The Minister said that the cost of building the pipeline from Cork to Dublin would be about £60 million. I presume BGE have already borrowed for the cost of the pipeline from Inch to Cork. Given that they have, they will soon reach the ceiling of £80 million. The Minister will have to come back to the House to increase the borrowing level. Is it intended that, in future, BGE should have internal reserves and, out of that, fund the building of the pipeline from Dublin to Belfast if that is the next spur to be built or will there be further borrowings?
Gas (Amendment) Bill, 1982: Committee and Final Stages.
Question proposed: "That section 1 stand part of the Bill".
It could involve further borrowings. There is a certain amount of self-financing at present, so all the requirements have not been borrowed. Borrowing stands at £8 million approximately. There is a fair amount of leeway. This is a major project. The Deputy said it would be a good idea to have an opportunity to examine such bodies regularly so that Deputies can scrutinise what is going on.
The Minister did not say if he agrees that the ceiling will be reached by the time the Dublin-Cork——
I do not anticipate that it will.
The Minister said it would cost £60 million to complete the project.
Everything included, yes.
Borrowings at present are at £8 million. If there is residual borrowing——
The Deputy has to take into consideration how much self-financing will be done.
I am anxious to tie down the policy the Government are pursuing. If the Government expect BGE to internally finance some capital undertakings and at the same time are taking funds out of it to contribute towards balancing the budget, this House should know. Someone should be able to state what the Government's policy is to what looks like being the biggest money spinner from the point of view of a State company in the history of the State.
Enormous profits are involved in this and we should know the Government's policy in regard to these. Do they intend to take an annual basis of some 50 per cent of BGE profits and use them for ordinary day-to-day revenue or do they intend not to take any more? Was this year's £28 million a once-off or do they intend to take some higher percentage in future years? What is their policy in regard to that? Having established that, if the Government intend to use BGE as a contributor to day-to-day financing of the State, then we come back to the point I was making of how much BGE should charge individual users for gas. When I said there was a pragmatic approach to it my meaning was clear, but the Minister did not quite answer the question as to what is to happen in the future. He talks about a cohesive policy for the pricing of gas for industry, and he repeated the word "industry" twice in his reply here today. If industry are to be the one taker of natural gas who are to be charged an energy-related price, there is a possibility that industry may choose not to use natural gas as an energy source. They may use it as a feedstock for different things, but not as an energy source. If the Dublin Gas Company, the Cork Gas Company and the ESB are getting gas at a below energy-related price, forming the hidden subsidy which I was advocating, then industry may decide to use either gas through the Dublin Gas Company or electricity as their energy source because in terms of one of their costs it comes cheaper as an energy source than buying it directly from BGE. When the Minister talks about a cohesive policy what precisely does he mean in that regard?
On the question of financing the capital projects it has been set broadly as a 70-30 basis, 70 per cent to be borrowed and 30 per cent to be self-financing to BGE. That is to be broadly set, not specific, and it is anticipated that this will continue for some time to come.
For any other capital undertakings?
Yes, for any others as well. It is broadly set in that pattern and we expect that this will be the pattern for the future. In relation to what I mean about gas for industry, the Deputy will appreciate that up to now there has been what could be described as a rather restrictive policy towards industrial use of natural gas until the question of the pipeline has been got under way and until you could quantify the amount of gas that would be needed in the premium market which we all want to see gas turned into in the first instance to maximise the value of Kinsale Head.
On the question of the quantities to be determined in relation to the ESB and the North of Ireland, when all those quantities are set it becomes clear that one can work out a cohesive policy for industrial use. That is precisely what we are doing and we hope to have it out to industrialists as soon as possible. There are industries which are ideally suited for the use of natural gas and they have been sitting back and waiting for a policy on it to see how they can plan their future. There are many such industries and we need not identify them here. The Deputy will be aware of some of them. That is what I mean by saying to industry that here is the situation in relation to natural gas, here is the price at which it will be. We can then let the company do their own planning from there on.
The Minister is not quite getting the point I am making. Industry could have two possible uses for natural gas, either as a feedstock as in the case of NET or as an energy source. We must differentiate between these. We can leave feedstocks aside because the negotiated price would depend on the market conditions and the price which can be got for the finished product for which the gas is used as a feedstock. Regarding the use as an energy source, there is a danger of a policy being adopted by the Government which might mean that you are planning a pipeline now and, even though not specifically identifying industries which may take gas as an energy source at its root or its destination, the ESB are getting that below the market value. Those industries which are now being counted on to take gas as an energy source and which will be charged an energy-related price would not take the gas as an energy source if they could get another form of energy at a subsidised price through the ESB. From that point of view it could interfere with planning.
I can see the point, seeing the price at which NET are getting gas.
I am leaving that aside.
Yes, they are an example, but there are others in that situation. I am not talking about NET specifically. The price about which industrialists have been talking was an indicated price which was very high and would not be attractive to them.
As an energy source or a feed source?
As an energy source. Indications were given six or eight months ago which would not entice anybody to think about it, but that could be described purely as a protective measure in relation to the overall quantity of gas, how it was to be divided up and who was to get it. That is the type of study that is going on at the moment. I intend to rationalise the price to industry. A link-up cost must be kept in mind because you cannot disrupt the balance in relation to the ESB as an energy source and natural gas as an energy source. It would be premature for me to go any further on it now until we have got to grips more with the various price mechanisms that have to be introduced.
I am as wise as I was. I will go back to the other point which the Minister has not answered yet. Have the Government decided how they will deal with the profits being generated by BGE? Will they take some of these profits on an annual basis to finance revenue? If so, what will be the percentage, or is it to be a fixed amount annually? I think £28 million is the figure this year. Will it be £28 million or £28 million plus next year? Will sufficient funds be left to BGE to do the internal financing of pipelines and any other capital involvements they may have in the future?
If it is not on a fixed amount basis it would be a function of what profit is there, but at all times a sufficient amount will be left to BGE to finance from internal resources their capital projects.
The Minister said 70-30.
That is capital financing. We are talking about profits here. It is not a fixed amount. BGE will be left sufficient funds to provide that they will be self-financing.
The Government obviously intend to charge above the contract price if they anticipate getting annual revenue from BGE to help finance the ordinary running of the State. They evidently contemplate charging for the use of the gas above the contract price with Marathon. Has the level above that been fixed for all users or is there to be a different level for every user? I am getting back to the Minister's cohesive policy.
The Deputy is trying to get the price we will be charging to these customers, which he surely does not expect to get.
Is it to be the same price for energy-related or a different price according to the user?
Utilities will be the same.
Will it be energy-related?
A link-up cast must be set.
Between what and what?
The cost of bringing it to a particular town. If you bring gas to Limerick or Galway, you must reflect the cost. It will be part cost-related.
If you are going to take profit out of BGE for the day-to-day running of the State after all these costs have been met, then you are charging above that cost again if profits are to be generated.
Not necessarily. The Deputy must appreciate that the usage will quantify three or four times over so that the level of profits will be substantially higher than the level we are talking about in present-day circumstances. The situation is totally different at this point in time. The Deputy is asking that BGE be left without funds.
At this point in time the gas costs X amount. The cost of transmitting it to Dublin costs Y amount so that we now have an X+Y cost factor. The point is that if the Government are to take profits from the board for day-to-day revenue the charge will have to be X+Y+Z. Is the Z factor to be constant for all customers or will it be Z for one, A for another and B for another?
The board have been set up and designed to make a profit and it will be for them to analyse the situation as they find it. We have set out general policy guidelines for them. The Deputy is hardly suggesting that the gas be given away for nothing?
I am not suggesting that except to the extent of my earlier suggestion, that is, that there is something to be said for a policy that will allow a subsidy to industry by way of charging a price to the ESB that would allow them to sell cheap electricity to industry. However, the point I am trying to make is that if the Government have committed themselves to taking profits each year from BGE, there must be adopted some policy regarding the charging for that gas so that it will generate those profits.
Of course the board are set up to make profits. Is anybody suggesting the situation should be otherwise? On the question of the subsidisation of energy to industry, there are many sides to that argument. We could go on discussing at length how the gas can be of most benefit to the economy as a whole. We could ask whether it would be best to take all the gas in and redistribute it or whether various aspects of the economy are considered in the context of how they could be helped by reason of this gas supply. The Deputy will appreciate that the ESB prices would not be at their present levels if it were not for the fact that the ESB are profiting from the availability of natural gas. Consequently, that benefit is available to industry. The fact that the recent increase in charges did not apply to the heavy night users is due to the availability of natural gas. Broadly speaking what I have said here is that at all times the board will be left with enough finance to ensure that they are self-financing. The Exchequer will take the excess profits.
Therefore, the price is not an energy-related nor an oil-related price.
It is energy-related and also oil-related.
I should like if the Minister would ask the board to state specifically in their annual reports the basis of their assumptions about the life span of the present sources of gas. These assumptions are of importance in assessing the wisdom or otherwise of investment in distribution systems. Clearly, distribution systems will only pay for themselves if they are in use for a fixed length of time. If, for instance, the distribution system is becoming overextended vis-à-vis the assumed availability of the gas, many of the new distribution arrangements being made would be uneconomic.
The Minister will say that it is not possible to say how much gas is available. I appreciate that. But if, for example, we are to reach a conclusion as to whether a particular extension of the natural gas pipeline is viable, we must know the assumptions the board are using as to the availability of the gas. If, for instance, there were 40 years' gas available for the existing grid it might be sensible to make the gas available to Navan, thereby increasing the usage and reducing the timespan to perhaps 38 years. If, on the other hand, there is only a 20-year supply of gas available and if the extension to Navan would reduce that to 17 or 18 years, it might not be such an economically sensible proposition to engage in the extra cost of extending the pipeline to that town. Therefore, it is important that there be an explicit statement each year from the board as to the assumptions they are using in determining the availability of the gas and I am suggesting that that statement be incorporated in the annual reports.
On Second Stage I raised a question which the Minister did not get around to dealing with in his reply. I refer to the breakdown of borrowing by the board as between foreign and domestic borrowing. I should like to know if any guidance is being given either by the Minister or by the Minister for Finance to the board as to the extent to which they should borrow abroad. I should like to hear also whether the Minister would agree that the annual report of the board should state the basis of their borrowing policy in so far as they are borrowing abroad. My third question is to ask the Minister to indicate how long in his view the authority given by section 1 for additional borrowing will suffice. In other words, how soon, based on present trends continuing, would he expect to have to seek an increase of the figure? I realise that there are many imponderables in this question. One would need to know the rate of inflation, the rate of cost increases and so on. I am not asking the Minister to speculate about any of those matters but I should like him to tell us what is the assumption on which he is working in regard to the durability of this piece of legislation.
The length of time that we expect section 1 to be sufficient to look after the borrowing powers of the board is approximately two years. If, however, the Northern Ireland project should not succeed, the timespan would be longer. I agree that more information should be available in the annual reports of the company and I will communicate that view to the board.
On the foreign borrowing, the Deputy can be assured that the advice from the Department of Finance is relayed to the board through our Department in relation to the various currencies. I presume that the Deputy is referring to the question of finding the best basket in terms of borrowing.
I can understand the board receiving advice from the Department of Finance in regard to the currencies in which they should borrow abroad but what I am asking the Minister is to tell us what advice the board are getting as to whether they should borrow abroad or as to the extent to which they should borrow abroad compared with borrowing at home. That is a different question from the technical one of, once the decision is made to borrow abroad, in what currencies should the money be borrowed.
The decision has been made to borrow abroad on the basis of what I have said already.
But in what proportion of the total borrowings have the board been advised to borrow abroad? Are they to borrow any of the money at home? If they borrow abroad, do they have any control in regard to the currencies in which they borrow, given that the EIB decide what they are going to lend? I would have thought they make the decision as to whether the borrowing is by way of deutschemark loan or guilder loan or whatever. Therefore, perhaps the Minister will say what is the relevance of the Department of Finance's advice in this matter?
The Deputy is hardly suggesting that the Department of Finance have no relevance as to advice on borrowing.
The Minister must not trivialise the issue.
In regard to foreign borrowing, it has been said that most of the borrowing will be through the EIB. There will be some, but not very much, at home. I am sure the Deputy appreciates that the more pressure one puts on domestic borrowing at present the more it aggravates an already difficult area in relation to interest rates and that a decision has been taken in relation to it.
Might I ask the Minister a further question? Given the fact that it is notoriously difficult to get legislation through this House — I am not talking now about the position politically but about the time factor — does the Minister think it wise to have an authority for additional borrowing by An Bord Gáis which, let us all agree, is necessary but which lasts for two years only? Has the Minister considered that? For instance, would he not have thought it wiser to have looked for an authority which would be sufficient to carry An Bord Gáis forward for, say, four years, thereby avoiding uncertainty and possibly even good terms not being taken up because legislation has not yet been enacted to enable further borrowing to be undertaken, they being already at their borrowing limit? We do not want a situation occurring in which An Bord Gáis would actually exceed their statutory limit — that would be a grave serious matter — but, if that is the case, we want to be sure that the limit is adequate. I would be worried at what the Minister has said about just two years.
I share part of the Deputy's point of view. But Deputy Barry made the point also — and I am inclined to agree with him — that one should not come here and legislate for a level of borrowing that could keep a semi-State company out of debate in relation to this situation. He is more inclined to the view — and I am inclined to agree with him — that there is nothing wrong with keeping it on the short term, so that the House can scrutinise what is happening. Many mistakes have been made in the past when one remembers what has happened in some semi-State areas. Therefore there is nothing wrong in coming back to the House that quickly. Irrespective of what Government may be in power I do not think the House would unnecessarily hold up any Bill which was in the best interests of the economy, whether it be in relation to An Bord Gáis or any other project which it was in the national interest to go ahead with. I do not think that would be reflected in the performance of any party in this House. On that basis there is nothing wrong with having it for a shorter period than heretofore. I appreciate the point made by Deputy Bruton in relation to the possibility of changes in interest rates but I do not think it is something one would have to worry about because I think the House would accommodate short legislation to increase the borrowing powers if such a situation arose. By and large that has been the record in the past.
I asked the Minister a question about the functions of An Bord Gáis at any given time, about the suitability of the sources of energy being used by the board in their consumer gas network. He said that he would communicate my view to the board.
I did not mean it in that context. The Deputy said their annual report should contain more information and, what I understood the Deputy to mean, assumptions in relation to reserves in the field in that particular area. That is what I interpreted from what the Deputy was saying.
The Chair is reluctant to interfere or to seem to be interrupting the Minister or the Deputy but, strictly speaking, we are not discussing the annual report of the board. On Committee Stage we are confined to what is sought in the particular section. While in the original legislation reference was made to the annual report, in this section there is no such reference. While the Chair will always accept passing references which may be deemed to be appropriate or relevant, we are dwelling too long on the annual report, which is not pertinent to the section, and the Chair feels compelled to remind the House of the position.
Might I say to the Minister and to you Sir, that one could only be expected here in this House to agree to authorise a body such as this to borrow substantially increased sums of money if one were satisfied that information would be available to this House on a continuing basis from which one could monitor the wisdom of such borrowings. The annual report is the one channel through which such information is made available.
The Chair appreciates that, but on the other hand, the Deputy will accept that the Chair must be guided by what is in Standing Orders. Standing Orders do not allow discussion, in amending legislation, on any matter which is not pertinent to the sections of the Bill before the House.
The Chair might agree that an amendment of this sort, which more than doubles the borrowing capacity of a particular body, is not just trivial amending legislation. In fact it is changing the whole character of the ——
Deputy, do not put words in the Chair's mouth. I do not talk about the triviality of it or otherwise. I talked about the spirit of legislation. Standing Orders, and the precedent is there, specify that discussion on matter which is not provided for in the amending legislation has not been accepted except in passing. Perhaps the Chair has been culpable. I have been giving a mildly deaf ear to the questions and answers between Deputies and the Minister, but, insofar as we seem now to be moving into a completely new area not provided for, I am drawing the attention of the House to that fact.
I appreciate that and I do not want to have a long discussion with you Sir. Might I just ask the Minister one question on this subject and I will not pursue it. Is the Minister telling us that in fact the annual report in future will contain the information I am looking for, or is he just saying that it is suggested?
I agree that the annual reports of semi-State bodies should reflect the maximum amount of information. The Deputy can be assured that the annual report of An Bord Gáis will reflect certain information the Deputy was seeking in relation to assumptions, in relation to the field and so on. Such information should be in it and certainly will be included in it.
Question put an agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."
Section 1 authorised the body to borrow. This section authorises the Minister for Finance to guarantee these borrowings. I should like to know the extent to which it is absolutely necessary for An Bord Gáis to have a State guarantee for all their borrowings. There may be a tendency in legislation to assume that every borrowing by a State company must also have a State guarantee. That would not be necessary if An Bord Gáis themselves had substantial assets against which they would be capable of borrowing anyway regardless of a State guarantee. The necessity for a State guarantee arises only where the body in question do not have assets commensurate with their borrowings and, therefore, need some other form of collateral security which is provided by way of State guarantee. I would like to know: what assets have An Bord Gáis? What is the value of those assets? Are those assets being used in any sense as security for borrowing by An Bord Gáis? If they are being so used, does this not mean that a State guarantee is not necessary for the full extent of the borrowings by An Bord Gáis and that An Bord Gáis could be entitled to borrow only with State guarantee to the extent to which their assets were insufficient to meet their total borrowing requirements in terms of being collateral for such borrowing?
The Deputy will be aware that I am continuing providing for the ability to guarantee if such guarantee is required. As regards the other question he asked in relation to the assets of An Bord Gáis, I would say that as of now I have not got a full valuation of An Bord Gáis assets. I accept that they are fairly substantial. But what we are providing for here is really a continuance of what has been done — to have the facility available to them, if required — and I agree that it should not be used unless absolutely required.
The Minister will accept I am putting to him one question not two separate questions. If An Bord Gáis have assets of a substantial quantity and value they do not need a State guarantee to the extent of those assets so far as their borrowings are concerned. They should be able to substract the value of their assets from their total borrowings and the residual should be the extent that requires the State guarantee. They do not require a State guarantee for their total borrowings, only for their total borrowing minus their assets. I know a practice has grown up in all borrowing authorisations before us to give a State guarantee for the entire borrowing regardless of the value of the assets of the company. I do not think that is necessary. We need to question more than we do the wisdom of giving State guarantees all around the place as if they did not count and would never have to be called upon anyway. We should make a distinction bearing in mind the value of assets.
The Deputy can be assured that I will not extend the State guarantee unless it is necessary and beneficial in relation to An Bord Gáis.
The Minister should not treat me like this.
I should like to advise Deputy Bruton of the fact that, maybe without his knowledge, there has been agreement that we will finish all Stages of this Bill by 5 p.m.
It would help me to take less time if the Minister would answer my questions rather than treating me as if I was a junior schoolboy who does not understand even the question he is asking.
The Deputy has a point in relation to that and we should have a look at these things but what I am saying is that I will not extend it unless it is absolutely necessary or beneficial. All we are doing is providing the facility.
If that is so, will there be some borrowing undertaken by An Bord Gáis which will not have a State guarantee and which will be guaranteed by their assets instead?
Probably, yes.
Question put and agreed to.
Section 3 agreed to.
Title agreed to.
I have to advise Deputy Bruton that an amendment to an amending Bill must refer to what was agreed on Second Stage. In so far as the sections which we have agreed do not refer to the annual report the Chair regrets, having considered the amendment submitted by Deputy Bruton, that it must be ruled out of order.
I submit to the Chair, with the greatest respect, that the ruling is not correct. The short title states:
AN ACT TO AMEND AND EXTEND THE GAS ACTS, 1976 AND 1980.
My amendment clearly comes within the terms of that short title.
I did not refer to the title, I referred to the content. It is the rule of the Chair — I know Deputy Bruton is not questioning the decision of the Chair, something which would be improper of him. The Deputy is entitled to ask for my reasons. I have indicated the reason, which is that the amendment must refer to the contents of the legislation being discussed. In that respect, as the Deputy will appreciate, the contents bear no relationship to the base on which he has tabled his amendment.
I should like to ask other Deputies who have longer experience than I to bear out my views on this matter. As I understand it, what determines relevance in regard to amendments is the relationship of the amendments to the Short Title of the Bill, not to the detailed contents of the sections which may be far more restrictive than the Short Title. My amendment is clearly relevant to the Short Title which is:
AN ACT TO AMEND AND EXTEND THE GAS ACTS, 1976 AND 1980
I am advising the Deputy that the House, with all its experience, has accepted that the scope of a Bill is determined by its contents, not by its title. That is a decision of the House.
Is the short title not part of the contents of a Bill?
As I have indicated to the Deputy the scope of a Bill is determined by its contents and not by its title.
The long title of a Bill is part of the contents of a Bill and my amendment is relevant to the long title.
The Deputy may make that point but the Chair has indicated to him what has been the tradition and order to date. Except in so far as the Deputy may want to change that order he must desist from pursuing it to the extent that he is doing now.
I must not do anything as long as I am in order.
The Deputy must accept that when the Chair indicates to him that he is out of order, and when the Chair indicates the case, which the Chair is not required to do, the Deputy's persistence in challenging the Chair puts him very much out of order.
I am not out of order.
The Deputy is out of order and he should resume his seat. If the Deputy is not prepared to accept the decision of the Chair in this matter he knows the alternative.
The decision of the Chair is wrong.
It is not wrong and I ask the Deputy to retract that comment until he has an authoritative base for it and has had an opportunity of arguing it elsewhere.
I have a base for it and I have been trying to put it——
The Deputy's view is not superior to that of Standing Orders nor is it superior to that of the Chair. In so persisting the Deputy is being unusually out of order and for what reason I do not know. The Deputy will accept that the decision of the Chair is a correct one in accordance with Standing Orders, precedent and tradition in the House.
I do not have any option.
Bill reported without amendment and passed.