I move that the Bill be now read a Second Time. The Bill was circulated with a fairly detailed explanatory memorandum which will have informed Deputies of its main purposes. These main purposes are threefold. First, the Bill is necessary to authorise an increase from the present statutory limit of £65,000,000 odd to £100,000,000 in the expenditure which the E.S.B. may incur for capital purposes other than the rural electrification scheme; secondly, to authorise the board to obtain moneys required for these capital purposes and for the performance of its functions generally from sources other than the Central Fund and, thirdly, to authorise an increase from £8,000,000 to £16,000,000 in the statutory limit of advances which may be made from the Central Fund to the board for the rural electrification scheme.
Bills to amend the limit of capital advances to the E.S.B. have been submitted from time to time. It has been the practice of the House to deal with the capital requirements of the E.S.B. upon that basis and in that respect this Bill is no different from any other. The main change which it proposes is that contemplated in regard to the raising of money. It proposes to enable the board to raise capital for its development purposes other than from the Central Fund by the issue of stocks to the public.
The Bill also contains a provision for the exclusion of the board from the application of the Public Authorities Protection Act, 1893 and provides for an increase in the maximum pensions which may be paid on retirement to whole-time members of the board. The remaining provisions of the Bill which are complementary to the main financial provisions deal with such matters as State guarantee and underwriting of issues of securities by the board, the use of sinking funds which will be established for redemption of such securities and the investment of surplus moneys which the board may have on hands at any time.
Under the Electricity Acts passed from 1927 to 1952 the total amount of advances available to the board is £58,945,000 for its general purposes and £8,000,000 for rural electrification. There are two other sources of finance available to the board—I will refer to them again later—but the Central Fund has been the main source and, in fact, the use of these other sources of finance merely postpones demands on the Central Fund.
Section 2 of this Bill which provides for an increase in the authorised total of the board's capital expenditure is also designed to consolidate the fianancial provisions of all previous Electricity (Supply) Acts (including the financial provisions of the Shannon Electricity Act of 1925, as amended) and of this Bill. That has been done not only to make it clear that the figure of £100,000,000 now proposed is inclusive of the amounts authorised under all previous electricity legislation, but also to give the House and the public a clear picture of the various sources from which the board has obtained finance in the past and of the additional borrowing powers which it is now proposed to confer on the board. I think that in view of the magnitude of the board's undertaking and the large proportion of national capital expenditure which its development programme will absorb for a considerable time ahead, it is desirable that the House and the public should have as much information as practicable on the board's general financial position, of the nature of its development programme and on the methods by which it has been financed in the past and will be financed in the future.
I propose, therefore, to deal first in some detail with the various existing sources of finance as set out in sub-section (2) of Section 2 of the Bill and to explain the need for the new programme before dealing with the new borrowing powers proposed in Sections 3 and 4 of this Bill.
With regard to the general financial position, first, there is the sum of £6,030,066 which is described as the expenditure on the Shannon works for which the board became liable under the Act of 1927. That sum represents the agreed liability accepted by the board in respect of the Shannon scheme. It was the Minister for Industry and Commerce who was authorised by the Electricity Act of 1925 to construct the Shannon scheme. The moneys required for its construction were made available out of the Central Fund. The Shannon works comprise the main works at Arnacrusha, as well as transformers, distribution systems and lands forming portions of the Shannon works which were transferred to the board under the Act of 1927. In law, however, these properties remain vested in the Minister for Industry and Commerce and it is now proposed to invest them in the board. Under the 1927 Act, the board assumed liability for the repayment of the sum and, therefore, it is included in the £100,000,000 as being part of the capital expenditure incurred by the board.
Secondly, there is a sum of £38,094,570, which represents the total of repayable advances made to the board from the Central Fund for purposes other than rural electrification in the period from the establishment of the board up to the 31st December last. That amount has been expended on the various works which the board was authorised to undertake under the Electricity Acts. I may mention that of the total liability of £44,000,000 odd in respect of these advances and the Shannon works liability the board has already repaid £1,961,515, but for the purposes of this Bill no account is taken of such repayments in calculating the authorised total of capital expenditure.
Paragraphs (c) and (d) of sub-section (2) deal with the two other sources of finance available to the board, namely, the board's depreciation reserves and the superannuation funds. Under the Act of 1927 the board is under a statutory obligation so to adjust its charges as to make adequate provision not only for its day-to-day expenses but also for the repayment of moneys borrowed by it and for the renewal or replacement of its wasting assets. In accordance with that obligation to provide for the renewal or replacement of its assets, the board sets aside each year out of its revenue sums which, accumulating over the life of these assets, will, it is estimated, be sufficient to provide for their replacement when the assets have reached the end of their useful life.
Under the Act of 1941 the board was authorised to invest these reserve allocations in trustee securities or in such other securities as might be approved by the Minister for Finance. In fact, however, the board has not availed itself of that power but has used these reserves for the provision of new capital assets according as these were authorised under successive electricity Acts. In other words, the board's depreciation reserves have been invested in its own undertaking. That practice has advantages both from the point of view of the board and of the Exchequer. From the board's point of view it is more advantageous to invest these funds in new capital works rather than in securities which might be liable to fluctuate in value and which would probably give a net return somewhat less than the board would have to pay for advances from the Central Fund. It has also relieved the Exchequer, temporarily, at least, of demands which might otherwise have been made on it if these funds had not been available to the board.
It will, of course, be appreciated that all sums used in that manner must be included in the authorised total of the board's capital expenditure at any particular time and paragraph (c) of sub-section (2) of Section 2 of the Bill provides accordingly. At 31st December, 1953, the amount of these reserves which had been temporarily utilised to finance new capital projects other than rural electrification was £10,845,342.
Paragraph (d) of sub-section (2) deals with borrowings from the superannuation funds. The Electricity Supply Board (Superannuation) Act of 1942 provided for the introduction of superannuation schemes on a contributory basis for the board's employees and for the management of the superannuation funds by trustees. Under Section 8 of that Act the trustees were authorised to lend to the board such sums as they thought proper to lend and the board was authorised to borrow from these funds for any purposes arising out of the performance of its functions. These borrowings are repayable at 90 days' notice on either side. The provision is mutually advantageous. For the trustees it provides a convenient and readily realisable form of investment, the value of which remains stable and for the board it provides a convenient additional source of finance. At 31st December, 1953, the total amount borrowed by the board from superannuation fund trustees was £1,546,200.
Summarised, therefore, the present position is that: (a) excluding the Shannon works liability, the authorised limit of capital expenditure is £66,945,000 of which £8,000,000 is for rural electrification; (b) the board has available to it three sources of finance, namely, the Central Fund, its own depreciation reserves and the superannuation funds; (c) at 31st December, 1953, the total of the board's borrowings from these sources was £58,486,112 (including £8,000,000 for rural electrification) or about £8,500,000 less than the total statutory provision of £66,945,000.
The difference between the amount authorised and the total of the amounts borrowed is due to the time-lag between commitments and expenditure which is inherent in the nature of the undertaking.
The appendix to the White Paper which has been circulated to Deputies with the Bill, gives a comprehensive picture of the existing installed capacity and of the board's development programme, including that part for which advances have already been authorised and which provides for an increase in installed capacity from the present figure of 377,000 kilowatts to 624,000 kilowatts; these new stations will be brought into commission in the period up to 31st March, 1958. The new programme which is outlined in Part III of the appendix to the White Paper provides for a further increase of 413,000 kilowatts, bringing the total capacity at 31st March, 1961, to 1,037,000 kilowatts, and part of this new programme will proceed simultaneously with the existing programme.
This new programme has two aspects. The primary object is, of course, to provide additional generating capacity to meet the growth in demand for electricity. The estimates of increased demand over the period to 1961 have been based on the board's experience of a doubling in demand in each period of five or six years. I am satisfied that there is considerable scope for development in the production and consumption of electricity in this country in which, despite the considerable expansion which has taken place, we still lag considerably behind other European countries with somewhat similar economic conditions. The results of a survey recently carried out by O.E.E.C. show that of the 17 O.E.E.C. countries, Ireland was in 15th place in terms both of installed generating capacity and production of electricity. If we are to maintain, much less to improve, our position in the increasingly competitive conditions which we may expect to experience in our export markets, it is vital that we should improve our productive efficiency and the measure of that efficiency will depend largely on the extent to which we apply modern methods to our productive processes. Electricity is recognised as one of the cheapest and most easily utilised forms of energy both in industrial and agricultural processes, and from the point of view of the national economy it has the further advantage that a large proportion of our requirements can be produced from native resources which we have in comparative abundance. I have emphasised to the board that its efforts should be directed not merely towards providing for the normal growth in demand, but that it should endeavour to stimulate demand by means of sales propaganda and demonstrations.
The other aspect of the new programme is that it is based almost entirely on the use of our native resources. It will be observed that the emphasis is almost entirely on turf-fired and hydro stations. In so far as the turf-fired stations are concerned, the new programme may be regarded as complementary to the Bord na Móna development programme which I outlined to the House last summer when the Turf Development Bill, 1953, was before the House prior to its enactment. When this co-ordinated programme has been completed the electricity generating stations fired with turf or native fuel will use annually at least 400,000 tons of machine-won turf, 120,000 tons of hand-won turf and over 2,500,000 tons of milled peat, as well as 45,000 to 50,000 tons of Arigna coal. The annual average output of all our native fuel stations will be over 1,500 million units which compares with an estimated total output of 1,300 million units from all the board's stations in the current year. Indeed, if past experience is any guide, these estimates may be exceeded. The requirements of the two existing turf-fired stations at Allenwood and Clonsast were originally estimated at 300,000 tons per annum and the annual average output at 225,000,000 units of electricity. In the year ended 31st March, 1953, fuel consumption was 395,600 tons and the output of electricity was 325,454,000 units. In the year ending 31st August, 1954, Bord na Móna has contracted to supply 410,000 tons to these two stations. There is also the possibility (mentioned in the appendix to the White Paper) that some of the additional capacity required may also be based on turf instead of on imported fuel. We will, therefore, have at least 63 per cent. and possibly more of our total installed capacity in native fuel or in hydro stations in 1961 and our dependence on imported fuels for our electricity requirements will be considerably reduced. In view of our experience during the emergency, and the increasing importance of balance of payments considerations I need not emphasise the desirability of this development.
With the exception of the Lanesboro' station and the four small stations for hand-won turf to be built in Kerry, Clare, Galway and Donegal, all the new turf-fired stations will use milled peat. The considerations on which this decision were based have already been outlined in the House. Briefly, they are that the necessary preliminary development work on bogs, being less elaborate, can be done more quickly; milled peat can be won by mechanical means and requires less man-power than sod turf, and it can be burned at a much higher moisture content, 55 per cent., than in the case of sod turf, which is 30 per cent. It is, therefore, a much cheaper fuel than sod turf. Deputies may be interested to learn that the board has already placed orders for three of the boilers which will use milled peat in the Ferbane station. This station, when completed, will be not only the largest in the E.S.B. system but the largest turf-fired station in Western Europe and will have an annual average output of 405,000,000 units.
As regards the four small stations, I think it should be emphasised that the primary object in establishing these was to provide an outlet in the areas concerned for hand-won turf. Normally the construction of stations of such a small size and with such a limited rate of consumption would not be considered as economic. In fact, these stations are directed more to serve a social than an economic purpose.
As explained in the White Paper, the total cost of this programme, excluding rural electrification, is estimated at £53,500,000, and a further £1,750,000 will be required to cover the increased cost of the existing programme, that is to say, the increase in the present estimate of its cost over that which was current when the programme was originally approved. If full provision were made now, it would be necessary to increase the authorised limit of capital expenditure from the present limit of £65,000,000 odd to approximately £120,000,000. It has been decided, however, that as an interim measure, it will be sufficient to increase the authorised limit to £100,000,000.
It is estimated that this will be sufficient to cover the cumulative total of the board's capital expenditure whether actually incurred or for which contracts wil have been entered into in the period up to 31st March, 1956, but excluding capital works which will at that time be still in the planning stage and will not yet have become the subject of contractual commitments. It will be necessary to make further legislative provision before 31st March, 1956, to increase the authorised limit of capital expenditure so as to provide for the completion of the programme. The House will regard it as desirable that provision should not be made too far ahead, so that it will have an opportunity periodically of reviewing the progress of the work on measures of this kind.
The next matter to which I wish to refer concerns the proposals for the financing of that programme. I would inform the House that since its establishment, the board has financed its operations from three sources—from the Central Fund, from its depreciation reserve and from the superannuation funds—and from these only. These sources will still be available to the board but in Sections 3 and 4 of this Bill it is proposed to confer new borrowing powers on the board. Section 3 authorises the board to borrow temporarily. Temporary borrowing is a normal feature of commercial undertakings and its convenience and advantages need not be stressed. Other statutory bodies such as Bord na Móna and C.I.E. already possess this power. This provision will empower the board not only to obtain overdraft accommodation which may be required from time to time to meet ordinary revenue expenditure such as salaries and wages but also to obtain short-term loans for capital purposes from such sources of finance as may be available. The only limit on borrowing for revenue expenditure will be that approved from time to time by the responsible Ministers. Borrowings for capital purposes will, of course, count towards the authorised limit of capital expenditure.
The principal new borrowing power is that contained in Section 4, which authorises the board to borrow money by the issue of its own securities and thus enables it to obtain its capital requirements in future from sources other than the Central Fund which as I have made clear has heretofore been the main source. The total of £25,000,000 which the board is being authorised to borrow under sub-section (4) of Section 4 is estimated to be sufficient to meet the board's actual expenditure on projects other than rural electrification in the period 1st April, 1954 to 31st March, 1956. The terms and conditions of such issues will be subject to the approval of the Ministers for Industry and Commerce and Finance and the uses to which the moneys so obtained may be applied will be subject to the approval of the Minister for Industry and Commerce. These provisions are designed to provide an assurance that the board's development programme will be on the general lines which the Government has approved and that there will be no departure from this programme without the approval of the responsible Minister. In view of the magnitude of the proposed programme and the large proportion of national capital investment which it will absorb, the Government regards it as essential that such an assurance should be given in statutory form. From the investor's point of view I can see distinct advantages in the existence of a provision which will ensure that the programme for which he will be asked to subscribe has ministerial approval.
I think it will be agreed that the board's undertaking has now developed to the stage at which it should be possible for it to obtain its capital requirements for projects other than rural electrification from the investing public and that it need no longer rely on the Central Fund save in exceptional circumstances. I will explain later the reasons for the exclusion of rural electrification.
The financial administration of the board has been satisfactory and it has succeeded in complying with the statutory obligations imposed on it to pay its way and make proper provision for the repayment of its borrowings and for the depreciation of its wasting assets. Its liabilities are amply covered by its fixed and liquid assets and it enjoys the advantage of being the sole producer in a market which is constantly expanding and in which the scope for future expansion is almost unlimited. The board's capital requirements will be considerable for some years ahead, but in view of the growth in demand which has been consistently experienced and which may be expected to continue the investor can be assured that the moneys which he will be asked to subscribe will be remuneratively employed. A further attraction is that these E.S.B. securities will be trustee securities and that issues of them by the board may be underwritten by the Minister for Finance. Section 9 of the Bill empowers the Minister for Finance to guarantee the board's securities.
The financing of electricity development from sources other than the Exchequer is the normal practice in most European countries, in some of which, of course, private enterprise plays a considerable part. One of the reasons which made it necessary for the State to assume responsibility for electricity development in this country was that we lacked a tradition of industrial investment and of large industrial enterprise to which a task of such magnitude could be entrusted. Since then, however, thanks to our industrial development, we have succeeded in gradually building up an increasing investment in native enterprises, some of which are heavily capitalised and operated on a large scale. I am convinced that there is still available a large volume of savings which are not productively employed due largely to this lack of a tradition of investment, and I am hopeful that some of these savings can be attracted by the board's issues. I have in mind particularly the ever-growing number of consumers, particularly in rural areas, many of whom will have much more direct interest in the E.S.B. undertaking than previously because they will have constantly before them tangible evidence of its activities.
The issue by the board of its own securities has other advantages. To the extent that the board can obtain its capital requirements from sources other than the Central Fund, the Government will be correspondingly relieved of the necessity for providing for such requirements in its own issues of securities to the public. The House is aware that the capital requirements of the E.S.B. represented a considerable proportion of the moneys raised by the State for investment purposes. It will also make available on our rather limited security market a new and attractive type of security which it is hoped will attract an additional class of investor who might not normally invest in State issues but would be prepared to invest in E.S.B. issues. The type of securities to be issued will, of course, be governed by the statutory position of the board which does not permit for instance the issue of stock with voting rights, but the board will nevertheless have considerable freedom of action, and its issues should be of the type to make a wide appeal to investors.
In future, therefore, the operations of the board will be financed by long-term borrowings from the public and by temporary borrowing from other sources of finance including the board's own reserves and its superannuation funds. In connection with temporary borrowing of this type there is in paragraph (f) of sub-section (2) of Section 2 a proviso, the necessity for which may have to be explained. From what I have already said it will be clear that all temporary borrowing which is used for capital purposes other than rural electrification must count immediately towards the authorised total of capital expenditure. Deputies will appreciate that the use of borrowings from the superannuation funds or of the board's reserves for capital purposes is really just another form of temporary borrowing. Superannuation funds borrowings are repayable at 90 days' notice, and the reserves must be replenished when it becomes necessary to replace the assets for which they were built up. The object of the proviso is to ensure that if and when it becomes necessary to repay such borrowings— by funding them in long-term issues for example—new borrowings which are intended solely for the purpose of such repayments will not count against the authorised total.
I mentioned that Central Fund advances would continue to be available to the board and Section 5 of the Bill provides for the making of such advances to the board by the Minister for Finance within the authorised limit. I should explain, however, that the sole purpose of this provision is to ensure that the board will have available to it at all times the moneys which it will require so that the development programme may go ahead unhampered. The Central Fund will, however, be only a secondary source of finance and it is intended that in future advances will be sought from the Exchequer only for the purpose of tiding the board over periods during which it might not be thought convenient or desirable to seek capital from other sources. The Central Fund will, therefore, be the lender of last resort and is unlikely to be called on to any great extent. During the course of my remarks I indicated that in the various figures I mentioned the cost of the rural electrification scheme was omitted and that, in the matter of raising capital from the board by the issue of securities to the public, rural electrification is also excluded.
This Bill provides for an increase from £8,000,000 to £16,000,000 in the total of advances which may be made for the purpose of the rural electrification scheme from the Central Fund. The reason why the rural electrification scheme will continue to be financed by the Central Fund is that it is a service which is being subsidised and will continue to be subsidised by the Government and it was thought preferable, therefore, that it should continue to be financed exclusively by the State. Aside from the fact that it would obviously be inappropriate to seek money from investors for a subsidised service the continuance of the present arrangement is more convenient and simple from the administrative point of view.
In the matter of rural electrification, the House should be informed that there have been two important developments in that sphere of the board's activities. The first is that the basis on which the order of priority of areas for development under the scheme was determined has been altered. I found that, in practice, the former system under which priority was determined solely on the basis of the ratio of fixed charge revenue to capital cost led to inequities in some cases because it did not give sufficient recognition to the percentage of the residents in the area willing to accept supply. I found that cases existed in which there was no prospect of development taking place at an early date despite the fact that a very large percentage of the people of the area were willing to take supply while areas with a relatively low percentage of acceptances were being developed simply because their financial returns happened to be better. I discussed the matter with the board and, as a result of our discussions, a new system of selection has now been introduced which gives due weight to the percentage of acceptances in each area. The effect of the new system is that in future the prospects of an area being selected will depend to a great extent on the number of residents in the area who agree to take supply. I think the House will agree that it is only equitable that those areas which show the greatest enthusiasm for the scheme and in which the greater proportion of the population want the scheme should be the first to benefit from the extension of the scheme. The revised basis of selection will not affect the ultimate cost of the scheme.
The second and perhaps most important development is that the rate of construction on the scheme has been accelerated by 50 per cent. and that a still further increase of 50 per cent. on this rate of development will commence to operate in the very near future. Up to recently the rate of construction was retarded by shortages of materials and as a result the number of areas completed in any one year did not exceed 49. The supply position has now improved and the number employed on the scheme has been increased. At 31st January, 1954, the number employed on the scheme was 1,800 as compared with 1,220 on 31st January, 1953, and the board estimates that this will enable the number of areas completed in each year to be increased to 75. As soon as this has been achieved a further increase is planned to bring the number of areas completed to 100 annually. At 31st December, 1953, 265 areas had been completed, construction work was proceeding in 30 areas and preparations for commencing work in a further 27 areas were under way. The total of 322 areas developed or in course of development at that date represents about 40 per cent. of the total number of areas and the board now hopes that it will be possible to complete the scheme in about five years from now.
The Government, as the House knows, attaches particular importance to the development of rural electrification and I can assure the Dáil that nothing will be left undone to bring the scheme to completion as quickly as possible. The fact that the sum now being made available to cover the period up to 31st March, 1956, is equal to the total amount authorised since 1945 is sufficient proof of this resolve. I have, moreover, told the board that if any difficulties are experienced which could be solved by Government intervention there should be no hesitation in approaching me for assistance.
There are some other provisions to which I should refer. Section 17 provides for the exclusion of the board from the application of the Public Authorities Protection Act, 1893. Legislation to amend this Act is at present under consideration by the Government but it has been decided that the position in so far as it affects statutory bodies such as the E.S.B. should be dealt with in legislation dealing specifically with these bodies. Advantage is being taken of the enactment of this Bill to provide for the exclusion of the board from the application of the Act.
I think that the only other provision to which I need refer at this stage is Section 19, which provides for an increase from 20 forty-eighths to 24 forty-eighths of salary on retirement in the maximum pension which may be paid to whole-time members of the board. Each of the three whole-time members has now service of over 23 years and I think it will be agreed that they should receive credit for their service in excess of 20 years sufficient to permit the payment of a pension to them equal to half of their salaries on retirement.
The programme for which approval is now sought is the largest ever undertaken by the board, and taken in conjunction with the co-ordinated programme being undertaken simultaneously by Bord na Móna, represents the greatest and most ambitious programme of national development which has ever been undertaken in this country. Its importance, not merely in the economic field but also in the social field, cannot be exaggerated. From now onwards, the greater part of the activities of both boards will be in areas which, because of their remote and desolate state, were in danger of being regarded as permanent "distressed areas" which were not only incapable of making any contribution to our national wealth but were likely to constitute a permanent burden on the whole national economy. When this programme has been completed these areas will be one of our most valuable national assets. In the 60-70,000 acres of bog which will be developed for electricity production, about 4,000 men will be permanently employed and about 7,000 will be employed in the peak periods of production.
The construction of the stations and of the transmission and distribution systems which will radiate from them will also provide considerable employment and, when all the native fuel and hydro stations are operating, about 1,000 men, many of them skilled, will be permanently employed in the stations themselves. All this additional employment will be available in areas where opportunities for productive employment have hitherto been almost non-existent and in which depopulation and emigration have been the chief features. The construction of the stations will also facilitate the extension of rural electrification to these areas and provide a much-needed amenity which might not otherwise be made available for some considerable time. There is no doubt, therefore, that the effect on social and economic conditions in these areas will be considerable.
I feel sure that the House will join with me in paying a tribute to the directors and staff of the E.S.B. for the energy and enthusiasm with which they have tackled and overcome the problems and difficulties which they have experienced in the design, construction and operation of the generating stations and of the transmission and rural distribution network. I think that we can take considerable pride in the fact that all these new stations will be designed by the board's own staff without any outside assistance. The success which they have already achieved is a tribute not only to their professional skill but to their appreciation of the national importance of their work. It is these qualities which have made the board one of our greatest national undertakings and which will, in the future, enhance the good reputation it already enjoys.
The enactment of this Bill is essential to enable the board to go ahead with its task of developing further our national energy resources and of bringing to the rural community a modern amenity and an important aid to increased production. I, therefore, confidently recommend it for the approval of the House.
