND GAZETTE

4 NOVEMBER

4247

BAY OF PLENTY ELECTRICITY LIMITED

Special Purpose Financial Statements

Electricity (Information Disclosure) Regulations 1994

Notes to the Financial Statements

for the 12 months ended 31 March 1996

C Changes in Accounting Policies
This is the first year that any assets have been recorded at valuation rather than cost. The effect of this change in accounting policy is to increase fixed assets and shareholder reserves by $93,661,964. This change in the valuation basis has had no effect on the reported profit. There have been no other material changes in accounting policies. All policies have been applied on bases consistent with those used in previous years.

2 Compliance with Electricity Disclosure Guidelines

The Ministry of Commerce (the Ministry) has produced guidelines to assist electricity distributors in complying with the various requirements of the Regulations. In particular, the Ministry provided guidelines for the methodologies to be used to separate and allocate revenues, costs, assets and liabilities of the Company into separate business units and resulting financial statements required by Regulation 6 of the Regulations.

The company has followed the guidelines in all instances except as follows.

Assumptions for Direct Allocations:

Transmission charges
Transmission charges, although completely absorbed by the Network business, as the guidelines recommend, have not been passed on to the Energy business.

Line Losses
Lines Losses are not settled between the energy business and the generators, as the guidelines recommend. The cost of line losses have instead been charged to the Network business by the Energy business.

Transmission Assets
Generation does not own transmission assets. The Company defines the point of injection as the point of exit from the Generation facilities.

All transmission assets are owned by the Network business.

Interface with Electricity Customers
The guidelines assume that the Energy business is the only interface with electricity consumers. The Company assumes that both the Network and Energy businesses interface directly with all consumers. Accordingly, line fees and energy sales are charged to customers as separate components and have been allocated directly to the respective business units.

The above assumptions have affected the following allocations.

Revenue
Connection fees for new customers have been allocated directly to the Network business.

Line fees charged to customers have been allocated directly to the Network business rather than the Energy business. The Network business has not charged the Energy business for services provided to it in respect of transmission charges incurred or the maintenance of the transmission facilities.

Line losses have been charged to the Network business by the Energy business.

Expenses
The costs of meter reading have been charged directly to the Network business as a cost necessarily related to the ownership of the meters. As line fees are allocated directly to the Network business, no charge for meter reading is made by it to the Energy business.

All marketing costs have been allocated in the same manner as other indirect costs and not to Energy business as recommended in the guidelines.

Bad and Doubtful debt expenses have been allocated on to the Network and Energy businesses in the proportion that Line fees and Energy sales represent of the sum of those two items.

Assets and Liabilities
Cash and Bank, Term Liabilities and Accrued Interest, where not directly allocated have been allocated on the basis described under the heading "Assumptions for Indirect Allocations". These assumptions have also been applied to the related profit and loss statement items.

Assumptions for Indirect Allocations

Where direct allocations of revenues, costs, assets and liabilities are not possible the Company has used as its basis of allocation the relative effort required to maintain the service each business unit provides to the consumer. The relative effort has been calculated on the basis of the number of staff directly employed by each business unit. The methodology is not considered a divergence from the guidelines.