I move: "That the Bill be now read a Second Time".
The purpose of this Bill is to update some important aspects of the legislation concerning town gas companies. Over the years the existing legislation has served an essential purpose. It established and developed the fundamental obligations and rights of gas companies taking account of their specific obligation to provide gas as a service to the public. Stagnation in the town gas industry in more recent times, and lack of incentive for development and capital investment, meant that no strain was put on this rather antique legislative framework. But that is now in course of change. The supply of natural gas to Dublin and Cork and the possibilities of supplying natural gas to other existing town gas companies, where practicable, calls for legislative change. There is an urgent need to remedy at least the more serious deficiencies in present legislation to prepare for the new situation.
Gas companies need more modern laws to put them on a footing somewhat similar to the modern company. The longer-term solution will be to repeal all previous Acts and Orders and to have a single piece of legislation dealing with all gas companies. But in the meantime, the purpose of the proposals in the present Bill is to deal with those deficiencies which are seen as a hindrance to gas companies, such as Dublin and Cork. These companies have to take immediate measures to raise capital and borrowings and to take other appropriate steps for the distribution of natural gas.
The major features of this Bill, which I will deal with in more detail later, can be summarised as follows:—
(1) the introduction of the option for gas companies to have a memorandum and articles of association like any other modern company. This will remove the necessity for ministerial orders requiring Oireachtas approval for routine management matters while still retaining the more critical provisions of existing legislation. When a gas company does not opt to adopt a memorandum and articles this Bill will still dispense with the need for ministerial orders in specified routine matters
(2) the application to gas companies of provisions of the Companies Act in such matters as issue of a prospectus and allotment and issue of shares or stocks. The existing legislation either does not cover these events or is seriously deficient in relation to them.
The updating measures will allow gas utilities to operate in a modern, commercial company law framework consistent with the needs for any major developments related to the lay-on of natural gas.
Deputies will know that there are eight operational town gas companies. These are in Dublin, Cork, Limerick, Waterford, Clonmel, Kilkenny, Dundalk and Wexford. None of these is a company incorporated under the Companies Acts. With the exception of Clonmel and Limerick, which are part of their respective local authorities, all other town gas companies are privately owned. The gas companies were established about the middle of the last century. Each is subject to its own separate regime of special Acts of Parliament from which it derives its initial constitution, powers and duties.
For example, the present Alliance and Dublin Consumers Gas Company was incorporated for the purpose of supplying gas under the Alliance and Dublin Gas Act, 1866. The Act also defined the company's area of operation and regulated its capital and borrowing powers. Seven other special Acts concerning this company were subsequently enacted, the last one being the Alliance and Dublin Gas Act, 1909. A pattern of Special Acts for each of the other town gas companies developed in a similar, independent way.
The independent evolution of special Acts for individual gas companies resulted in a certain lack of cohesion in the law on such companies. It became obvious that there was a need for legislation which could have a common application and which could supplement the special Acts. Thus various Acts, suited to gas companies in general, were also enacted. For example, the Companies Clauses Consolidation Act, 1845, as amended and supplemented in a minor way by other Acts, contains comprehensive provisions for the internal regulation and management of public utilities such as gas companies. The provisions in these Acts are largely the forerunners of a kind which would be found in the articles of association of a modern company. Many of these Acts are deficient and outmoded in many respects.
The Gasworks Clauses Acts, 1847 and 1871, gave gas companies the right to open up public streets to lay, replace and repair gas mains. They contain provisions obliging a gas company to supply gas to a person located near a gas mains. They also contain provisions concerning use of meters and testing quality of gas. The Gas and Waterworks Facilities Acts, 1870 and 1873, were enacted to enable a gas company to construct gasworks and raise capital for that purpose; to amalgamate with another gas company and to do various other things. Various Acts which have application to gas companies were enacted over the years. The more important of these are listed in the Schedule to the Bill.
The Gas Regulation Act, 1920, deserves special mention. Prior to that Act gas companies were, as I have outlined, almost totally locked into a regime of Acts which extensively controlled their operation and regulation even in matters of a routine nature. Change, even minor change, could be achieved in most instances only by an amending Act. The significance of the Gas Regulation Act, 1920, was that it enabled a variety of changes to be made by ministerial order. In particular an order could be made to modify or amend the provisions of any special Act or other provision relating to a gas company which would help the company to operate more efficiently. It was a substantial improvement because it opened the way for some flexibility in effecting change. The need for a more flexible approach is reflected in the numerous orders which, at the request of individual gas companies, have been made in the intervening years. Most of these orders are still in force. They deal with a wide variety of things, such as increasing the number of directorships, determining the frequency of general meetings and evaluating stockholders' funds.
The 1920 Act did not, however, give gas companies the degree of flexibility which today's circumstances require. Before an order is made the draft must be laid before, and approved by resolution of, both Houses of the Oireachtas even though the draft order might relate only to some fairly simple aspect of day-to-day administration. In the case of an ordinary company such matters could be dealt with by resolution of the company. I think Deputies will agree that the procedures for making an order which I have described can therefore be regarded as unnecessarily cumbersome in many cases.
I have mentioned a few of the more important enactments to give Deputies some idea of the complex web of legislation which has become woven around gas companies over the years. This interweaving of special Acts, generally applicable Acts and various statutory orders made from time to time, has created a situation where functions and constitution of any gas company are contained in a confused statutory framework which is unnecessarily inflexible, outmoded in many respects and inadequate for an expanding gas industry.
The case of Dublin Gas Company is a prime example. Some 37 Acts, orders and amending orders have been made in relation to this company. Most, if not all, are still in operation. They interact with each other in a complex way which makes it extremely difficult to understand the constitution and laws of the company. It is for these reasons that I propose the measures contained in the Bill.
Section 2 of the Bill gives gas companies the option of adopting a memorandum and articles of association. This will enable them to adopt a modern constitution generally. In particular it will provide a flexible framework for raising the level of capital and borrowings required and for altering those levels to meet changing needs. In general a company which adopts a memorandum and articles will have a more modern alternative to the provisions enshrined, for example, in the Companies Clauses Acts which I mentioned earlier.
However, existing laws will be replaced only to the extent of the provisions of the memorandum and articles. In particular, those enactments or parts of enactments which give a gas company its fundamental powers and obligations as a gas utility will not be capable of dilution in the memorandum or articles. There is a safeguard against this in a provision in section 2 which provides that a memorandum and articles or any amendment must be confirmed by me as Minister. Of course, I have the option to waive the need for confirmation in appropriate circumstances and I will give maximum flexibility to gas companies in this respect.
Section 3 applies to gas companies, with necessary modifications, the provisions of the Companies Act, 1963, regarding the issue of a prospectus and related matters concerning the allotment and issue of shares or stock. The present laws on gas companies contain no provisions about a prospectus and are seriously deficient in other related matters. Section 4 gives a gas company general borrowing powers subject to the provisions of its memorandum.
Section 5 applies the provisions of the Companies Act, 1963, regarding appointment of auditors. This means in particular that an auditing firm may be appointed as auditor. Under present legislation at least some gas companies must appoint individuals.
Under sections 6, 7, 8, and 9 provisions similar to the Companies Act, 1963, are being introduced regarding the creation and registration of charges on the property of a gas company, appointment of a receiver over its property, security for debts and priority of debts. Existing creditors will not be prejudiced by these provisions.
Present legislation on gas companies does not cope adequately with such matters. Gas companies need to be on the same footing as ordinary companies when securing borrowings for the capital investment which will be necessary for the changeover to natural gas. The proposals in this Bill to apply provisions of the Companies Act could possibly give rise to doubts and difficulties about the scope and extent of the application of company law. Section 12 enables such difficulties to be resolved by order.
A town gas enterprise which is part of its local authority does not have a company structure. Local authority borrowings and other affairs are controlled by the Department of the Environment. It would not be appropriate to apply to a local authority which supplies town gas the provisions of sections 2 to 9 aforementioned. The effect would be to give the appearance of diluting the necessary controls which are the responsibility of the appropriate authorities.
Sections 10 and 11 replace subsection (2) of section 10 of the Gas Regulation Act, 1920, the repeal of which is provided for under section 15 of the Bill. The effect of section 10 is to empower the Minister to allow gas companies to do certain things of an administrative nature, such as giving a separate supply of gas for industrial purposes, which under section 10 (2) of the Gas Regulation Act, 1920, would have to be done by order. Section 11 retains the order procedure for important matters such as reduction of capital and alteration of the authorised limits of supply.
As I said earlier, these are interim measures. A more comprehensive Act to deal with all gas companies is planned. Such legislation will have to take account of an appropriate procedure for the incorporation of new gas companies. No such procedure is provided for in the present gas laws and it may be needed as the gas grid is extended. Preparation of new legislation will afford the opportunity not only to replace out-of-date provisions on the constitution, financing and management of gas undertakings but also to provide a broad framework within which expansion of the natural gas network can take place with due regard to commercial, technical and safety considerations appropriate to modern circumstances. I have instructed my Department to prepare as quickly as possible proposals for a comprehensive Act.
It has been considered necessary to have this Bill enacted during the present session because it will facilitate certain measures which must be taken by the Dublin Gas Company within the next couple of months in preparation for the receipt of natural gas around the end of this year. The Bill will also provide similar flexibility for Cork Gas Company in case special measures are needed by that company in the near future. As Deputies will know, the essential elements of the contract between BGE and the Dublin company have only recently been approved. Since then, a great deal of consultation, at administrative and legal levels, has been necessary in the course of drafting the Bill. In order to meet parliamentary deadlines, the text of the Bill was circulated while certain legal drafting points were still under review. This process has been completed and I am advised that a number of minor amendments are desirable, mainly in the interests of greater legal precision and clarity. I have circulated these amendments and I will deal with them at the appropriate stage.
I commend the Bill to the House.
