Dáil Éireann debate -
Thursday, 15 Jul 1982

Vol. 337 No. 11

Electricity (Supply) (Amendment) Bill, 1982: Second and Subsequent Stages.

Minister for Industry and Energy (Mr. Reynolds)

I move: "That the Bill be now read a Second Time."

The provisions of this Bill can be divided into four general areas. The first and most substantive area is the ESB's power and duties in relation to financial matters, and, specifically, expenditure and borrowing for general or capital purposes. Under the legislation as it stands there is a limit on capital expenditure by the board which is extended, by amending Acts, from time to time. The present limit, which was set in the Act of 1981, stands at £1,400 million.

On the basis of expenditure on approved capital projects now in hands, it is clear that this limitation will be reached in the latter part of this year. An increase in the statutory limit is therefore necessary, but I am proposing in the Bill to change the nature of the limit from one based on expenditure to one based on borrowings. There are a number of reasons for doing this. The scale of expenditure for capital purposes, which the board must incur is now such that the greater part of it — currently about 80 per cent — must be financed by borrowings. A change to a borrowings limit will, therefore, not only more accurately reflect this commercial reality but also more realistically reflect the real control which the Oireachtas can exercise, which is over the amount the board can borrow. The change to a borrowings limit will also bring the ESB legislation into line with more recent legislation affecting other semi-State Bodies such as the Gas Act, 1976 which covers Bord Gáis Éireann.

The limit which is specified in the Bill is £1,600 million, in aggregate, of borrowings which have not been repaid by the board. At present the level of the board's unrepaid borrowings stands at £840 million. After taking account of money, which can be allocated from internal resources, it is estimated that the amount of new borrowings required to meet the capital programme up to 1985 will be £735 million which will bring the total to just under £1,600 million.

This limit set in the Bill will, therefore, be sufficient to cover the board's capital operations up to the early part of 1985. At that stage it will be necessary to review again the financial requirements of the board and, if necessary, to seek the approval of the Oireachtas for a further increase in the limitation on borrowings.

The Bill also updates the statutory requirements relating to guarantee of ESB borrowings by the Minister for Finance, again the objective being to bring them into line with more modern practice. A limitation of £1,600 million is proposed on the total amount of such guarantees to coincide with the limitation on the board's total borrowings.

Apart from the foregoing provisions on borrowing limits, I consider it is desirable to formalise the arrangements for Ministerial control over the capital expenditure programmes of the board. It has been the administrative practice that the board submit for Ministerial approval their proposals for the construction of new generating capacity and the estimated capital outlay thereon. There are also the arrangements, in the annual budgetary context, under which the annual capital programme of the ESB is included in the capital budget. The capital expenditure programmes of the ESB are very substantial indeed and they impact on the economy both in specific and general ways. I believe, therefore, that the principle of Ministerial review of such programmes should be formally covered in the statutes governing the board's operations.

Deputies may feel that the provision proposed in sub-section (1) of section 2 of the Bill is too all-embracing. However, the provision as it stands has the merit of simplicity. Deputies will know that the capital expenditure programmes of the board in relation to new generating plant cover a period of many years. It may in certain cases be necessary to give broad approval in principle with provision for review of the project in the light of changes in demand for electricity. A substantial element of flexibility would, therefore, be necessary in relation to the giving of Ministerial approvals. It will also be necessary to look at the Board's capital expenditure proposals on an annual basis, in the context of general economic policy. Furthermore, there may be relatively short-term proposals for capital expenditures by the board which would need to be considered on an ad hoc basis. Deputies will appreciate that if an attempt were made to draft legislation which would comprehend the variety of circumstances which I have mentioned the result would be unduly complex.

I have discussed the matter with the ESB and we have agreed that arrangements can be settled between us and the Minister for Finance, which will enable the provision in the Bill to be operated satisfactorily without inhibiting in any significant way the day-to-day activities of the board in regard to capital projects and expenditures.

These are the principal elements in the financial provisions of the Bill. A number of minor, technical financial amendments to existing legislation are also proposed to improve administrative efficiency, from the viewpoint of both the board and the Minister for Finance. For instance, the requirement on the board, under the Act of 1954, to create a "form of security" when borrowing is being removed. Differences of legal opinion over the interpretation of this obligation on the board have given rise to delays in the negotiation of loan agreements. It is proposed to remove the obligation on the board to create a form of security but the option of doing so will remain to the board if lenders insist on it.

The second area covered by the Bill relates to annual payments to be made by the board to the Minister for the Environment in lieu of rates on the board's generation and distribution plant. Under existing legislation, the board are exempt from the payment of rates on such plant. The previous Government, in their consideration last year of departmental Estimates for 1982, decided that the ESB should pay £10 million this year as a contribution in lieu of rates. Provision for the receipt of this sum was made in the Estimate for the Department of the Environment. This was to be regarded as a temporary arrangement for 1982, pending official valuation and rating of the board's exempted property.

The Government have, however, concluded that in the special circumstances of the ESB there are arguments in favour of the concept of a payment, fixed by the Government, to be made annually by the board in lieu of rates and the Bill provides accordingly.

The third area covered by the Bill relates to amendment of certain provisions in the Electricity Supply Board (Superannuation) Act, 1942, so as to remove any doubts which might exist about the powers of the trustees of the board's superannuation committee to invest in real or personal property, and also to remove the existing requirement on the board to consult with the Minister for Finance before investing funds in securities authorised by law. This brings the relevant ESB superannuation provisions into line with those applicable to other State bodies.

The final area dealt with in the Bill is the involvement of the board in fisheries activities. These activities stem directly from the generation of electricity from hydro-electric stations on rivers which are the habitat of migratory fish such as salmon and eels. Legislation in the past has given the board the authority and responsibility to acquire, manage and preserve fisheries affected by their hydro-electric schemes.

Initially work involved the construction of salmon hatcheries and the contribution of these hatcheries to the country's salmon stocks has been of vital importance in the face of nationally declining runs of salmon. In response to a Government request, the board have agreed to increase their overall salmon smolt production, and the fish thus produced will be released into salmon rivers in need of restocking on an annual basis. The board have assisted anglers in Wicklow and Cork by cultivating brown trout in cages in Poulaphouca and Inniscarra reservoirs, and, to judge by reports from angling clubs, this has been a great success. The board is also the principal eel exporter of the country, and has assisted the State and other eel fishery owners in marketing their catches with those of the Board.

This brief review underlines the success achieved in the board's fisheries activities to date. It is important for the good of the fishing industry in general that the board should be given expanded powers in this area. At present the board has statutory powers in relation to specific fisheries on rivers on which it has constructed power stations. In order to enable the board to engage in fish farming in the open sea, and in rivers on which it has no fishing rights, it is necessary to statutorily empower the board to engage in the range of activities comprehended by the term "aquaculture", as defined in the Fisheries Act, 1980. In the present text of the Bill, section 9 uses a definition which is contained in section 54 of the Fisheries Act, 1980. I am now advised that, since this section of the Fisheries Act is not yet in force, it is necessary to have a definition incorporated in the Bill itself and I am introducing an amendment for this purpose.

The ESB occupies a position of very considerable importance among public sector institutions. Their operations and the service they provide affects the entire economy and every citizen. It is a major source of employment and its expenditure budgets are very substantial by any standards. For example, in 1982 the total expected capital expenditure by the board is estimated at over £230 million of which some £125 million will be spent on generating plant and about £87 million on transmission and distribution networks.

It is, therefore, right and reasonable that this House, and I as responsible Minister, should be concerned with reviewing the overall activities and the trend of policies of the ESB, without inhibiting the board's freedom to pursue its day-to-day business. Before concluding, I would like to refer to two broad policy issues which are related and which I know are of much concern to Deputies as they are certainly to me. The fuel mix of the ESB's generating capacity is of vital importance because it affects our balance of payments and the use of certain valuable indigenous resources. It also has a major effect in the second area to which I would like to refer, namely, the level of ESB charges to consumers.

A main element of strategy on ESB fuel use must be to diversify away from oil as a primary energy source. Apart from the volatility of oil costs, the risk of major disruption of international markets is always present. In this context the coming on stream of the new coal burning facility at Moneypoint will be a major diversification. The proportion of our installed generating capacity that depends on oil has been falling off in recent years, and this trend will be maintained. The proportion which stood at 54 per cent a year ago, now stands at 51 per cent and by the end of the decade it will be about 35 per cent.

The other prong of our fuel strategy must be to maximise the proportion of native fuel used by the ESB. Of the 1,362 megawatt capacity approved for commissioning between now and the end of the decade, 88 megawatts will be fired by peat, including extensions to Shannon-bridge and Lanesboro generating stations, and 45 megawatts will be fired in a new station at Arigina using local low grade coal. The ESB are already using native natural gas in some of their power stations and, while the premium domestic market is building up for this gas, its use by the ESB is helping to stabilise electricity prices to the consumer and creating savings on oil imports which assist the balance of payments.

Electricity tariffs have been in the news lately. Over the past two years or so these have increased quite substantially although, of course, they were granted on the basis of allowable cost increases incurred by the board, including fuels, salaries and other unavoidable increases in overheads. The level of increases has, however, been disturbing not only for domestic consumers but also, and especially, for industry. It has been possible to limit the most recent increase granted to the board to 5 per cent, which is the most moderate for some years. I was also glad to announce, that, while allowing this increase for general purposes, there would be a reduction in the night-time electricity tariffs which would be of benefit to industry. Furthermore, I removed the fuel variation charge from ESB bills which had become a source of confusion — and indeed some annoyance — to electricity consumers.

I would like to assure the House that I will be concentrating my efforts to ensure that this desirable moderation in electricity increases which we have been able to achieve will be maintained in the immediate future at least. The Government have, in fact, decided that the position on electricity prices generally should be fully reviewed, particularly in the light of recent reports that, at least in some respects, our electricity prices compare unfavourably with general levels elsewhere. I am arranging to have this review carried out and I will be taking a personal interest in the results.

There are many other aspects of the activities of the board which could be mentioned. A number of these have been dealt with in the House recently, either in the course of questions or on other occasions. I have a high regard for the professional and technical competence of the ESB organisation, which has served this nation well over the years. I would emphasise, however, that I consider the broad policy objectives of the board, and the means of achieving these, as major areas of direct concern to me. I have a very satisfactory working relationship with the board and senior executives of the ESB and have every confidence that I will have their full co-operation in seeking to achieve the paramount objective of providing all consumers with a safe and continuous supply of electricity at the absolute minimum cost to them and to the economy.

I recommend this Bill to the House.

Mr. Fitzpatrick

(Cavan-Monaghan): The Electricity Supply Board is the first or most senior of our State companies and indeed could be described as the most successful. The expansion and development of the Electricity Supply Board really is the story of the development of this nation.

It is true that we have become very dependent on electricity. We look to the ESB as the main source of our energy. For a long time energy was supplied by the board at a cheap rate but, those days are gone. I have said that we have become very dependent on the board for the energy used in our households, in industry and in our agricultural sector. As a matter of fact if, suddenly, the ESB and its network were to go out of action for some unknown reason the country would be paralysed and brought to a standstill overnight. Therefore it is extremely important that the ESB run their business in a way that will produce electricity, energy, at the lowest possible cost. It is even more important that the Government conduct their business and manage the country in a way that will not make it impossible for the ESB to supply us with energy at a reasonable cost.

I noted that the Minister said in his concluding remarks that the cost of electricity here compared unfavourably with its cost elsewhere. Unfortunately at present the price of a lot of things in this country compares unfavourably with their counterparts elsewhere. As I shall be saying later, for example, interest rates are coming down in other parts of the world but seem to be going up here. There is something generally wrong with our economy. We are becoming less competitive in foreign markets.

Generally speaking, if electricity is becoming comparatively dearer here that is partially due to the cost of oil. That has been the position since 1973 but, apart from that, there are other things making it difficult for the ESB to compete. I do not use the word "compete" in its literal sense of whether we can afford electricity but rather that it makes it difficult for the ESB to produce electricity on terms as favourable as those elsewhere. That is not necessarily an indictment of the board or of the way in which the board manage their affairs. It is as likely to be an indictment of the country as it is in general likely to be an indictment of the Government.

In the last six months we have had two Bills. On 25 July 1981 a very short two-section Bill was introduced here which fixed the borrowing powers of the board at £1,400 million. The present Bill proposes to fix the borrowing powers of the board and the guaranteed powers of the State at £1,600 million, an increase of £200 million. That is a comparatively modest increase. This measure is an enabling measure designed to enable the Minister to guarantee the borrowings of the board. I do not know what increase there was last year in the £1,400 million but an increase of £200 million this year does not seem to be a very big increase.

The Minister seems to take complete control over capital expenditure by the board. In referring to that I thought he was a little bit on the defensive, because section 2 (1) says that the board shall not increase any expenditure for capital purposes without the approval of the Minister. If that is implemented, as it certainly will be, it is a very far-reaching power and it will be difficult to operate. If it does not mean Ministerial control it does not seem very sensible to have it here. It is also provided that the board may borrow in the national currency, punts, or it may borrow in foreign currency. If it borrows in foreign currency we shall have to repay in foreign currency. That is inevitable. There is also provision that the board may invest its funds in trustee securities and we seem to be departing from trustee securities and giving authority to the board to issue such other investments as the Minister may approve. Is that a new departure? I should like the Minister to comment on it when replying. If it is a new departure is it a recognition that trustee securities are no longer attractive and that it is better to look further afield?

I would also like the Minister to tell us what the indebtedness of the board is at the moment. How much of the indebtedness represents native borrowing and how much foreign borrowing? How much does it cost to service this borrowing? I think the board have a sort of Hobson's Choice here because if they can get money at home they will be faced with high and unattractive interest rates, interest rates dearer than those in other parts of the world. As recently as Tuesday of this week the Chairman of Allied Irish Banks is reported in the Evening Herald as saying that there is no hope of a drop in bank interest rates because the Government are borrowing too much. He went on to say that our serious balance of payments problem, the high level of inflation and Government borrowing, are making it impossible for a fall in bank interest rates.

Now we have the position wherein, if the board borrow money at home, they will be faced with sustained and increasing interest rates and those rates will have to be serviced. That of course, will make it more difficult for the board to produce electricity at a reasonable rate. If, on the other hand, borrowing takes place abroad the interest will have to be repaid in foreign currency and, as we know from what the Chairman of Allied Irish Banks, Mr. Neil Crowley has said, the rate of exchange is not favourable to the punt. That will inevitably put up the cost of electricity again. These are things over which the Government have control. They are things over which the ESB do not have control. There are certain things the Government should put right. I have asked the Minister to deal, when replying, with the present indebtedness of the board and the cost of servicing that indebtedness.

The Minister said that this Bill imposes a charge on the board of £10 million in respect of rates this year. When Ministers refer to their own Government's budget proposals, they present them here as if they were our proposals. They go out of their way actually to say that certain budget proposals were those of the previous Government. I find it necessary to put on record again that the budget of January was rejected and the budget of March is this Government's budget. It made changes. We were toying around with the Finance Bill until as late as yesterday and certain changes were made in that. Let us be clear now about the situation. These are Fianna Fail proposals.

The last Government proposed to make a charge on the ESB of £10 million in lieu of rates. That was done on the basis that when rates were abolished on private dwellings other sources of income had to be found for local authorities. At the time it was stated that the intention was that this charge would be a temporary measure until the ESB property was valued for rating purposes. When that task was completed it was proposed that the ESB would pay rates like other rate payers. Under this Bill it is proposed to impose this charge of £10 million in 1982 and in each other year the board will be liable for a sum to be determined in accordance with the Bill, by the Government. That figure is intended to be in keeping with the rates payable by the board if the various installations of the board were valued and rated. I wonder if that is a wise move, because we are giving authority to the Government to impose a charge on the ESB each year which will, in the opinion of the Government, be approximate to the rates that the board would be liable for but the figure will not be increased as rates would.

Section 7 states:

7.—(1) The Board shall, in the year 1982, pay to the Minister for the Environment the sum of £10,000,000.

(2) (a) The Board shall, in each year after the year 1982, pay to the Minister for the Environment such sum as may be determined by the Government for each such year.

(b) A sum determined under this subsection for any year shall not exceed the amount of the rates made by local authorities which, in the opinion of the Government, the Board would, but for the exemption from such rates by the Electricity (Supply) Acts, 1927 to 1981, of certain property of the Board, be liable to pay for that year in respect of that property.

(3) Moneys paid to the Minister for the Environment under this section shall be paid into the Exchequer or disposed of for the benefit of the Exchequer in such manner as the Minister for Finance thinks fit.

In my view it would be better if the board was rated like other owners of property rather than the Government making a stab at an approximate charge.

If the board find it difficult to produce cheap electricity a lot of the blame for that is due to the way it is managed. Since 1973 the cost of electricity has rocketed due to inflation and the huge increase in the price of imported oil, but other matters must be taken into consideration. The Minister should tell the House the amount of natural gas that will be supplied to the board and the effect the provision of such cheap fuel will have on the price of electricity.

I should like to compliment the board on the development of their consultancy service throughout the world. The board have made a big name for themselves by taking on contracts in many foreign countries. The work of the board in this regard should be followed by other State and semi-State bodies. Yesterday we discussed a Bill relating to the planning and development, and in that regard I wonder if the time has come when the ESB should have regard to the planning and development laws as far as the installation of electricity is concerned. I am referring to the erection of electricity poles and the carrying of cable over ground. I am aware that in new housing estates the ESB put all their cable under ground, but I wonder if they could do more in general in regard to environmental planning.

I understand that almost 100 per cent of houses are connected to the ESB, but we should go a little further and complete the job. It must be remembered that in the past some old people refused to accept a subsidised supply when it was passing their homes. The result is that the young people who now occupy those houses do not have an electricity supply. It is desirable that every effort be made to give them a supply.

The Bill is also concerned with the fisheries activities of the board. I was pleased to hear that the board proposed to extend their aquaculture activities particularly in regard to salmon rearing. That move is welcome because in recent years salmon catches here have fallen drastically. In fact, since 1975 the salmon catch has halved. That drop is due to many factors, including matters outside our control such as the Faroese catching our salmon as they passed through the waters adjacent to their islands. The EEC should investigate that matter. We also must contend with a lot of poaching and unfair fishing practices indulged in by some fishermen. That should be stamped out. I was pleased to hear that the Mulroy bay venture was a success and that the amount of salmon produced by the board is in the region of 50 tonnes per annum. I was also pleased to learn that the target is 100 tonnes per annum.

It must be remembered that salmon fishing is a great attraction for tourists and the breeding of salmon should be encouraged. Many people wonder why the ESB are involved in fisheries. The reason is obvious. The first source of energy used by the ESB was the River Shannon and that involved the control of fisheries on that river. The Board's concern about fisheries now extends to the River Erne. I am in favour of giving the board every encouragement in their fisheries operations, particularly aquaculture for which there is a big future. This is a limited debate and I do not wish to drag it out further. I hope we will be given some brief period for a Committee discussion.

Mr. B. Desmond

The Labour Party welcome the Bill. Deputies on all sides will agree that the ESB are one of our better State-sponsored bodies, being in the top five in terms of professional competence, managerial structuring and general ability to discharge their functions. It is in that setting that I will comment on a number of aspects of the Bill.

The Minister has told us it is estimated that the amount of new borrowing required by the ESB to meet the capital programme between now and 1985 will be £735 million, the sum specified in the Bill. Therefore, the amount of money involved up to the beginning of 1989 is very substantial for capital investment, and a number of questions must be asked. We should be told about the likely sources of money, whether the Departments of Finance, and Industry and Energy have had discussions about the phasing of the borrowing.

We are now in 1982 and by 1985 £735 million will have been borrowed. Therefore, the House is entitled to be given a breakdown of the major capital borrowing in that time. Possibly we will not be here reviewing the overall borrowing requirements of the board for a number of years. Today, with the international money market being so expensive and domestic capital savings being so sparse, it is essential we should be given this detailed information if we are properly to assess the exercise outlined in the Bill.

Last year I supported the decision of the previous Government to request the ESB to pay £10 million this year in respect of rates. I have always held that all our State-sponsored bodies should bear full liability for normal commercial rates, and I am surprised that the Government now have concluded that the special circumstances of the ESB should render them liable for only a fixed payment annually in lieu of rates. I should like the Minister to tell us what he regards as special circumstances in this case. Special arguments have been put forward from time to time in regard to special circumstances, but I hold the view that all our semi-State bodies should be run with efficiency, high profitability, dynamic management and committed work forces, and with very clear terms of reference. I say that the ESB should be obliged to pay rates.

I am pleased that it has been decided to amend certain provisions of the ESB Superannuation Act of 1942. It is good to know that the doubts that existed regarding the powers of the trustees of the superannuation committee to invest in property have been brought into line firmly and that appropriate amendments have been clearly set out in the Bill.

The Labour Party are very pleased at the continued expansion of the ESB's profitable fisheries activities. I am glad that for the first time in the history of the board's activities in this field they are being allowed to expand from salmon hatcheries, cultivation of trout and eel fishing — the ESB are our principal eel exporters — and that it has been recognised that aquaculture can make a considerable contribution. Section 9 of the Bill gives statutory power to the board to engage in general aquaculture activities. With such tremendous investment in their hydro-stations, the board are ideally situated to diversify from salmon, eel and trout fisheries into the profitable national resource of aquaculture both in the open seas and in inland waters. I have strong views on that and I am pleased to know that that is recognised in this legislation. It is a progressive measure and I hope there has not been any internecine warfare between the different Departments of State regarding the general diversification of the activities of the ESB. In that context again this is a progressive Bill.

There are two or three aspects I want to refer to in relation to this Bill. The Minister indicated that in 1982 the total expected capital expenditure by the board is estimated at over £230 million of which £125 million will be spent on generating plant and about £87 million on transmission and distribution networks. We all know the general refurbishment and the capital development works being done by the ESB in relation to our national network. But we should have from the Minister, if possible this morning, a breakdown of the £125 million being spent on generating plant this year. These moneys are very substantial. The board is one of the major expenditure components of our public capital programme and it would be of interest in mid-1982, as we are about to enter into adjournment, to a breakdown of the £125 million for generating plant.

The Minister also spoke about the diversification by the ESB away from oil as a primary energy source. The Minister rightly pointed out that in this context we expect to see the new coal-burning facility at Moneypoint coming on stream. The magnitude of the Moneypoint development is not appreciated by politicians here. We should be told this morning the total capital cost of Moneypoint. I have an admiration for the way the ESB can build our generating capacity here. If the ESB say they will build a power station for £64 million, it might work out at £64.5 million or £65 million and there are no overruns. I remember having lengthy discussions with the late James Kelly who, tragically, died rather young. As chief executive of the ESB he had a tremendous managerial ability. The board and the chief planners spent money without having massive overruns on general capital expenditure. Their capacity to plan, to develop and to construct is quite extraordinary. Indeed our other semi-State bodies could usefully follow that example. But Moneypoint is a very major development and we should know how it will be phased in and the actual expenditure there.

The Minister indicates that he is concerned, as we all are, about the effects on the balance of payments of Moneypoint. I do not know how many millions of tonnes of coal we will have brought in for Moneypoint. I would like to know the anticipated coal imports for the first year of operation. These would be very substantial and will have a substantial impact on our balance of payments, counterbalanced of course by the fact that we will not be importing oil. It would be of particular interest to have that information.

The Minister disclosed a rather interesting figure here: the proportion of our installed generating capacity depending on oil. The proportion, which stood at 54 per cent a year ago, now stands at 51 per cent, and by the end of the decade it is anticipated that it will be down to 35 per cent. That brings me to the question of the use of natural gas by the ESB. I am subject to correction on this but, as I understand it, the ESB are currently getting natural gas from An Bord Gáis at about half of the conventionally oil-related, energy-related price. The energy-related price per therm would be over 30p in terms of petrol. It is in the national interest that it should be known that the ESB will be paying about 15p. I have a view about that kind of development. I firmly believe that all our State bodies, whether it be Bord na Móna selling turf to the ESB or An Bord Gáis selling feedstock natural gas to the ESB, should charge the full energy-related price. If as a result of charging that An Bord Gáis or Bord na Móna make a handsome surplus — in the case of An Bord Gáis I would think it would make an extra £20 million — then the Exchequer has this money and the Exchequer can then decide to subsidise the price of electricity. The Exchequer then has control of the situation and the full commercial value of a very valuable, scarce natural resource accrues directly to the State. Otherwise we will have hidden internal energy subsidies which will be unknown to the public at large and which will be assumed by the boards of State-sponsored bodies to be their natural right and this in the long run is not conducive to general efficiency. I would ask the Minister to give us the information in that regard because I do not believe in what I would call artificial accounting in State-sponsored bodies by giving such bodies a transfer subsidy of that nature with the approval of the State.

That brings us to the overall generating capacity of the ESB. There has been a fair amount of comment on this. I would like to know how much spare generating capacity there is in the ESB at peak winter season with Moneypoint on stream. Will it still be 25 per cent or will it be 30 per cent or will it be 40 per cent? There is no doubt that, despite very careful planning by the ESB, they now have very substantial surplus generating capacity in their system. There was a 10 per cent growth in electricity demand each year but in the late seventies and early eighties there appears to have been a decline in the growth of consumption.

I now refer to the decision of the Government to proceed with a 45 megawatt station in Arigna using local low grade coal. This was also the decision of the previous Government. Even if there is great growth in electricity consumption, the ESB have very substantial surplus generating capacity with Moneypoint coming onstream and they are anything but enthusiastic about the new Arigna station. They would have preferred to put it off into the late eighties and hope that politicians might forget about it. The project has been brought forward and we should know the cost of this development and the date on which the station is likely to come onstream. We should also know whether the Minister is satisfied that the proposed technology is reasonably efficient. I must confess that I have some doubts about the exercise as a whole and I do not regard it as an integral part of the so-called diversification programme of the board.

In the course of his speech the Minister stated:

The Government have, in fact, decided that the position on electricity prices generally should be fully reviewed, particularly in the light of recent reports that, at least in some respects, our electricity prices compare unfavourably with general levels elsewhere.

What does that mean? It is one of those statutory sentences that civil servants feel they may be required to put at the end of a Minister's speech when he has nothing else to say but wants to convey the impression that he might do something if the thought struck him.

Mr. Reynolds

There is a lot more in that sentence than the Deputy might think.

Mr. B. Desmond

It sounds impressive. It is a classic piece and I suppose Deputy Kelly would call it "tautology".

The Minister went on to state:

I am arranging to have this review carried out and I will be taking a personal interest in the results.

The best of luck to him. There is a need to have electricity prices "under continuous review", to use the classic phrase, but I should like to know what the Minister means, and perhaps he would clarify the point.

I wish to compliment the staff of the ESB on the work they are doing abroad. A large number of them have been involved in major international capital development projects in countries such as Saudi Arabia and Bahrain and in other countries involved in Ireland's development aid programme. They have also been involved in independent consultancy projects. I have the highest admiration for ESB engineers, technicians and general staff who have in the past decade gone abroad and won expensive international contracts for consultancy services and the commission, design and construction of works.

I wish to record my admiration of their work and my direct encouragement to the board to expand in this way. By the mid-eighties our transmission network will be virtually complete and will only require maintenance and refurbishing. When the programme is complete the staff of the ESB will seek international pastures and the kind of consultancy work they have been undertaking. I have no doubt that they will discharge their functions with equal competence.

I regret that the late Jimmy Kelly will not be there to advise the Minister in the years ahead but I accept that the board of the ESB as now constituted are competent. The chief executive is an extremely competent person and his senior executive staff are highly efficient. As one of the arch critics of the State sector and yet one of the arch supporters of that sector, who demands the highest from it and will give the highest support in return, I am pleased to welcome this Bill on behalf of the Labour Party.

Mr. Manning

This Bill should not be much more than a formality and should involve little more than tidying up aspects of legislation which have become outdated in the 28 years since the last such Bill was enacted. It should simply make it possible for the ESB to borrow the amounts which are adequate for their programme of capital investment. If that were the only purpose of this Bill, then the figure of £1.6 billion would be seen as adequate for the amount of capital investment needed and we could wave this Bill through, making critical or complimentary comments about the ESB and our national energy policy. However, there are aspects of this Bill which I find deeply disturbing, particularly section 7 which imposes an arbitrary open-ended tax of £10 million on the ESB, with every certainly that this sum will be increased in succeeding years. I object both to the principle of what is being done and the way in which it is being done. There is no point in saying that this idea originated with the last Government because I know this to be the case, but I still think it is a bad principle.

I wish to make five brief points on this aspect of the Bill. First, there is the general question of whether the ESB should pay rates on their generating plants. Up to now they have not done so, for a number of reasons. In the early stages there were some difficulties of demarcation between local authorities but the principle was accepted that Ardacrusha and the other generating plant were seen as national property and great national assets. Ever since rates have not been levied on generating plants. The Minister knows, particularly from his own constituency, that these plants have been located in underdeveloped areas and have played a major part in providing jobs. The contribution of the ESB, from Ardnacrusha on through the various turf programmes and rural programmes of the forties to the ambitious programmes of the sixties and the seventies, has been part of a pattern of national economic development.

Is it wise in the national interest to introduce a new tax on this form of development? It is a tax on national properties which are located largely in depressed regions. Obviously it has been decided to bring in rates by the back door, and we must now look at the way in which the money to be levied is to be assessed. How was the sum of £10 million arrived at? Was it just taken out of the air by the last Government and regarded by this one as a fair figure? How does it compare with rates charged on similar plant in Northern Ireland or Britain? Can the Minister, with his hand on his heart, say that it was arrived at after a detailed examination of such properties all over the country? I doubt it. It was a handy figure and one which can be increased as the Exchequer desires.

Section 7 (2) (b) gives the Government the right to decide what the amount should be. The words "in the opinion of the Government" are objectionable because they confer on the Government power of a most arbitrary and open-ended kind. Why involve the Government at all? If the ESB are to pay rates, the rate should be decided by the proper rating authorities, that is, the local councils in each area. This may be cumbersome but there will be some consistency in it. It will put the ESB on the same footing as other bodies. The Government, which will collect the tax, will also decide what the amount will be on principles of a very vague nature—I am sure purposely vague — which have been incorporated in the Bill. I am sure the Minister, on reflection, would agree that this is a bad and unfair provision. It is open to abuse and will be abused by Governments in the future as they search for new sources of revenue. If the section is to remain and rates are to be levied a fairer, more consistent and open method of assessment should be arrived at rather than "in the opinion of the Government". We should have something more honest and straight forward.

What will happen to the money which ultimately will be taken from the electricity consumer? If it was rates — the word is not used in the Bill but we are talking about rates — it would go to the relevant local authority to improve their finances. As everyone knows, particularly the Minister for the Environment, local authorities have never been so starved of money, but not a single penny will go to local authorities. Will the money go to the Department of the Environment which collects it? If it did and could be used for some purpose associated with electricity such as putting wires underground or improving the environment in areas which were scarred in the production of electricity there would be some point in it. However, that is not the case. The money will go straight into the endless empty coffers of the Department of Finance to be spent as the Exchequer thinks fit. In other words, we are not talking about rates to be used for local development in areas where the plants are situated but about a new back door arbitrary tax on those who are customers of the ESB. This money, which the Government feel is necessary, should more appropriately have been part of the Finance Bill and debated and voted on as such.

A semi-State body is being involved in the collection of taxes directly for the Government. The cost will not be borne by the ESB but by the consumer. It is ironic that the Minister in the gobbledegook referred to by Deputy Desmond or the "Albert speak" which others might call it, says nothing but has many nice platitudes wishing the best for everyone without saying how it will be done. In that sentence there is almost a promise that electricity charges will be kept down or at least will not be allowed to get out of control. The fact is that the £10 million which must be raised this year will lead to an increase of 2 per cent in the cost of electricity. As we are so late into the year, the cost will probably be 4 per cent this year to the consumer. How can the Minister square that with his exhortation to do good and keep prices down? He is bringing in through the back door a provision which will raise the cost of electricity by 2 per cent and possibly by 4 per cent. That is a fact. Is the Minister serious when he urges industry to keep down its costs and yet imposes this savage and unnecessary new tax?

I know the Minister is very busy and has enormous responsibilities. He is one of the most hard pressed Ministers in the Government, with a huge range of responsibilities which in general he is carrying out very well. I do not believe he has given this section the thought which, as a businessman, he should. Does he realise the full implications of this section on the electricity consumer and the cost to the already hard pressed industrialist? It is a bad tax. It is badly introduced and badly phrased. It is a time bomb which confers arbitrary powers on Government and will seriously affect the autonomy and development of the ESB. I am not exaggerating. I am merely giving the implications of what is involved. I do not wish to be obstructive. This has been decided and we are merely involved in a rubberstamping exercise. It would be much better if we had a committee system in the House where experts could be sent for and we could have detailed questioning. I know the Bill is necessary to allow the ESB to borrow money which is needed for capital investment. I resent the way in which urgent legislation is used to sneak in a new backdoor tax. I do not make this case in any party political way. I know it was under the last Government that this idea originated. I know there was approval for it and that this Government adopted the idea. It probably originated from the very competent gentleman on the Minister's right or his colleagues in the Department of the Environment and the Department of Finance. The last Government might well have done what this Government are doing.

I would ask the Minister to look at the points I have made, and I will raise others on Committee Stage. I should like to congratulate the ESB on running a very efficient service. Their consultancy service has been extremely successful, especially in Third World countries, and is an example to other semi-State bodies of what they can do to earn money and to help developing areas at the same time.

Like Deputy Desmond, I am concerned about the financial transactions between the various State sponsored bodies engaged in the energy sector and the costs paid by the ESB for gas and turf. There is a certain amount of behind the scenes activity which should be fully aired, because we need to have the proper facts and figures which underlie our full energy policy, if there is such a thing. This is not the proper forum for a detailed discussion on the matter. This question should be discussed in detail in committee, and I hope that when the new committee on State sponsored bodies finally meet, they will turn their attention to some of the matters raised here this morning. Apart from that serious reservation, I welcome the Bill.

Minister for Industry and Energy (Mr. Reynolds)

I want to thank all the Deputies who took part in this debate. I agree with the last speaker that there are certain points here which could be the subject of longer debate and thrashed out in detail in committee. I have not enough time to cover all the points in detail. I should like to take this opportunity to join with other Deputies who have spoken in complimenting the ESB and paid tribute to the late Mr. Jim Kelly who made a marvellous contribution, not just to the ESB, but to the development of the national economy. Of course, his successors are also excellent people. They have secured vital contracts and export earnings abroad, sold our services to the Third World and underdeveloped countries and paved the way in physical and financial planning. Deputy Desmond paid a tribute to them for having the least overrun in the semi-State sector. I am very conscious of overruns and what has been happening in semi-State sectors in recent years. I have already announced that I have established a monitoring system which will enable me to get information on a monthly basis instead of waiting for two years. We know that, in the past, information was not available to the Minister or to the House, and this falls in line with the thinking here in relation to the borrowing powers that have been set, that it will probably last for approximately one-and-a-half to two years. Some people argue that you should give them very large scale borrowing so that they do not have to come back to this House for five or six years. I do not agree with that argument. I think they should come back very often and be subject to scrutiny so that we can monitor their whole operations. That is why it has not been extended more than we felt was necessary.

Deputy Fitzpatrick asked about total outstanding borrowings. The split up of £840 million is as follows — £210 million from native sources and £630 million from foreign sources. The £200 million is sufficient for approximately two years, and that is the better way forward. Deputy Fitzpatrick also asked if there was a change in relation to the trustee security investment. There is no change in that regard but, from time to time, the Minister for Finance declares certain investments under law to take place. In other words in the case of new investments created by the Minister for Finance under law they can go ahead and invest in them without the approval which was necessary up till now.

Mr. Fitzpatrick

(Cavan-Monaghan): That is the trouble. I do not agree with the Minister's interpretation of the section. Section 8 (a) invites the board to invest in trustee securities and (b) in such other manner as the trustees, with the approval of the Minister for Finance think proper. If that meant new trustee securities, it would not be necessary to say so because they would still be trustee securities. Obviously, this is something other than trustee securities which the Minister may permit them to invest in.

An Leas-Cheann Comhairle

The Chair would like to explain that, ordinarily, while the Minister is replying he should not be interrupted but, as we may not reach Committee Stage, I presume the Minister will be receptive to questions that might be put.

Mr. Reynolds

One of the major questions raised, and which was dealt with extensively by all Deputies, was about the ESB paying rates. A sum of £10 million was mentioned. I believe the original thinking in relation to not levying rates on the ESB was to give them an opportunity of getting off to a good start. In the sixties an interdepartmental committee was set up and recommended that rates should be applied to the ESB in line with CIE, Aer Rianta and other semi-State bodies. Gas companies and oil refineries pay rates and they are also selling energy.

I do not wish to get into a political argument, but the last Government, when they were drawing up the Estimates, wrote a figure of £10 millions into the Appropriations-in-Aid of the Department of the Environment Estimate. I inherited those Estimates and I have to deal with them as best I can. There is a lot in what Deputy Manning said, that this is more appropriate to the Finance Bill, where the opportunity would arise to argue on the basis as to whether it is right or wrong in the first instance. I do not think the ESB should be exempt from paying rates. The figure of £10 million is sufficient for this year, but there is always a danger that when you put in a certain figure like that, Deputies will ask what will happen in future years. The figure that is intended to be collected from the ESB will never be more than they would be paying in rates. The reason I have adopted this position is because of the last point raised by Deputy Manning, that it can add significantly to the cost of electricity. This is another area in which I must be concerned when wearing the industry hat.

I come back to the three or four lines that seem to mean nothing to Deputy Desmond. From the way he read it one would not expect him to take much meaning out of it, nor would Deputy Manning. The core of the whole problem is competitiveness in ESB charges and the competitiveness of energy in Irish industry. Let us deal with the rates situation first. The case has been reasonably established, not alone in the sixties and seventies or even in 1975, that they should be rated. Let us concentrate on where the ESB stations are, in Clare, in my constituency and elsewhere. To rate them in the normal way would be unfair and impracticable because certain local authorities would be given a complete windfall if the ESB were subject to rates in the normal way and the whole central situation would be distorted. Furthermore, ESB costs, rises in prices and expenses as an allowable cost come into the arena also. On balance, while we can argue about it being an arbitrary tax the best result can be achieved by the amounts being collected centrally and paid in centrally.

The Minister and the Government have the opportunity of ensuring that it does not distort the electricity cost in future. They must also bear in mind in fixing the figure the effect which Deputy Manning rightly says it will have on the allowable cost for the ESB. It will have to be part and parcel of the examination of electricity costs every year when it comes up to see what part it will play. Otherwise we must rate them totally and give a windfall to four or five local authorities who would have an unfair advantage over everybody else. I am satisfied that the Central Exchequer could not demand anything from them under law, because the percentage is already fixed for local authorities, who would have a windfall, and consumer electricity prices, if we did not have a mechanism for controlling it, would be affected seriously. That is why we have gone along this road. As Deputy Manning said, if we had an outside committee we might be able to devise a better system. However, I have inherited the situation but I think I can achieve better control in the area of electricity prices and in a fair dispersal of the money. The argument that the ESB should not be rated will not stand up.

From time to time and in recent reports comparisons have been made of the cost of energy in Ireland in relation to industry with costs in the EEC and how we have gone out of line. Many times very unfair comparisons are made — for instance, with France which produces a significant amount of its electricity by hydro, or with Germany which uses nuclear power. We are not comparing like with like. Another area of contention for a long time is the double depreciation of ESB accounts. I have taken a particular interest in this. While the sentences might not be written in a manner which would appeal to Deputy Desmond or Deputy Manning, it means a review of the whole situation, taking into account the comparisons that must be made, realising that Irish industry must be competitive in every situation and that we must be seen to make our contribution in the area. A start has been made in the recent price increases granted to the ESB. The increases did not apply to the night users and a significant reduction was made to the people on night reduction. This was a contribution into the area of restoring competitiveness in energy charges. Basically involved in that is the review of energy costs to industry and how we can keep them competitive in a competitive world.

I was asked for details of the £125 million. The breakdown is as follows: Moneypoint, continuing work on the three 300MW units to be commissioned in 1985-86, 1986-87 and 1987-88 respectively, £85 million; North Wall Station, continuing work on construction of two 100MW of new peak load capacity in the form of combustion turbines due for commissioning in October 1982, £13 million; Lanesboro' Power Station, construction work on a 40MW extension to existing peat-fired station, £12 million; Shannon-bridge, construction of extension to existing peat-fired station, £7 million; Aghada, County Cork, clearing up operation on site of new gas-fired station which was commissioned in 1981, and work on installation and purchase of new combustion turbine to be commissioned in 1982, £5 million. The total cost of the Moneypoint operation which is very significant and which, I agree with Deputy Desmond, is not appreciated generally, is estimated at £678 million.

Mr. Fitzpatrick

(Cavan-Monaghan): The Minister did not give the cost of servicing foreign and native borrowing.

Mr. Reynolds

It is not available to me here but I will make it available to the Deputy. On the question of the make-up of energy sources, in 1980 oil was 64 per cent, in 1981 it was 55 per cent and for the year ended March 1982 it was estimated at 40 per cent; peat, 16 per cent in 1980, 16 per cent in 1981 and estimated this year to be 13 per cent; gas, 11 per cent in 1980, 20 per cent in 1981 and 36 per cent estimated in 1982; hydro, 8 per cent in 1980, 8 per cent in March 1981 and 9 per cent estimated for 1982; coal, 1 per cent in 1980, 1 per cent in 1981 and estimated 1 per cent in 1982.

The Deputy talked about the growth in patterns of consumption. I do not want to go back too far, but the tables showing the demand for increases and the growth in energy requirements in 1977 was + 10.7 per cent, in 1978 + 8.1 per cent; in 1979, + 8.7 per cent; in 1980 + 7.5 per cent; in 1981 - 2-3 per cent; the figure for 1982 is not ascertainable at this time. This shows a heavy growth pattern right through the seventies and this is one reason for the big expansion in the ESB capacity. I agree in general with Deputy Desmond that we must watch the capacity that will be required in future years and look at the peak-load situation. One advantage of gas is that it can be a quick switch-on and switch-in, while the situation with turbines, oil and so on is a 12-hour build-up. With the introduction of more gas stations we will have a quick switch-in and a quick switch-out. When we talk about load peak we are talking about providing for very bad weather such as we have had within the last 12 months and which we can always have again.

On the question of coal imports, the requirement of Moneypoint will be approximately 500,000 tonnes building up to approximately 2 million tonnes.

I have dealt to some extent with the question of prices in respect of gas to the ESB and of supply at peak times. There is not sufficient time to permit of my going into this area in more detail except to say that the price of gas to the ESB is a subject that is being negotiated. The price will have to be related to heavy fuel oil prices since by and large the ESB use heavy fuels. Of necessity, there will have to be discounts to the ESB in respect of plant conversions and so on. It must be said that if the ESB were not there as a customer the Kinsale Head development and the Cork-to-Dublin pipeline would not have been put on stream so soon.

I have been asked, too, about the Arigna situation. This project is expected to come on stream in about 1988 or 1989. I do not have sufficient time to give an account of what my judgment might be on the crow coal development.

An Leas-Cheann Comhairle

In accordance with the resolution of the Dáil on 6 July I am now putting the question. The question is: "That the Bill be now read a Second Time, that any amendment set down by the Member in charge of the Bill, for Committee Stage and not disposed of is hereby made to the Bill, that the Bill, as amended, is hereby agreed to and as amended is reported to the House and that the Fourth Stage is hereby completed and the Bill is hereby passed."

Question put and agreed to.

Mr. Fitzpatrick

(Cavan-Monaghan): I can only express the hope that this sort of thing will never happen again.

An Leas-Cheann Comhairle

In accordance with the modified Order Paper, I am calling on the Minister for the Environment to move the motion in connection with the Joint Committee on Building Land.