I move:
That the fuel variation levy in electricity accounts be discontinued in view of (1) the glut in oil supplies and the consequent lowering of heavy fuel oil prices, and (2) the adequate supply of natural gas to the Electricity Supply Board.
The price of electricity in Ireland has been described as being among the world's highest. Indeed, in a report in The Irish Times of 20 June 1981 it was said that an American consultant had found that Ireland's electricity was the third most expensive amongst a range of countries surpassed only by Britain and Belgium. That does and has posed serious problems for domestic, commercial and, perhaps most of all, industrial consumers.
In the past two years or so our electricity costs have been subjected to serious criticism by industrialists and the public in general. It is a fact also that the hydrocarbon tax in force adds to the cost of each unit of electricity — I understand, approximately 4 per cent. The rise in the price of electricity over the past two years have been very substantial. I understand that the price increases allowed in 1980 were of the order of 40 per cent, some 20.5 per cent in February and 19.5 per cent in September of that year. In the year 1981 an increase of 25 per cent was granted, coming into effect in September of that year and affecting the August/September accounting period. The 1981 price increase was sanctioned by the last Government of which I was Minister of State at the Department of Industry and Energy. The rise sanctioned on that occasion had to be of that proportion because the Fianna Fáil Administration, from February 1981 to the time of the election, had refused to allow the Electricity Supply Board any price increase. The then Minister, Deputy Colley, communicated with the board saying that there would be a Government subsidy to defray the loss of revenue. It is clearly understood that the board of the ESB did not want subsidisation but rather to be financially sound without recourse to State subvention. It is interesting to note that part of that 25 per cent increase — I think approximately 8 per cent thereof — was earmarked simply to recoup to the board approximately £30 million lost during the period February to end September that year. Indeed, that 8 per cent was to obtain for a period of a year only, to be withdrawn thereafter.
We are due for a reduction in the cost of electricity. In that context I was surprised to read recently — I think in the Sunday Press of 23 May 1982 — that the ESB had applied to the National Prices Commission for a rise of approximately 6½ per cent in the basic price of electricity. At the time of sanctioning the 25 per cent increase my stern warning to the ESB was that there should be no further price increase for a period of one year. I take it that the present Minister will take cognisance of that fact. It was a stern warning to the board that I did not expect any further price increase for a period of one year. Allied to that one must understand that Members on this side of the House would expect that that 8 per cent — sanctioned as a temporary price increase — be used to reduce the price of electricity to consumers. I must put that fact on the record. I am sure the Minister is aware of it but I would hope that he would insist that a reduction of 8 per cent be effected and indeed that the price of electricity be seen to decrease rather than increase. Electricity sales are directed more or less in the proportions of 50 per cent to domestic, 25 per cent to industrial and the remaining 25 per cent to commercial consumers. Therefore, while the bulk goes to domestic consumers, any adverse change in the price of electricity is damaging right across the board.
The amount of dependence on oil is interesting and has been decreasing substantially. Last year the board used approximately 54 per cent oil in the generation of electricity as opposed to other sources of primary energy. It is intended that that percentage should fall to approximately 40 per cent by the end of the eighties. Of course that policy is in line with the EEC one of diversification away from dependence on oil, which is to be welcomed. The fact now is that the price of oil has been reducing substantially over the past few months, a reduction which came about quite suddenly. Here I should like to quote some statistics I received from PIW of 12 April 1982 from a table entitled "The Ups and Downs of OPEC Prices, 1960 to 1982". I am taking the spot price for Mid-East light crude — 34 dollars — as being indicative of the type of oil used by the Electricity Supply Board. The average price per barrel of that crude in 1981 turned around at 34,1725 dollars. In January of 1982 the price was 34 dollars per barrel, in February it had dropped to 30.40 dollars per barrel and, by March, had dipped again to 28.20 dollars per barrel, constituting a substantial fall in the price of crude oil. Based primarily on that fact I feel that by now electricity consumers should be benefiting from the collapse in oil prices.
I readily admit that the board are taking a quantity of heavy fuel oil from the Irish National Petroleum Corporation, but I do not think the volume of that offtake will seriously affect the price of oil at this point in time. I feel we should now be benefiting from the collapse in the price of oil. It is evident that the price of oil from the North Sea has fallen and this should aid the oil supply position as far as the ESB are concerned.
I am surprised to see in the monthly report of the National Prices Commission, No. 113 of January 1982, in paragraph (5) that in their projections for 1982-83 they state the board are anticipating an increase in their total fuel cost bill. In the case of fuel oil they state that the board have forecast an average price for 1982-83 slightly above the average 1981-82 price. I take it that when the fuel variation charge is reviewed this month by the National Prices Commission cognisance will be taken by the commission of the substantial fall in oil prices since the beginning of this year and since the publication of the January 1982 report.
The other prong of the motion refers to the availability of gas. I am aware that at the moment the gas supply to the ESB is at the Cork Plant at Aghada. It is interesting to note in the appendix relating to the particulars and performance of generating plants of the Electricity Supply Board's Fifty-Fourth Annual Report for year ending 31 March 1982, that the fuel cost per unit for electricity sent out from Aghada was 1.452p per unit and that the works cost per unit sent out was 1.689p per unit. This was a very cheap source of electricity. During my period in office the ESB were allowed a larger off-take to help them to be competitive. In comparison, in Great Island, County Wexford, we find that the fuel cost per unit sent out was 2.710p per unit and the works cost per unit was 3.165p per unit, which is substantially in excess of the gas-fired stations.
I am seriously worried about the Ringsend generating station where the fuel cost per unit sent out was 3.630p and the works cost per unit was 5.912p. That is an oil-fired station and in the context of the cost of generating electricity an explanation is owed to the House for that cost per unit at Ringsend, which seems to be very high.
When we take account of the fact that there has been a solid reduction from 34p to 28p in spot prices and the fact that the ESB have a greater offtake agreement for natural gas from Bord Gáis Eireann, those lower prices for the cost of generating electricity and the cost of electricity generated from oil should be publicly manifested in the price of electricity to the consumer.
I am pleased to note that the ESB are currently converting the Poolbeg Station at a cost of £3 million to take natural gas when it comes on-stream at the end of this year. I see that as a priority. I am pleased to note, as reported in The Irish Times of 19 January, 1982, that Professor Dillon, speaking to the Rotary Club in Dublin, predicted that next year natural gas will replace imported oil in supplying the major portion of the ESB's total fuel requirements for electricity generation. While I accept it is in the future it must be a source of confidence that the benefits of natural gas will become apparent in the very near future.
I also note from an Irish Times report of 13 May 1982 that Mr. Seán Tinney, the director of advance projects at the ESB, said that the board were only too conscious of the level of price increases in electricity. He said that the board realised that industry needed to be assured not only about supplies but also about price stability. He said that the whole of the ESB is at present focused on a corporate priority to achieve far more price stability in the eighties than was possible in the past decade. He said that the target is to achieve an annual price inflation considerably lower than the national level as measured by the consumer price index. It seems that we are going into a period of price stability. It is essential for Irish industry and agriculture as well as for domestic consumers that the price of electricity should be more competitive than it is at the moment and that maximum advantage is taken of the lowering of oil prices and the availability of natural gas.
With regard to the price of natural gas, I fully appreciate that a pricing policy should be set down. I am not sure if it has been finalised in the Department. I realise that natural gas cannot be given away, that a pricing policy must be one that is to the best benefit of the people. It is within the power of the Minister and the Government to control the price of natural gas and to ensure that its price to the ESB is such that it will remain cheaper in the energy sense than the cost of higher energy sources such as oil and perhaps such as coal.
I am comforted in this matter by the fact that reserves at Kinsale are higher than what were forecast originally. Proven reserves began at one trillion cubic feet and the figure was later upgraded to 1.35 trillion. That is encouraging. When I was Minister of State I directed that a further examination be made of the reserves and I am optimistic that on foot of those tests the reserves at Kinsale will prove to be higher than the present estimate. Though I may be somewhat on the optimistic side, I am hoping that the consultants' report will show that the reserves are nearer to the two trillion cubic feet figure. When we discussed this matter here last week the Minister told us that the question of the reserves must be treated as confidential. I cannot see any validity for that argument. These reserves of gas are the property of the people and if they turn out to be higher than previously estimated surely we should be pleased to give the public that information.
Now that a deal has been finalised regarding the supply of natural gas to Northern Ireland it is important that the reserves be stated. The implication of supplying gas to the North is interesting. We are talking about a finite reserve. I am aware of the intended off-take to the various sectors of the community and I appreciate fully that in the case of a finite reserve a choice must be made as between users. Therefore, it is important to find out exactly what the reserves are. It is only by having that information that we can finally establish a policy of off-take and of prices.
Regarding the ESB situation, I am pleased that the board's generating capacity will be based on natural gas as the primary source of supply. I understand that about 55 per cent of the board's generating capacity will be by way of natural gas. When we consider the availability of this resource it is important to ensure that ultimately the consumer will be the one to benefit from the availability of the gas and that its price is not kept artificially high. A balance must be struck and it must be struck in favour of the consumer, the consumer being the Irish nation. To date, though, there has not been evidence of price benefit to the consumer. I do not know whether this is because the amount of natural gas available is not of sufficient significance to justify a reduction in electricity costs; but it is clear from the annual report of the ESB that the availability of the gas is having an impact and that impact, allied to the impact which has resulted from the lowering of crude oil prices, is seen in pricing policy.
I should like to refer briefly also to the structure of the fuel variation charge. This charge was introduced in January 1974, was discontinued in July 1978 but reintroduced in January 1980. The current domestic rate for electricity is 4.36p per unit and the fuel variation charge is 2.017p per unit. In other words, the fuel variation charge represents 46.26 per cent of domestic electricity costs. I do not think it was ever envisaged that this charge should be at such a level vis-á-vis the fixed charge. As I understand it, the fuel variation charge was introduced in order to allow some flexibility to the ESB whereby they could vary the charge without having recourse to the NPC on every occasion on which the price of oil changed. In the history of this charge it has never before been at such a high level. There is no justification for this situation. We should have a pricing policy for electricity whereby the price increase would be on an annual review basis. The fuel variation charge should be used only as a mechanism in times of rapid changes in the price of oil.
Therefore, if we view the likely trend in oil prices, it is important that we do not over use the fuel variation charge. In this context I would refer to the likely situation in the future in respect of oil prices. In an article in The Financial Times of 26 March, the chief economist of the International Energy Agency is quoted as forecasting that there will be a continuous decline in the real price of crude oil in the next three years. That analysis is interesting. The economies of western Europe seem to be in a stagnant mood with a growth rate this year of about ½ per cent. If we consider this trend in oil prices continuing to fall or even of stabilising, we cannot find any justification for the continuation of the fuel variation charge. That is why I say that this charge should be dropped now. We are not in a situation in which the price of oil is changing rapidly or in which the board must increase prices immediately so as to avoid the loss of huge amounts of revenue.
There is little justification, based on the forecasts of the price of oil, for continuing the fuel variation charge. The Minister may say that we should keep it on for a while longer, but I do not think there is any justification for retaining it. We are entering a period of price stability for electricity. That stability is soundly based on the fall in the price of oil, the availability of natural gas, and the fact that there does not appear to be any surge in the economies of Europe or the US now or in the immediate future. In making that statement I am relying on the opinions of experts.
I should now like to deal with the workings of the board. The ESB are responsible for supplying power to our homes, our factories and farms. Earlier this year a comprehensive agreement was reached between management and employees. It was a fairly expensive agreement and one hopes that as a result of it we will not have any further lapses in the supply of electricity to the nation. For the staff the agreement was financially attractive, but I must question the need for it. While the electricity generating industry is important — it is a monopoly and has a vital role to play in keeping our economy going — I doubt if employees in any semi-State body, no matter how delicate an area they serve in, should be treated any better than those in any other area. For instance, the Garda and the Army have an income level that is not excessive, but the staff of the ESB got a special comprehensive agreement about which I had reservations when it happened. It had been concluded when I came to office. The man sweeping the street is doing just as essential a service as the man who turns the switch in a generating station. I can see now why there cannot be any grounds for industrial disputes within the ESB. They have a comprehensive agreement and their incomes are generous compared to other workers. It would be a sad day for the State, and for the ESB, if we were to have a spate of industrial disputes such as occurred in the past.
The board have a responsibility to be efficient and that is important in a period when electricity usage has fallen — it fell, according to the annual report for 1981-82, by about 8 per cent and the board envisages a further reduction in consumption this year. I am aware that the board have major capital commitments such as the Moneypoint and Poolbeg projects and the new crow-coal station in County Leitrim. But the board have a responsibility at a time when electricity consumption is stabilising or, as in this instance, is falling, to ensure that they are not overmanned. While I understand that the lead time into any major capital programme is flexible, the board must ensure that responsible decisions are taken about further capital expenditure. Obviously, they cannot be caught. If there is an upsurge in the economy it is important to have the necessary reserves, but when we have natural gas that can be done by switching in and out from that source.
The board have a responsibility to ensure that their workers are carrying out their tasks efficiently and that the price of electricity is at its most competitive level as a source of energy.
In July 1978 the fuel variation charge was dropped and the time has come to do away with that charge again. It is far too high in proportion to the total cost of electricity. The price of oil has fallen sufficiently to make an impact on the cost of generating electricity and the increased availability of natural gas should combine to ensure that a price reduction can be made. Allied to that is the fact that in the 25 per cent increase granted in July last year was a figure of approximately 8 per cent which was given for one year only. That was designed to help the ESB recoup revenue losses incurred from February to September 1981. That should be withdrawn before the next billing period, August to September. That would mean a reduction of approximately 8 per cent in the cost of electricity. I am perturbed that the board have applied for a further price increase. I do not think they can justify it and I have outlined the reasons why. There is no reason why there should not be a reduction in the cost of electricity and now is the time to remove the fuel variation charge.