I move: "That the Bill be now read a Second Time." As your are aware, Sir, we are taking items Nos. 3 and 8 together.
Gas (Amendment) Bill, 1987: Second Stage.
That is so.
Deputies will be aware that I have expressed in this House and elsewhere my concern to complete the takeover of the assets of Dublin Gas as quickly as possible and to get the Dublin city utility under full control and management of BGE so that safety, efficiency and progressive development would be the hall marks of the future.
Dublin Gas is a problem which I inherited from the previous Government. Matters were dragging on with no sign of finality, either on the organisational, financial or safety fronts. As soon as we came into office we decided that this situation needed to be regularised and stabilised at the earliest possible opportunity. The receiver of Dublin Gas has made substantial advances since he was appointed. Nevertheless receivership is an inherently unstable state for any organisation and I have been keen to bring this state to an end as soon as possible.
The BGE bid for the assets of Dublin Gas was successful and I am now pressing ahead with all possible haste to put the legislative framework in place so that there will be no delay in forging ahead and adding substantially to what has already been achieved. This Bill is designed so that the Minister for Energy can oversee the operations of gas distribution with particular emphasis on safety. It also provides for the appropriate capital borrowing powers so that the contract for sale of the assets can be signed very shortly.
I am also pressing ahead with all possible haste on the organisational front. I am insistent that the takeover will be done properly so that we can go forward and build on what has been achieved through the best possible management and organisational arrangements, and through the extension of the competence of the board of BGE to deal with their new remit.
This Bill covers three main points, though not necessarily in the following order. It increases BGE's borrowing powers, to enable them to effect the take-over. It proposes power for the Minister for Energy to confer on BGE, the new owners and operators, the powers and functions which Dublin Gas Company have as a gas distribution utility. Thirdly, it enables the board of BGE, which will be responsible for both the existing BGE and the Dublin Gas utility as an integrated entity, to be increased in numbers, so that the wider spectrum of operations can be reflected at board level.
The discovery of natural gas in 1971 represented a major development in Irish energy. The Kinsale Head gas field was our first commercial discovery of hydrocarbons. The volume of gas in the field is about equivalent to 250 million barrels of oil. Since gas came ashore in 1978, we have reduced our dependence on oil from 75 per cent to 53 per cent of total primary energy. Deputies are aware that the initial allocations of Kinsale gas were to NET for ammonia manufacture and to ESB for electricity generation. These allocations were essential to underpin the economics for the field to be developed and brought into production. The ESB have now become a major coal consumer, following the coming on stream of the Moneypoint scheme, and this has allowed a significant diversion of supplies to other consumers.
In addition to the major volumes flowing to NET and ESB — which, as I have said, made the exploitation of Kinsale possible — it was recognised that the direct distribution of natural gas to domestic and commercial consumers would be a premium use of natural gas. Natural gas is a particularly clean and convenient fuel. It can be burnt efficiently in modern appliances and it has hardly any undersirable by-products. This makes it expecially attractive where fine control of heat and high levels of purity are required.
The premium domestic, commercial and industrial consumers normally use gasoil or LPG when natural gas is unavailable whereas heavy industry and the ESB are able to make do with cheaper heavy fuel oil. In the premium markets natural gas can displace gas oil and LPG which are both more expensive to import than most other competing energy forms.
In order to gain access to these premium markets the gas transmission system was expanded, and natural gas was made available, first in Cork, then in Dublin, and later in Limerick and Clonmel. Plans are afoot to supply Waterford City, Kilkenny, north County Dublin, Drogheda and Dundalk. Large volumes of gas are also being supplied to major industries, including the dairy industry, in the vicinity of the transmission pipelines.
Dublin is by far the largest premium market for natural gas. Dublin Gas have approximately 130,000 consumers and in 1986 83 million therms of gas were sold compared with 34 million therms in 1983. The target is to get this to at least 124 million therms within the next few years. A number of marketing studies which have been undertaken in the past few years have indicated that this level of sales should be possible though, of course, it will not be easy.
The unfortunate events of the past six months or so have not helped. I am quite satisfied, however, that under the care of BGE all of the necessary steps will be taken to ensure the integrity of the gas network and the safety of the public. A great deal of the pipe network in Dublin was laid at a time when attention to safety was not as important as it is today and when it was impossible to forsee the volume or weight of traffic which now uses the streets of the city. BGE have already recently appointed a member of their staff to oversee operations in Dublin gas and a major task of determining a policy for repair or replacement of mains which are most at risk has been started. Remedial work will not have to await the outcome of that study, however. Significant repairs and renewals have been under way all year and the Cremer and Warner reports on the Raglan and Dolphin House explosions have emphasised the areas most in need of attention.
With this heavy emphasis on repairs I am sure that customer confidence will be restored and we can now look forward to a resumption of growth in gas sales in the Dublin area. It will be a primary function of BGE and their management to ensure that this is achieved.
The Dublin Gas Company project was financed broadly 50:50 by a consortium of Irish Banks and others, and by BGE. The bank loans were to be repaid by 1991 and BGE's thereafter. From 1985 onwards the company encountered serious marketing and costs difficulties which they were not able to rectify. They seemed unable to get their costs and management structures under control. Mounting debts in the company and failure to pay outstanding sums of many millions of pounds due to BGE for gas forced BGE to put in a receiver in April 1986.
Major improvements in the costs and operations of Dublin Gas have been achieved during the receivership, but further improvements on the marketing and operations fronts remain necessary if their future is to be assured. Apart from the fact that the receiver cannot remain in place indefinitely, these improvements are unlikely to be fully achieved while uncertainty about the future remains. That uncertainty effects the customers and the staff of the company.
In March 1987, following Government decisions designed to safeguard the Dublin Gas Company's customers and employees, BGE submitted a bid for the assets of Dublin Gas, and this has been successful. With good management we can now ensure that the utility will continue and prosper and that natural gas will be supplied, safely and efficiently, in the city of Dublin to increasing numbers of satisfied customers. Much work remains to be done to bring gas distribution in Dublin up to modern technical and commercial standards. I am confident, however, that BGE will tackle these problems in a thorough manner and that the Government's decision to ensure continued distribution of natural gas in Dublin will be rewarded.
Here I would wish to make a few points very clear. I remain convinced that the decision to bring natural gas to Dublin city was the correct one, despite the various traumas we had to endure. The chosen vehicle, Dublin Gas Company, did not achieve success for a variety of reasons and, in consequence, there was probably no option but to put in a receiver. The alternatives of liquidation or an uncertain future under a bank receivership were hardly palatable. The consumers of Dublin Gas would also be put to major expense for other cooking and heating systems, the employees of Dublin Gas would have been hit severly and a large number of small contractors and subcontractors would have been ruined. On top of all that, a valuable outlet for the sale of our gas would have been lost and GBE's large investment in the infrastructure of Dublin Gas would have gone for nought.
The purpose of this Bill is quite straightforward. In view of the time constraints, the Bill has been restricted to the absolute minimum necessary to enable the takeover by BGE of the Dublin Gas assets, and to give BGE the powers to carry out the duties and functions involved in the operation of a gas utility.
There are in essence two aspects to the gas business. The first part, that which is at present being carried out by GBE, is the transmission of gas at high pressure in reasonably large diameter pipes such as the pipeline which runs from Cork to Dublin. Then there is the business of gas distribution which is the business of the gas utilities and involves the distribution of the gas generally in low pressure small diameter pipes and its sale to domestic, commercial and industrial customers within a specified area. To date BGE have been involved in the distribution business in subsidiary companies such as Cork Gas and now also in Limerick.
The functions, powers, duties and obligations which are necessary for the purpose of gas distribution are somewhat different from those needed for the business of gas transmission. While as I mentioned earlier the 1976 Gas Act conferred the right on BGE to distribute gas it did not specify what these rights actually are. The Government have decided that it is appropriate at this time to clarify these rights, duties and obligations and this we propose to do under section 2 of the Bill.
The urgency to enact the Bill arises because it is essential that BGE should complete the assumption of control as soon as possible. While the receiver has achieved very considerable successes, I am anxious that such a large and important entity should be under normal control and management of an operating company — in this case BGE. That will create the necessary confidence and stability among the public at large and the customers and employees of Dublin Gas and that is the only way to enable the business to achieve maximum efficiency and the highest safety standards.
It is very important for us to clarify the situation here and to specifically confer such powers on BGE. It is also vital that I do all in my power to secure the safety of the public and property as far as is practicable. In so doing I would wish to be able to ensure that appropriate standards are adhered to and that the necessary powers exist for BGE, in cases of emergency in particular, to enter and inspect any premises and there to take such measures as BGE consider appropriate for the purposes of ensuring the safety of the public and of property.
On the question of ensuring proper and safe standards I have seen to it that the implementation of the numerous recommendations of the Cremer and Warner Report are being implemented by Dublin Gas. Officials of my Department are closely monitoring this and I am assured that good progress is being made. I am very keen that we should do all in our power to ensure that the occurrence of accidents such as we have had earlier this year is reduced as much as is humanly possible. Where new updated procedures are required they should be implemented. Where new standards of workmanship, reporting, installation of services and the standard of pipe work are needed then these should be implemented. I recognise that the putting in place of a mains replacement programme will be an expensive undertaking and will need to be phased over a reasonable period of time but there is no way we can or should attempt to avoid this. We must aim to have the best possible standards of performance and safety in the running of this gas utility. Very good progress has been made by the receiver in this area and I am convinced that similar progress will be maintained and brought to an appropriate conclusion by BGE. I will be insisting on the highest standards of performance.
The Gas Act, 1976, which established BGE, set out the board's powers and responsibilities. The sections dealing with borrowing were amended in 1980 and 1982. In 1976, of course, BGE were only involved in buying gas from Marathon and delivering it on to NET and the ESB. It was not envisaged that BGE would be directly involved in the retail distribution of gas in towns and, as I said, the 1976 Act did not provide, in sufficiently clear terms, the specific powers necessary for such operations. This is now being rectified.
The way this is being tackled it to give BGE powers which have been available to Dublin Gas for many years and which have withstood the test of time. At the same time I was conscious that the Dublin Gas powers derive from legislation which dates back to the middle of the last century. Rather than make those Acts apply to BGE I am proposing to give effect to the necessary powers by new orders which can be expressed in modern terms and which can be tailored to meet current requirements and concerns.
The Bill also provides for the order defining the area in which BGE may undertake these functions. Initially such an order will relate to the existing Dublin Gas area and later it is likely that similar orders will be necessary for other parts of the country, such as the towns of north County Dublin which will be served when the north eastern pipeline project is undertaken.
Heretofore the Gas Act, 1976, conferred on the Minister powers in relation to permissions for BGE to construct pipelines. That power will continue to rest with the Minister. However, in the designated areas for gas distribution it will be within the Minister for Energy's power, with the consent of the Minister for Finance, to grant a waiver on the need for such permissions in the case of each and every individual pipeline. It would be quite impracticable to have officials of my Department deciding on each and every small pipeline in a distribution area. However, the power conferred on me by the 1976 Act will continue in existence in the normal course of BGE's activities, except that from now on such consent for the construction of a pipeline will also require the consent of the Minister for Finance, a provision not in the 1976 Act. This approach has been decided on by the Government because it is appropriate that the Minister for Finance should have a say in any area where the expenditure of large sums of public money are involved.
As mentioned above, the Government have considered that it is important that not only the assets of Dublin Gas be transferred to BGE but that BGE can carry out the functions necessary to use these assets. It is also necessary that the matter of the workforce of Dublin Gas be dealt with, in particular the question of their existing pension fund. Section 18 of the Gas Act, 1976, deals with the pension fund arrangements for Bord Gáis Éireann and it is appropriate that the existing Dublin Gas pension scheme be brought under this section of the Act. When all the necessary formalities with regard to the pension fund have been completed the Bill provides that the appropriate section of the Bill can be brought into operation by a ministerial order.
The old private Acts for Dublin Gas in the last century provided for such matters as financing of the company. Dublin Gas are partly financed by debenture stock issued under these Acts. Some of this debenture stock is irredeemable. It has a first charge on all the assets of the company. I am advised that it is not possible to transfer this debenture stock to BGE. Therefore, the Government have decided that it should be redeemed. While such redemption could have been effected by an order under section 11 of the Gas Regulation Act, 1982, the Government decided that it was more appropriate to deal in the present Bill with all matters relating to this issue. To that end we have made provision for the receiver of Dublin Gas to redeem this stock and we have also specified the method by which he can redeem it.
BGE's borrowing will rise by £66 million directly on account of the takeover because of the debts associated with the assets of Dublin Gas. This amount is inescapable because of the commitment made by the previous Government in a letter dated 22 April 1986 to the banks confirming the position that they had a prior charge on the assets of Dublin Gas and that the Government intended that all amounts due to the banks would be paid in full.
I have adverted earlier to the reasons for that course of action. I now expect that these loans will be rescheduled on more favourable terms than heretofore.
I wish to emphasise at this point that the financial reality of this transaction we are debating today, the take-over by Bord Gáis of Dublin Gas is that a nil value is being placed on the assets of Dublin Gas and BGE will only be assuming the guaranteed debts. This is the best position that can be achieved. The net effect of this is that the only cash outlay by BGE in the transaction will be some £4 million on stamp duty payable to the State.
To provide for the further future development of the north east pipeline project and essential capital expenditures in Dublin over the next few years, I propose to increase the borrowing limit by £90 million rather than £66 million to £170 million.
Deputies should note that, regardless of precedents set by earlier legislation I do not propose to increase the limit on guarantees by the Minister for Finance from its present level of £80 million. In the present economic climate the Government are most anxious to ensure that borrowings by semi-State bodies can stand on their own feet.
As has been already agreed by the House it is the intention to include in this debate the Clonmel Gas Order 1987. The purpose of this order is to establish the new Clonmel Gas Company as a gas undertaking with authority to maintain, continue and expand the existing Clonmel town gas network and to distribute and sell natural gas within the limits of supply as defined in the order — the Clonmel town area and environs. Currently, Clonmel Corporation are the gas undertaker in the town under the Clonmel Corporation Act of 1895 and the order provides the vehicle by which the assets, functions and legal authority of the corporation's gas devision are transferred to the new company.
The Gas Regulation Acts, 1920 to 1982 provide for the making of regulations, orders etc., to oversee the gas industry. The 1920 Act in particular provides for special orders to be made to enable new gas utilities to be constituted. These orders must be laid in draft before both Houses and their approval given before the orders are made. This order is similar to that passed in draft form by both Houses in December last and subsequently signed by my predecessor to enable the Limerick Gas Company to commence operations when natural gas became available. That company are now up and running.
This procedure has been adopted because the vehicle for carrying out the distribution of natural gas in Clonmel is to be a limited company, similar to that in Limerick, representing a joint venture between BGE and the corporation. This company will, accordingly, be a gas undertaker within the meaning of the gas untility legislation and the most appropriate and expedient way of conferring the functions, status, and jurisdiction of the corporation's gas division on the new company is by making this order.
The new company, Clonmel Gas Company Limited, has already been incorporated and its Memorandum and Articles of Association will be confirmed by me under the Gas Regulation Act of 1982 as soon as this order is made. The Company are to be owned jointly by Bord Gáis, with 90 per cent of the equity, and by the corporation with the remaining 10 per cent.
Agreement on the structure of the project for Clonmel was finally reached in December last between BGE and Clonmel Corporation and no time has been lost since in pushing ahead with the project. Construction of the 4.5 kilometer link from the main Cork-Dublin pipeline at Ballyveelish to Clonmel commenced on 12 May last and is now well advanced. It is expected that this work will be completed in a few weeks. The cost of the construction project for BGE will be approximately £860,000 and the conversion of the Clonmel gas system to use natural gas is scheduled to begin immediately gas is available at the town gate. The conversion project will cost about £840,000 and will be funded also by BGE by way of loan facility to the new company.
There are approximately 1,800 domestic customers in Clonmel with annual consumption of 170,000 therms at present and the availability of natural gas will ensure the survival and potential for growth of the distribution industry there. As a clean, efficient and versatile fuel, and competitively priced, natural gas will provide a new impetus for expansion of gas sales in the town. The projected market for natural gas is 2 million therms by 1997. It is this sale of natural gas to the domestic markets which enables us to maximise the contribution to the economy of natural gas.
As usual, considerable amounts of Irish goods and services are being used on this project and will represent up to 80 per cent of the expenditure on it. Employment during the construction phase has been provided for 20 people and the availability of natural gas in Clonmel means, of course, the assurance of continued employment in the distribution industry with about 50 additional jobs during the conversion programme. The making of this order clears the way for the new company to begin operations, and I recommend this motion to the House.
I would now like to return briefly to the Dublin Gas takeover. I believe it is possible to run an efficient and profitable gas undertaking business in Dublin, operating to the highest standards of safety and efficiency. I believe that with the proper care and attention, with hard work and concerted effort that BGE can run a successful and profitable gas undertaking in Dublin. I am also confident that this new venture will have the full, loyal support of the workforce of BGE and Dublin Gas and I have no doubt that it will merit the support of the citizens and business community in Dublin.
I commend the Bill to the House.
Successive Governments have recognised that the gas distribution network in Dublin is a very important infrastructure that can give premium use for our natural gas. It is obviously important that the potential of this custom would not be lost by the windup of Dublin Gas. Therefore this Bill is important legislation that deserves our support.
However, in agreeing the take-over of the assets of Dublin Gas by Bord Gáis, we must be alive to the danger that many people have aired in the past, that essentially the problems of Dublin Gas could remain unresolved under the much larger and profitable Bord Gáis Éireann and the very effective cash flow into Bord Gáis from their special position of having a very low Marathon price would provide resources that could conceal the real problems that need to be tackled in Dublin Gas.
For that reason, I would raise a serious question with the Minister regarding his proposal for the total integration of Dublin Gas within BGE. Everyone recognises that the problems of Dublin Gas are far from resolved. I do believe that this approach to the problem is fraught with danger. It is important, instead of total integration, that Dublin Gas be set up in such a way that they are operating as a subsidiary of Bord Gáis Éireann. There are, in my view, essentially three options as to the way in which we could approach this problem. One is the idea of a separate State company altogether, distinct from BGE; the other is, as I say, a subsidiary, the option I favour, and the third is the idea that the Minister is putting forward of a fully integrated operation within BGE.
There are strong arguments to support the view that we should have a subsidiary relationship rather than full integration. First, there is the very simplified argument that the skills required in the task of transmission, which is BGE's expertise, are very different from the skills in distribution and although BGE have had some minor experience in recent years with the Cork Corporation, I would still raise the question as to whether BGE have the established capability to run Dublin Gas and to resolve the problems that remain. What assessment has the Minister made in regard to that matter?
It is fair to say that the problems in Dublin Gas are not entirely new, that Bord Gáis have themselves been involved on various monitoring committees. If we are going the road of total integration with all that means in concealing from the public view exactly what is happening financially and otherwise, it is important that we have entirely clear assessments laid before us by the Minister as to the proven capabilities of Bord Gáis. For instance, what new resources have been brought in to give BGE the capability to tackle this problem? I would also like to know something of the analysis the Minister has carried out on what went wrong and why the advice given in 1983 has been so terribly wrong in its realisation. There are problems in Dublin Gas and we need to be confident that the advice we are now getting, that they can be resolved within BGE, is correct. That is an important aspect of this with which the Minister has not dealt adequately in his speech. That is the bottom line for the taxpayers. If we are having what is well known to be a severely loss-making company taken into the maw of BGE, we need to know more about their capability to pull it around.
In preparing for this debate I was hampered by the fact that Bord Gáis accounts for 1986 were not available to us. I noticed that in the course of its review the Oireachtas committee commented on this same area and said that at a minimum accounts should be available to the Dáil within six months of the end of the year. I know that technically we have a few days to run but BGE should have made a special effort, when the House was going to debate this, to have those accounts available to us to provide a foundation for our discussion.
I favour the approach of having a subsidiary rather than total integration because there is a certain benefit in a contractual relationship between the distribution company and the transmission company. It provides a certain amount of friction, a competitiveness, that is of gain to the consumer in the long run. I am very concerned that the distinct management problems of Dublin Gas which as we know relate to the marketing approach and to the various personnel problems in the company, will be buried in the wider personnel functions and marketing functions of the larger Bord Gáis and that instead of being resolved, because they are now part of a larger personnel, marketing or managing approach by BGE, they might reflect badly on both operations rather than curing the remaining problems.
The very obvious problem is on the cash side. Bord Gáis have been set up as an extraordinary profitable company. They profitted in 1985, the last year for which we have accounts available, by £94 million on a turnover of only £2 million which is a massive return on turnover, but that is not a genuine profit. Bord Gáis are in effect operating as the collector of royalty on behalf of the people. This cash rich environment in BGE is one that could easily lend itself to burying the much smaller problems, relatively speaking, of Dublin Gas in BGE. Dublin Gas has a turnover of only £38 million and it could be lost within an integrated company. At the least there must be a separate transparent account provided for the Dáil to see how Dublin Gas is performing. I understand that this is not what would be involved by the Minister's proposals. In the 1985 accounts there are no separate returns made for the Cork subsidiary and we are unable to examine what is happening there. The same will become the case if Dublin Gas is wholly integrated. The taxpayers will not be able to assess what is happening. If the taxpayers are being asked to subsidise a loss in Dublin Gas for the foreseeable future, the very minimum is that they should be able to see precisely what is happening. As the Minister recalled in the final comments of his speech, it is possible to run an efficient and profitable gas undertaking in Dublin. The taxpayers will want to see that that is what is happening. I hope the Minister will take on board an amendment in that area that would at least allow the taxpayers to see a separate financial return by Bord Gáis in respect of its Dublin operations.
In relation to the safety aspect, it is not right as is proposed in this that the job of policing safety should be integrated into the company Bord Gáis Éireann. If we have learned anything from the tragedy of Raglan House it was that under the pressure of day-to-day management of a company, a gas distribution company, safety standards can be and are sacrificed. It is important now that we are setting up a new approach to the running of Dublin Gas that we should take that lesson on board. For a start it is important that we have new legislation. The Minister adverted to this but he has not specified anything so we do not know what he has in mind. In new legislation we need to tighten up the old gas Acts which are in force. More than that, we need some sort of watchdog or supervisor who would be independent of the gas company, to look after safety aspects. With the best will in the world it is unrealistic to expect a gas company to tell us that safety matters have an all-clear when things go wrong. There should be procedures to be overseen by somebody outside the company. I hope the Minister will reconsider on Committee Stage the approach to safety. There should be a supervisor who should organise a periodic audit on safety in the company and he should be independent of the operations.
Dublin Gas at the moment are undertaking a safety action programme and the Minister said that his Department are closely in touch on this. It should be agreed to operate a similar safety action programme in this company. What we need is a supervisor who has the explicit brief of monitoring and keeping this action programme up to date. It will be equally important that such a supervisor would spot check the work practices being carried out by the company. We only have to refer back to the Raglan House experience to see how various practices set out, hopelessly fell through when it came to their execution. There was a failure to properly report the incidence of leak. There was a failure to carry out appropriate checks. There is no point in going back over the ground. There were numerous failures in the way in which agreed practices were executed. Let us be honest, Dublin Gas will be under commercial pressure for a number of years. We should be alerted by what happened at Raglan House: If practices are to be kept to the highest possible standards there must be someone other than the company with their commercial brief checking that that is being done.
It is a terrible lack in our present approach to safety that there is no supervisory authority recording the number of leaks. If we had a public record of the leak experience it would alert us to problems that are emerging, it would give some system of advance warning and, more important, it would give some indication of success in coming to grips with safety problems. It is well known — and this was reported by an Oireachtas Committee who debated Bord Gáis — that there has been tremendously high leakage problems in the distribution companies. In Cork they reported that 40 per cent of the gas was unaccounted for.
Originally.
I am not saying that it is happening now. This is a real problem. The experience in that regard was better in Dublin but it still is a serious problem. It is important that we have some public record where we can see openly that progress is being made in these areas so that we and the public know that the problem of leakages is being tackled and overcome. I know that very considerable progress has been made in Cork but we need a public record which will be looked after by somebody other than the company. The question is why did it reach that stage in Cork. If there was a record one can be sure that that would not have happened.
The question of supervision and of who should be responsible for it is an open one. My attitude is that in the first instance the Department should take responsibility. It need not be expensive and the Department could contract out the required work to various agencies in the public sector without setting up any new gas supervising authority. There are agencies in the public sector who have expertise in this area and who could easily undertake this function. If the first duty to supervise is placed on the Department it would be up to them to allocate that job to various State agencies as they saw fit.
The Minister has allocated the functions of safety to the board but he should also ask that the board report annually on safety. In this way the board's annual report would deal explicitly with that function and we would see comments from the board on their execution of this new safety responsibility that has been given to them.
I would like to refer to the wider issues raised by the Bill with regard to the rational use of natural gas. There should be proper public appraisal of all proposals to extend the national gas grid. There is the danger of an extension of the natural gas grid becoming a politically good thing to do. Everyone regards it as a benefit to extend the gas grid willy-nilly whereas in reality it is only going to benefit the people close to the line. If it is going to impose some sort of cost it is the taxpayer at large who suffers. Therefore, the taxpayer is entitled to a published appraisal of any extensions that are proposed in the gas grid. This would give a more rational and clear policy of what precisely is being done when gas grids are being extended. It is important that all the assumptions and projections that underlie a proposed extension of the gas grid should be available to public scrutiny and that we have a chance as taxpayers to see that the investment plans of a company like BGE are up to the highest possible standards.
An issue that is going to become more and more important in the coming years and this is raised specifically by the Bill and the proposal for BGE to move into the gas distribution activities — is that BGE are moving further and further away from their original mandate which was the simple job of transmission of gas to two state operators, NET and the ESB. Because of the low Marathon price and the low royalty Marathon was paying, BGE became effectively the collector of royalty on behalf of the Irish people on this natural resource. The amount of profit earned in 1985 was £94 million on a £200 million turnover. It is effectively a royalty collection exercise being done by BGE.
I would seriously question whether that is the proper commercial climate for a company like BGE to be operating in as they now embark on new commercial ventures and move away from their initial mandate of gas transmission into the distribution activity. It is important that all of the decisions taken by Bord Gáis Éireann on investment and supply be divorced from that huge cash flow which is effectively a royalty. It would be a shame if Bord Gáis found themselves in a position where they were papering over decisions to subsidise in one way or another because they had this royalty being collected.
The proposal to provide low priced gas to certain industrial users is one that could become seriously unstuck. By the end of this century, and in reality in about ten years time, the Kinsale gas field will be exhausted and we will have to turn to much higher priced sources of gas. In that context any decision to supply that involves discounting gas to such an extent that the company who are taking that gas are not paying enough to pay for the replacement cost of gas when we have to move away from Kinsale, effectively means we are walking ourselves into a position whereby in ten years time we are going to have to give those companies subsidies directly from the State — which I do not think many intend when they say that discounted gas should be provided — or else we are going to have to pull the plug on them thus leaving the companies who have built up on the expectation of discounted gas no longer having access to it. We must guard now against such an eventuality. The lessons of the past prove that if we use a scarce natural resource in a way that it goes to people who cannot afford to pay the commercial value of it — which for us are the proper costs we would have to pay for imports — we are misusing a scarce natural resource and we are asking the taxpayer to take less than he is due from that resource. That is a wrong approach.
It is time the Minister looked at the financial framework within which BGE are operating. The sensible approach is that the Exchequer should impose a royalty which would grow over time in the next ten years eventually reaching a stage where the effective price BGE were paying for Kinsale gas would be equivalent to the replacement import price they would then have to pay. This would do a great deal for getting greater transparency into the operation of BGE. The royalty element which that is collecting on behalf of the taxpayer would be clear. The subsidy, if any, it was giving to loss making operations in the distribution area would be clear and we would have a company like the companies in Belgium and other countries that are importing natural gas, companies which are running effectively and profitably on a much higher priced gas than the present Marathon price. We have to be gearing up for the day which will dawn in ten years time when we should not be drawn into making decisions about who would be supplied and at what price they would be supplied as that would undermine the proper framework for developing gas in this country into the next century. In this context it is very important — and I am glad to hear the Minister mention it on a number of occasions — that we sit down and seriously consider the proposal of gas inter-connector. The Minister should do a serious cost benefit analysis of that project at this stage. That analysis so far as possible, and as soon as possible, should be available for public scrutiny.
I feel there will not be an upsurge in exploration activity for a new gas source in Ireland, which of course would be the optimum outcome if there is not a prospective market for a new discovery until the year 1999 or 2000. If we want to have a spur to exploration of gas it is not on the route of large concessions or terms. It is essentially the route of clarifying the gas price that a new explorer would get if he found gas and providing some mechanisms whereby if something is discovered early that there will be the opportunity for export. I would like to see the proposed inter-connector, which the Minister has mentioned on a number of occasions, properly teased out with some research into the pros and cons at an early stage so that we would be in a position to make a decision on it. That I believe would be the most effective spur to improving exploration for gas. There are a number of other smaller items which will come up and I do not want to delay the House as there may be other speakers who wish to contribute but we will have the opportunity to discuss them on Committee Stage.
I notice that the Minister is providing a waiver of the requirements to get special permission for projects for small piping activity by Dublin Gas. That is only as it should be. He should go further and extend that waiver to the operations of BGE where their proposed activities are below a certain figure. There is a problem in having to go to the Minister and his Department for sanction for smaller items of investment by BGE which probably are ordinary commercial operations of the company. Perhaps he would look at whether there would be some sense in having a similar waiver for BGE's proposed activities where they fall below a certain figure; that he would reserve unto himself, as it should be, the right to examine the larger expenditure items which would be involved. He should not ask BGE to come for sanction every time any more than he expects Dublin Gas to come every time they decide to replace some piping. Perhaps the Minister would look at that matter — I know it relates to the wider issue of BGE but I think it is important. I note that the Minister is also extending the board membership. I hope the Minister will be in a position to give us some assurances on the high quality of the people he will be adding to the board.
The Deputy can be assured that the quality will be superb.
It is important that the people who are appointed to the board have some proven expertise in the area and that would be a very important aspect of making sure that this company operates effectively.
That was always a feature in the past that previous appointments of successive members to the board——
I am sure it was. It was the right approach.
——I did not have the opportunity.
I am quite happy.
The Deputy thinks there are stones growing in glasshouses at present.
I am quite happy. I look forward to Committee Stage when we can tease out these issues in greater detail.
This Bill is a necessary measure to bring to an end the saga which unfortunately has been going on in Dublin Gas for a considerable number of years and it seems to be the only way of dealing with that unfortunate situation. The distribution and sale of gas in Dublin can hopefully be safely continued by the enactment of this Bill. I emphasise the word "safely" because it is a very important aspect of this whole matter and there is great public concern about it and it is being referred to continually. If this Bill is enacted it is hoped it will have the effect of restoring the confidence of gas consumers in the ability of the newly structured company to function properly and also to restore public confidence generally in the gas distribution system in Dublin to the extent that the market for gas will expand through additional demand from domestic, commercial and industrial sectors.
The Minister said that the purpose of this Bill is to effectively enable Bord Gáis Éireann to take over the assets of Dublin Gas and the control of the operations of the company which, as we all know, has been held in low esteem in recent years. The company went into receivership in April 1986. The mismanagement of the company in latter years, I would suggest, has become quite legendary. The number of holes we see in the streets of Dublin are a daily topic. There is great concern as to why such a large number of openings on public roads have got to be made. This is something I would hope to come back to later when I speak at greater length about the safety aspects of the existing gas networks.
The safety aspect of the distribution has been in the public mind as a result of recent accidents at Raglan House, Dolphin House and also the events which occurred at Nicholas Street. It is against this background that Bord Gáis Éireann will now be looked to to turn that situation around and get on with the safe and effective management of this public gas utility. To enable this happen the Bill provides under section 6 for an amendment to section 23 of the Principal Act which allows an increase in the limit of capital borrowings of Bord Gáis Éireann from an existing level of £80 million to £170 million. This additional £90 million is necessary in order to enable Bord Gáis Éireann to take over the assets of Dublin Gas Company and have it properly funded to enable them to expand and carry out the necessary improvement to the gas pipe network in the coming years. This represents an increase in the borrowing capacity of something in the order of 112 per cent.
What are the assets of the gas company? How does it justify this kind of a price tag and an increase of such an amount in its borrowing capacity? More important, it should be asked what are the liabilities and the potential ongoing liabilities of the Dublin Gas Company? These liabilities have to be looked at and we need a great deal more information on them. I presume the assets that An Bord Gáis Éireann are buying are effectively the contract they have with the Dublin Gas Company, which will be now a contract with itself, to purchase natural gas and to distribute it on behalf of the Dublin Gas Company. As I mentioned earlier, it will also inherit the pipe network which appears to be in need of constant repair. Bord Gáis Éireann will also be taking over the consumers who were formerly customers of the Dublin Gas Company. These are the assets together with whatever liabilities existed. I understand they were in the region of £60 million and were guaranteed by the State through letters of comfort which were given to the various banks. We now understand that a sum in the order of £60 million has to be made available through an increase in borrowing capacity for a company which in November 1983 was valued at just over £1 million on the Dublin Stock Exchange. Presumably the company had some borrowings at that time, but those borrowings would not be anything as substantial as the borrowings the company have today. These figures speak for themselves and are an indictment of the management of the Gas Company, particularly from 1983 onwards.
The main objective of this Bill is not so much to justify the figure which is being put on the assets of the company but to ensure that the long suffering consumers will be given an efficient, safe and cost effective service. I have some reservations as to whether this will be the case and I would like to deal with that by putting down some amendments on Committee Stage. The point made by Deputy Bruton in relation to the structure of the proposed takeover is important. Bord Gáis Éireann should look at the operation of the Dublin Gas Company in the form of a subsidiary as distinct from taking it over entirely and subsuming it into Bord Gáis Éireann entirely.
As I mentioned earlier, the safe distribution of gas through the Dublin network is of primary importance and Bord Gáis Éireann will now be charged with the responsibility for ensuring that all of the recommendations in the Cremer and Warner report in so far as they relate to Dublin Gas are fully implemented. The present management of Dublin Gas have made a start in fulfilling their obligations in this area. Work practices and procedures in line with the recommendations of Cremer and Warner have been implemented. I hope this aspect of the company management will be pursued with even greater vigour on completion of the takeover by Bord Gáis Éireann, the primary objective of which is to put the whole thing on a proper footing and restore confidence generally, and particularly in Dublin, in the gas industry.
The Government task force set up after the publication of the Cremer and Warner report have been carrying on their work for some months. I recall that the Minister for the Environment told the Dáil some weeks ago he expected the task force to issue their report in July. The main function of that task force was to identify all potentially vulnerable multi-storey buildings throughout the country which were liable to suffer from progressive collapse and consequently would be at great risk if subjected to an explosion from a gas source, an internal explosion. On the same occasion the Minister told the Dáil that he did not intend enacting the new building regulations until the task force had reported on their investigations into the vulnerability of existing multi-storey buildings. Why do we have to wait so long for the implementation of these new building regulations? They have been on the stocks for nearly 11 years. They were first drafted in 1976. There is absolutely no reason why we have to await the report of the task force on this matter. They should be implemented immediately.
I will deal now with the condition of the pipe network in Dublin. There are many problems associated with the underground pipe network. This has been the subject of much public comment and concern and vast amounts of money are being spent each day on leak investigations and repairs. Could I ask the Minister are there any financial projections available as to the overall ongoing cost of these operations and the extent of these repair and pipe replacement programmes? Will the State have to continuously fork out money for these programmes, or is there an end in sight to this problem? What additional financial commitments will Bord Gáis Éireann be storing up by now undertaking responsibility for repairs to the Dublin pipe network? I would like the Minister to quantify this if he would. I note that new techniques have been developed for repairing defective old pipes such as the insertion of plastic sleeves and I am sure these repair techniques are effective both from the point of view of preventing leaks and the cost involved. I trust that new developments like this will have a major impact in bringing down repair costs.
Have the current leak problems any bearing on the changeover from manufactured gas to natural gas? As I mentioned before in this House, natural gas is a dry, lighter gas than the old manufactured town gas, which is moist and heavier. There is a substantial body of opinion that suggests that it is much more leak prone than the older form of gas. This matter needs to be cleared up. The level of leaks reported for repair has increased greatly since our conversion to natural gas. The Cremer and Warner report concluded that there was no evidence that the conversion to natural gas, or leaks from joints, contributed to the accidents it investigated, but that those accidents were in fact caused by fractures and, in any event, the same conclusions cannot be applied to all other leaks in the pipe network throughout Dublin city.
The Minister in reply to my question on 27 May said he expected to have a report in June from the Dutch consultancy company which had been carrying out an investigation into the long term pipe replacement and repair programme required for the pipe network in Dublin and, I believe, in other locations as well. Has the Minister received this report and, if so, what are its findings? The urgent publication of this report, particularly if it categorically states that conversion to natural gas has not given rise to additional leaks in the existing pipe network, would be very welcome. It would be very welcome indeed if such confirmation were received and would do a great deal to restore confidence in the gas system. I urge the Minister to clear up the understandable doubts many people have at the earliest possible opportunity.
I would like to deal with continuity of supply, which Deputy Bruton referred to in his contribution. At the present rate of depletion, natural gas from the Kinsale Head gas field will be completely exhausted by the late nineties. As we know massive amounts of money have been spent in converting appliances and improving the underground pipe network facilities for the distribution of natural gas. This investment will be rendered useless effectively if long term supplies are not available and assured. We really need further Irish gas discoveries and the only way in which that can be brought about, as Deputy Bruton said, is if as an incentive to the exploration industry we put an interconnector into the UK which would tie us into the European grid. This would undoubtedly be an incentive to the exploration industry to go out and investigate the prospects of finding gas in the Celtic Sea. If we had an inter-connector the exploration industry should be given an assurance that if we found a gas field which was far surplus to our needs, they would have permission to export that gas. The fact that we would be plugged into the European grid would ensure our long term supply of gas because the supplies available in the European grid will be there for the next 60 years. I support the points Deputy Bruton made in that respect. I hope to deal with certain aspects of this Bill in greater detail on Committee Stage.
I recommend this Bill to the House and I thank the Minister for bringing the order for Clonmel town forward so promptly. Neither of my two colleagues mentioned that, although Deputy Bruton has a connection there. Politically perhaps they are abandoning that area, seeing that it did not merit even a mention in the debate on the Clonmel Gas Order.
The Minister sprang it on us at the last minute.
It is spelt "Clonmel". It is quite easy to see in the Minister's script. I appreciate that Dublin is the capital and I hope Deputy Bruton was not trying to insinuate that these little spurs off smaller places are not important when he said we are not bringing the pale syndrome into this House again. While I am on my feet let me congratulate the Minister on his stand on Sellafield. This is my first opportunity to do so publicly.
The safety aspect of gas worries me as it does other speakers. Recently about 3,000 holes were dug in the Dublin Corporation area. Apart from finding leaks they must have found something else if they dug 3,000 of them. Maybe the reason is being kept a great secret from us. There was an unfortunate, tragic death in Clonmel due to a gas explosion in the early seventies. The old pipe system was of no use. I am happy that the new system coming into the town will be safer and much better for the industrial atmosphere apart from the domestic atmosphere there. The ailing old Gas company were not able to continue satisfactorily. The connection of Ballyveelish into Clonmel town is almost complete.
In that regard let me say that BGE have done a wonderful job all over this country in the restoration of the lands and roadways after the installation of the gas pipes. We often hear criticism of companies, but BGE must be complimented on that. That is good for public relations. Good work was done on the gas pipeline from Dublin to Cork and the spurs to Limerick and Waterford. When the route of the spur from Ballyveelish into Clonmel is restored we will be happy that it will be satisfactory.
Clonmel is the most industrially based town in County Tipperary and the people there are extremely happy to get the new gas. Perhaps contrary to what other Members have said, I hope consideration will be given to keeping the price constant and that there will be no price escalation in that area. The adaptation industry has to make for taking on gas must be taken into consideration in these hard times when money is not freely available.
Perhaps BGE will look at the system of either funding or guaranteeing loans to some of the school authorities who may consider converting to gas. In view of the need for savings in this area that would be very welcome. BGE have made profits in this area already, and they might consider over a period of some years giving some support to the vocational school in Clonmel and to the other girls' and boys' secondary schools there and providing them with a cheaper system of heating. I hope that the advent of gas into the town will ensure the continuation of industry there and increased employment and that the 20 people who are employed by the old gas company can be kept in continued employment. Sometimes we forget the work that was done by people during many years with an old, inefficient system.
I look forward to an expansion of the Gas company. I look forward to cleaner air. I am delighted that the heavy industries which were using heavy duty oils such as Merck Sharp and Dohme (Ireland) Ltd. are turning to the use of gas.
This new fuel will be of tremendous value to the Suir Valley in ensuring pure air there. This is important not just for the commercial aspect but the environmental aspect also. I would like the Minister to come to this area to meet some of the industrialists who may wish to talk to him about it. I thank him and his predecessors for the interest they have shown in Clonmel in this regard. I hope Deputy Bruton's comment on side spurs does not imply that the big industrial towns are to be considered as minorities in view of Dublin's size.
The purpose of the Clonmel Gas Order is to continue development in Limerick of the joint venture scheme with the corporation in Clonmel. This Bill under discussion is to allow the takeover of Dublin Gas by Bord Gáis Éireann and to give them the necessary power to run the Dublin Gas networks. It increases the borrowing level for BGE from £80 million to £170 million. That is significant. It provides for an increase from six to eight in the number of members on the board. The Bill allows BGE to take over the administration of the existing Dublin Gas Company pension fund.
The essence of the Bill is that one of the most efficient State companies ever established, BGE, who between 1881 and 1985 made accumulated profits of £304 million, is being asked to take over one of the most incompetent and inefficient privately owned companies, Dublin Gas, one of the worst ever inflicted on the Irish people. We have seen hundreds of incompetent and inefficient companies closing down over the years. Dublin Gas, despite massive State subsidies, still managed to make accumulated losses of almost £20 million between 1981 and 1984 and that was before the real crisis set in.
One can imagine the comments in this House if Dublin Gas were a State company, the howls that would have emanated from the Progressive Democrats and from Fine Gael about how this would have illustrated the inherent inefficiency of the State sector. They would claim it should be privatised to ensure that it was run efficiently. Privatisation is the great cry of the right wing at the moment. It is supposed to mean efficiency but that is not so. I am sure this Bill and what it contains must be sticking in the throats of Fine Gael and the Progressive Democrats, to have to propose that a private company should be nationalised. Because of its total inefficiency and mismanagement, as Deputy O'Malley clearly pointed out it has to be taken over by the State. The creeping socialism those Deputies talk about, as it there was any creeping socialism, when the State has to take over private companies is still continuing today. The State has to take over when the private entrepreneurs who are supposed to exist totally fail to provide a service to the people.
This Bill and the decision to take over Dublin Gas clearly shows that the concept of State enterprise as far as conservative parties are concerned is simply one of fire brigade action. In the thirties the State and the taxpayers had to step in to rescue the people from the incompetent privately-owned transport companies. The State established BGE at an enormous cost to the taxpayers. Those taxpayers are now being asked again to rescue the people from the incompetence and mismanagement of those who, through their greed and avarice, brought the gas distribution network in Dublin to its present disastrous level.
Even before the crisis in Dublin Gas came to a head in the past few years, the incompetence and inefficiency of the company was legendary among consumers. I recall that it often took months to deal with the simplest repairs and defects. People talk about An Post and Bord Telecom but there were constant complaints from consumers in regard to billing procedures in Dublin Gas. No work whatever was done on the replacement of pipes. There was no planned renewal programme or maintenance programme and the gas network, much of which has been in existence since the early years of this century, was allowed to deteriorate to such an extent that disasters have been occurring almost monthly in the past 12 months, in particular the disaster at Raglan House and Dolphin House. Nobody seems to be quite sure how much Dublin Gas have already cost the Exchequer and the taxpayers or how much this takeover will cost. I doubt if we will be told the full details of the cost.
It is in the speech.
There is a considerable amount of information in the speech but it does not give all the information. The former Taoiseach, Deputy FitzGerald, indicated in September 1986 that the total cost of Dublin Gas to the Exchequer at that stage was about £124 million. Various figures have been given as to what this take-over will cost and the figure of £66 million was mentioned. The fact that borrowing by Bord Gáis Éireann is being increased from £80 million to £170 million suggests that the figure will be substantially higher than that.
That point is answered in the speech.
Everything is answered in the speech. I read the Minister's speech, apart from listening to bits and pieces of it, and all the points are not answered in it. I imagine that most of the money is going to the banks. We believe the shareholders, the directors and the banks should not get anything from the taxpayers. Dublin Gas, as a commercial company, is absolutely worthless. If they were a normal commercial company that could be left to their own devices and not one for which the State had responsibility, the shareholders and the banks would have got nothing.
The shareholders are not getting anything. I would like the Deputy to be accurate. It has been clarified that the assets are nil and the shareholders are getting nothing. The Deputy should not misrepresent the position.
I will not misrepresent it because it is not a serious point. The value of the shareholdings at the end of 1983 was only £1.6 million but the banks were asking for £66 million. It is a relatively minor point.
£62 million.
In the case of a normal commercial company left to their own devices, no-one would have got anything. Many of the former directors who must bear direct responsibility for the whole chapter of disasters have been rewarded for their efforts with extraordinarily generous pension schemes. One of the directors, Mr. McAleese, received a pension of £35,000 a year out of a pension fund of £600,000. The banks are fully protected for their investment of £66 million. The real losers are the consumers and the taxpayers. The record of the asset strippers and the cowboys who sat on the board of Dublin Gas shows they have been so irresponsible, incompetent and reckless that they should not get one penny in compensation. Indeed, the case was made that they should be held personally responsible for the debts of Dublin Gas and should be pursued for the money. In 1983, just before losses increased from £2.8 million to £8 million, the 14 directors increased their own remuneration by 75 per cent, from £106,000 to £186,000.
They are not getting a bob out of this. I am sure the Deputy will be delighted with that.
That is fair enough. I accept that but many of them have already received money. The Minister is too late.
The Deputy is talking to the wrong side of the House.
I agree with the Minister. Actually I am talking to both sides of the House. However, the Ministers responsible for Energy, since the blame to date lies on this side of the House. The catalogue of commercial mismanagement of the company has certainly been matched by the ineptness of the supervision at political level of Dublin Gas by the previous Government.
Successive Governments, and Ministers responsible for energy, since the late seventies must accept their fair share of the blame for the disastrous development which has led to this Bill. If the Government had moved to take over the company earlier much of the present difficulties and financial commitments might have been avoided. The Workers' Party have continuously pressed for the nationalisation of Dublin Gas. Successive Governments refused to accept that idea and continued to pour good money after bad into the bottomless pit of Dublin Gas. The objection to nationalisation of Dublin Gas — if the Minister would prefer that I should avoid using that word I will substitute the words "the takeover of Dublin Gas"— seem to have been an ideological one. To avoid that a series of disastrous decisions were made by the outgoing Government.
The Deputy will be delighted with what I am doing.
I am delighted. At the outset I should have said that I am giving full backing to the Bill. One of the ironies about this is that the company who will possibly end up costing the taxpayer in the region of £200 million — taking into account what has gone and what remains to be paid — could have been acquired on the open market, certainly a majority shareholding of it, for as little as £1 million in 1983. Instead the Fine Gael-Labour Coalition decided in 1983 to underwrite more than £100 million for a private company which had a record of gross mismanagement without insisting on any real control over the management of that company. The State has now to pick up the tab for all the debts incurred by Dublin Gas and not just those associated with the conversion programme.
The assurances given by various Coalition Ministers in 1983 and 1984 proved to be as worthless as a share in Dublin Gas. In April 1984 when I urged public ownership of the company the former Minister for Energy, Deputy Spring, told me that the interests of the taxpayer would be well protected by the appointment of four State directors and by the interest which the State has taken up in Dublin Gas. There are not many taxpayers who would consider that that promise has been honoured since then. It is important to ensure now that Bord Gáis Éireann are not dragged down by the burden of taking over the Dublin Gas mess. There may now be an argument for developing Bord Gáis Éireann into a national gas authority with sole responsibility for the sale and distribution of all piped gas to domestic and commercial users and for ensuring that natural gas is used in the most effective way possible for the creation of industrial jobs. Dublin Gas is only part of the problem. The involvement of private enterprise in the sale and distribution of piped gas has over many years been characterised by bungling and incompetence. An Bord Gáis have already had to move in to take over a number of private gas companies. They have taken over, for instance, Cork Gas and, as mentioned at the outset, had to set up a joint venture with Limerick Corporation and in Clonmel.
The performance of the Dublin Gas Company in the conversion programme to natural gas has been abysmal. The State company, An Bord Gáis, have on the other hand worked very well, made a major contribution to State funds and handled the construction of the Dublin-Cork pipeline which was completed on budget and ahead of schedule with considerable efficiency. Natural gas is far too valuable a national resource to be left to the cowboys of private profit who made such a mess of Dublin Gas. Given the Government's decision to nationalise Dublin Gas there is no reason a national gas authority should not be established to have sole responsibility for selling and distributing natural gas. Such a natural gas authority should have the same responsibility for gas as the ESB have for electricity. An Bord Gáis have performed well but their terms of reference are rather limited. An Bord Gáis could be developed to constitute the national gas authority or a separate authority could be established to work with them.
A major priority for the new authority should be the use of natural gas to create jobs. Our natural gas supplies have not been used to their full potential for industrial development and it would be unfortunate if this valuable natural resource was used simply to boil kettles rather than create jobs. In particular the gas that had been earmarked for export to Northern Ireland, which is not being taken up, should be used for industrial purposes.
We cannot discuss Dublin Gas without referring to the disgraceful state of Dublin's streets, the proliferation of holes in the street. I understand that at the last count there were more than 3,000 holes. That number is increasing. Apart from the inconvenience to the public that those holes are causing they also cost a huge amount of money to the Exchequer through higher fuel consumption, damage to CIE buses, traffic hold-ups and a general loss of production because employees have difficulty getting to work. They have also caused accidents as a result of people cycling or driving through them. There is much evidence to suggest that the rush to lay off people last year resulted in a serious deterioration in safety standards in the company. Some of the staff with the greatest expertise to deal with the problems that are occurring daily were laid off. Highly experienced tradesmen, gas operatives, joiners and so on were laid off and people who knew nothing about the job were asked to do their work at half the rate of pay. Considering the end result of that move I believe it was bad economics on the part of the company to lay off their best staff. Shortage of staff has led to a delay in filing in holes and the completing of jobs in a competent way. The position has been made worse by the use of British repair crews being hired to do the work, people who do not know Dublin City or the gas network.
The Bill gives the Minister power to make such conditions as he thinks desirable in relation to the construction, maintenance, repair and replacement of pipelines. That is an important provision provided it does not end up with the Minister having power to interfere on a day to day basis in the operation of the company. It is important that the Minister should have power to make such conditions but I suggest that it should be amended to specifically include the power to set deadlines for the completion of work, the filling in of holes and so on in Dublin City. I will be considering tabling an amendment along those lines for Committee Stage.
In the last six months I asked a number of questions in the House in regard to Dublin Gas and Bord Gáis Éireann but I did not get a satisfactory reply. I am anxious to get information about the amount Bord Gáis pay Marathon for the gas. I am told that is a secret. I was informed about the amount the ESB pay Bord Gáis Éireann for natural gas, 24p per therm but I have not been told how much NET pay for the gas, that is a commercial secret. I hope the Minister will give us some idea of how much BGE pay Marathon, how much Dublin Gas paid BGE for gas and how much NET pay for gas. We were never given that information. That is very important in understanding how much Dublin Gas was costing the taxpayer and the Exchequer because any loss to Bord Gáis Éireann is a loss to the Exchequer. State companies, unlike private companies, hand over all their profits to the Exchequer and Bord Gáis Éireann have been a great contributor to Exchequer funding, thereby saving the taxpayer money and contributing to the better running of the State.
I am very glad to support this Bill. I am only sorry it has come so late and cost the taxpayer and the Exchequer so much to try to shore up this totally incompetent company over the past number of years. We poured money into this company unnecessarily. The steps being taken now by the Minister should have been taken three or four years ago by the outgoing Minister.
And the Deputy is delighted with how fast I did it.
Like previous speakers I welcome this legislation. Listening to the last speaker one got the feeling that previously the Gas Company provided little or no service to the citizens of Dublin. I would be saddened if the House adopted that attitude because this company provided a great service in the past. Like many other companies in this city they have been overtaken by time and new developments as well as the massive change which has taken place in the demands of ailing industry. Therefore, it is not a question of condemnation of an industry which served developing Dublin at a time when the price of gas was far lower than the price of alternative fuels. It would be wrong not to lay some of the blame for this debacle on the fact that the pace of change which was necessary did not happen fast enough. To pick out the Gas Company for special mention in this way could be misleading.
I wish to refer to safety in this city. Many of the 130,000 gas consumers live in fear of a dangerous explosion. I had the opportunity to visit two areas where there were explosions — Raglan House and Nicholas Street. I heard the explosions in both instances because I live and work quite close by. When I visited these devastated sites I was reminded of bombed areas. It is important to realise the emergency forces — Dublin Corporation, the Eastern Health Board and the Gas Company — came together very quickly and worked efficiently and effectively with the mop up arrangements. I say this with a degree of reluctance, but it is not unreasonable to assume that more explosions will take place in Dublin city. That must be recognised by everyone. In a few moments I will mention the steps which could be taken to alleviate that problem.
When there is an explosion the real hardship is that people are displaced from their homes. The Minister will appreciate this because there have been, and still are, many meetings taking place about the Raglan House explosion. We had a deputation with the Minister last week and we also met the city manager because we wanted to do something to alleviate the difficulties under which these people are living. Soon after the explosion it was said that the problem had been cleared up very quickly, that the people were given alternative accommodation and that they could now go back to their apartments which were safe for occupation. The reality is that at present there is a complete impasse because the developer will not fill in the caverns under the apartment blocks or ventilate them in accordance with the recommendations of the Cremer and Warner report. No matter what action the residents attempt to take the developer will not abide by the recommendations of this report. It will probably be the recommendation in the task force report — which I believe will be issued on 20 July — which will force the developer to do something about this.
It may not be realised that all our old flat developments have caverns below street level and when gas piping becomes eroded or needs sealing at the joints, gas can leak into the street and then under the apartments. This can be a veritable time bomb if the pressure builds up because it can lead to an explosion. I know there has been a mad scramble on behalf of the Gas Company to try to seal as many of these pipes as possible, but it is a race against time. I do not believe it is possible to repair the vast numbers of pipes which can potentially do damage. One could cynically say that at the moment modern Dublin is more like medieval Dublin with all the potholes. Coming into the millennium year it will be an absolute disgrace if there is not a crash programme to improve the footpaths and fill in the potholes.
It should be mandatory that all these caverns be ventilated. Anyone in his right mind would realise that if there is a void under an apartment block, gas can leak into it and so be a potential danger. It is essential that such a void be ventilated. This is not an expensive exercise. It may be more expensive to fill the void because in the case of Raglan House that figure was about £56,000, but it is less expensive to ventilate. There should be an alarm system. Sophisticated gas alarms like smoke alarms are now available. It is possible to set up an alarm system for leaking gas instead of depending on phone calls and reports to the company asking them to send out people to sniff out these problems and then have to dig up roads. As a first move, homes should be equipped with these alarm systems. Some kind of educational programme should be undertaken through the Minister's office to alert people to the steps they can take.
As I said at the commencement of my contribution, people are afraid to go into their homes. In Nicholas Street, just after the explosion, the residents said they would not go back until the voids were ventilated and until they could be given an absolute guarantee that they would not be put in the awful situation of an explosion taking place again. The Minister cannot give such guarantees and there is no point in being emotive about it. However, there should be an alarm system all over the city. I would not expect the State to provide it, after all people buy house alarms to protect them against burglary and so on and this would be an extension to protect themselves against this awful risk.
In regard to flats, a system should be written into legislation which will bind developers to complying fully with the by-laws and not to take short cuts by having apartments with unventilated voids. Regrettably, in the case of Raglan House, the application to build was not fully in accordance with Dublin Corporation by-laws, which is a disgrace. Many of these residents are hard pressed financially as they are old age pensioners. Some people are under the impression that they are wealthy enough to be able to seek alternative accommodation but they are literally living from day to day and are not able to go back to the Ballsbridge complex because of the potential from the voids not being filled.
The map of the area shows that the pipes leading along the railway are also in a dangerous state, they could again leak and gas could seep back into the caverns. People should not be expected to return to that development until the developer — in this case Holland Lansdowne Developments — carries out this needed work. A recent engineer's report stated that there were exaggerated fears about the safety of some apartments and that it would cause many problems if they had to be pulled down. It might be possible to get over this impasse by having the voids filled without admission of liability. In many cases this would free the developer of the possibility of actions being taken against him whereas at present if he filled the voids it could be wrongly interpreted as an admission of liability. In this case, the residents concerned are quite prepared to go along that line as they just want to get back to their homes. Six months have passed and there is no light at the end of the tunnel.
In Nicholas Street some of the residents are back in their homes but much of the property is still boarded up. The main emphasis of any expansion of natural gas — this great product and resource which is for sale — must be on safety. However, there is a widespread feeling that the product is not safe, that the previous type of gas on sale throughout the city had the effect of self sealing many of the pipes and the connections which acted as an extra liner. It is felt that the clean gas has the opposite effect and tends to be a corrosive element, breaking down the sealing effect of the previous gas. Perhaps the Minister would comment on that because, if such information is not accurate, it will be necessary to dispel such fears. There is a feeling that the network and some of the older piping are breaking down because they were not built to cope with the new gas system.
The use of natural gas is a marvellous way of cutting down on the very high sulphide dioxide levels and is a better balance for an alternative fuel to high bitumenous coal with a high smoke and sulphur dioxide content. On environmental and health grounds it is a very desirable product to sell but it must be safe. There should be a progression into this type of fuel with an inbuilt safety factor, especially in regard to the type of pipes used. There is a huge and daunting task ahead of us in providing gas as an alternative system of fuel. I should like to see natural gas used all over the country but it must be developed with the very best technology and shortcuts cannot be taken. The piping and alert systems must be second to none. I stress that we must not allow any developer to take short cuts and, in cases where by-laws have been breached, we must force developers to right the wrongs. After all, the consumer should come first.
The industry will expand at an accelerating rate into the close of this century if we provide a safe product and put maximum research into the transitional changeover. I welcome the legislation.
Deputy M. Higgins rose.
I wish to remind Deputy Higgins that I have had an indication that Deputy Dermot Ahern would like a minute or two to make a contribution. It is a matter for Deputy Higgins.
I do not want to prevent Deputy Ahern from airing his views and I will be delighted to facilitate him. When does the Minister propose to reply?
The debate must finish at 7 o'clock.
No doubt, the Deputy will facilitate me.
Indeed. I am sure the Minister's reply will be of great help to the House even if he is not under an obligation to reply to particular points.
I was very interested in the thrust of the Minister's opening remarks in which he states:
Dublin Gas is a problem which I inherited from the previous Government.
Buried beneath that sentence is indeed a long saga and a great story. I would not want to depart from the spirit of nonrecrimination which has characterised the contributions so far. However, if the Minister chose to make such a remark it was incumbent upon him to give the House at least some details of the financial history and the different forms, incarnations if you like, of Dublin Gas. I find it very interesting and welcome to note the conversion to the advantage of public ownership which is taking place in the larger parties. It is reminiscent of the generous speeches made in those days when people accepted the need for public utilities, the responsibilities of public utilities, the accountability they provided to the public in terms of safety, which is mentioned so often, in terms of regular provision, in terms of delivering a product to the consumer. This was not the thinking, I recall, in the days when it was likely that profits could be made from the delivery of what was a natural asset owned by the people to a private company on to what was acknowledged in the Minister's speech as a lucrative market in the Dublin area.
That history, which has not been told by the Minister, would have emphasised that phase in the history of the exploitation and delivering of natural gas which had all the hubris of speculative activities associated with it, indeed more at that time in the newspapers. One newspaper has been discovering oil and gas practically every week consistently now for seven years.
Leaving that aside, at that time the movement in the shares of Dublin Gas, the special general meetings that were held and so forth took a great deal of precedence over any questions of safety, of consumer satisfaction, of appropriate development, of changes in required building standards and so forth. It is very important that we should not forget that. I welcome any time when the State's ability to organise the development and delivery of a service like this is recognised, as it is in the legislation which is now making this transition.
I intend to use only a few minutes and to be very specific about the further development of this company. I note that the Minister quotes the details of a letter from the previous Government to the banks. I find this phrase "to the banks" unsatisfactory. The different bank investors should be identified. If one is going to take a letter — and I do not know the status of this letter and should be glad to be guided about it——
It has been in the Library of the House since last December.
Yes, but the status of it is what interests me. I have in mind the kind of commitment which this letter indicated in terms of the commitment which other investors and creditors at that time enjoyed. This matter was never satisfactorily resolved, as far as I am concerned. There are several possible constructions that could be put on the activities of all of us who had invested in the company and how they sought to resolve what was for them a particular dilemma. I note, in fairness to the Minister, that he stated:
I wish to emphasise at this point that the financial reality of this transaction is that nil value is being placed on the assets of Dublin Gas and BGE will only be assuming the guaranteed debts. This is the best position that can be achieved.
Quite frankly, the operation of the company in this period was very unsatisfactory from a public accountability point of view.
I want to make my own position perfectly clear on that. One of the advantages, not much heralded, I might say, by the people who write about such things, about public ownership and public operation and so forth is that there is far greater public accountability of the best kind in relation to financial movements. Let us be perfectly clear here. We are now in a situation in which the Government in relation to other matters, the development of the meat industry and so forth, are responding to proposals made many years ago by the Allied Irish Investment Bank and others in relation to future relationships and so forth and I hope that the accountability——
Transparency.
——will flow over into the association. We shall wait and see it happen. However, there was a great deal of public cloud around the whole question of who was investing in Dublin Gas, who was providing money, what was the status of different creditors and so forth. I read the Minister's speech and listened to it with even more care and find myself having to ask a question because, perhaps, it is buried somewhere by allusion in it — the question of the transfer of the rights of workers under the existing company to the new company. This has not been a simple transition. There have been different models available for the take-over of different companies. I should have preferred if I could have heard this afternoon a more specific commitment in terms of not only their existing rights as they stand while they are workers but in relation to pensions and so forth. I cannot find it in the Bill in terms of specific guarantees.
There is a specific section on pensions.
It is not specific. There is a section. I am aware of identified sections but I am also aware of the subtlety of language. I am also aware that workers are usually the victims of subtlety and that investors, the kind of people who have been involved before, are the beneficiaries of subtlety. That is the history of this country.
There are a couple of other little questions that are equally unsubtle. I agree with the previous speaker who mentioned the question of the adaptation for the development of the lucrative markets that have been identified. I wish BGE and their workers and management well. I wish everybody well in the development of this asset. What I find very interesting is in relation to the question of liability, which is not addressed in the Minister's speech and is not addressed very adequately in the Bill. Perhaps it cannot be addressed. Everybody knows that there is a 90 per cent majority in this House against any constitutional change which would have changed the immunity which developers enjoy in relation to many of the consequences of their actions in terms of the structure of buildings, in relation to the adaptation of buildings and to the future provisions of buildings in compliance with certain standards. The Minister would have my support if amending legislation were to come before this House — or his colleague, the Minister for Optimism if he wants to bring in legislation changing the liability and obligations of builders and developers in this regard. This point was adverted to by the previous speaker, Deputy Brady. One should support the extension of the borrowing limit.
When we are seeking legislation like this we should do three things. We should acknowledge the superiority of there being a public company with accountability. Secondly, we should come clean about the unsavoury involvement and financial history in some respects. Finally, we should in so far as we can, allay fears in relation to usage. Above all else we should be concrete in regard to guarantees given to the workforce in such transitional arrangements.
I welcome this Bill because anything that increases public confidence in our gas system after the problems we have had in Dublin over the last few months is to be welcomed. This Bill gives Bord Gáis Éireann the powers the Dublin Gas Company had. It is in effect dealing with what has already happened, the takeover by Bord Gáis Éireann of the assets of Dublin Gas.
I congratulate the Minister extension of the gas pipeline and the grid northwards to County Louth. This Bill expands the ambit of Bord Gáis Éireann. Will the Minister bring in legislation in relation to this aspect? The Bill defines the areas over which Bord Gáis Éireann can have power. Will the Minister bring in an order in relation to the extension of the pipeline northwards to Dundalk and Drogheda? I understand that the planning of this scheme is well under way and that it is hoped to finish it in 1988. This project will give a number of jobs in the area. The Minister suggested that somewhere in the region of 225 jobs will be created in the construction of the project. The pipeline will be diverted north of Dublin to take in the horticultural areas and this is to be welcomed. Dundalk is a large town with many problems. The gas company there have subscribers of the order of 1,700 both commercial and domestic. The extension of the pipeline to that area will help; it will increase the infrastructure and hopefully it will increase industry.
The Bill increases the powers of BGE in relation to safety. Will these provisions extend to areas where the pipeline has been extended? The Minister mentioned that there would be an extension or an outlet across the Irish Sea to Britain and to Europe so that if our natural gas resources dry up we will also be able to tap into the European market and into the British market. The fact that the pipeline is to be extended northwards might enable us to supply some of our gas to the Six Counties if there is a change of attitude there. I welcome this Bill and I hope to contribute on Committee Stage tomorrow.
I thank Deputies for their contributions and for the general welcome for the Bill. Many of the points raised today can be dealt with in detail on Committee Stage tomorrow. In the limited time I have available I will restrict myself to aspects of the financial history of this operation. I was accused of a lack of subtlety by Deputy Higgins in relation to the financial affairs of this company. The Deputy referred to the fact that I did not quote in the letter of 22 April exactly who it was addressed to. I will quote the exact letter signed by the then Tánaiste and Minister for Energy, Dick Spring, TD.
22 April, 1986.
Allied Irish Investment Bank, plc,., Investment Bank of Ireland, Ltd., Ulster Investment Bank, Ltd., Irish National Insurance Co. (As Trustees).
Re: Dublin Gas Company ("DGC") — In Receivership
Dear Sirs,
I refer to the discussions between representatives of your banks acting in their capacity as Load Managers of the Syndicate Banks and my Department.
I confirm that it is the Government's intention that: (1) DGC will continue to trade under the Receiver; (2) the company or its successor will be placed on a viable footing and furthermore it is my intention to recommend the nationalisation of the company as soon as is practical without prejudice to the participation of workers or consumers in the future ownership.
I also confirm that it is the Government's intention that the affairs of DGC will be conducted in such fashion as to allow all amounts due to BGE, to the Loan Stock Trustees, and to the banks under the terms of the Syndicate Loan Agreement dated September 13, 1984 to be paid in full. Furthermore any arrangements for the transfer of the undertaking to another entity will be such as to recognise these intentions.
I am aware of the BGE letter to you and approve of its contents.
Yours sincerely, Dick Spring, T.D., Tánaiste and Minister for Energy.
There was another series of correspondence by Bord Gáis to the same group of people and there were further letters in August last year from the then Taoiseach to Deputy Frank Cluskey. Those letters were dated 18 August and 25 August.
Deputy Higgins referred to subtlety. My colleague, Deputy Reynolds, who is now Minister for Industry and Commerce asked a question in this House on 26 November. Deputy Reynolds asked if that letter was a guarantee and this was the subtlety of the response given by the Tánaiste at the time. I would ask Deputy Higgins to judge the subtlety of the Tánaiste at the time having regard to his comment when asked if this was a guarantee, and if he had misled the House in relation to it. Deputy Spring said:
I totally reject the implication of the Deputy's statement that I have attempted to or have in fact misled this House. I have made my position very clear. This letter is in the Library of the House at the Deputy's request. It is not a letter of guarantee or a letter of comfort in the normal manner of Government business. I, likewise, have legal advice available to me and it is that this letter is not a letter of guarantee or a letter of comfort.
The accuracy of that statement is reflected in the fact that tonight those institutions who were the recipients of that guarantee by the Tánaiste of the day will be as a result of this changeover, in receipt of £62 million. This will not be paid immediately but I hope that in the future we will be able to negotiate better terms than the appalling terms that were negotiated and that the Irish taxpayer will benefit from the improvements. I came into office on 10 March. We are now in mid-June. We have taken three months to bring this to finality. It took the previous administration nearly four years of talking about it and 12 months with the Receiver in. Yet nothing was done. This Government are proud that as a result of this Bill we are going to provide the people of Dublin and the country generally with an efficient gas network. As far as subtlety is concerned, surely nothing could be more subtle than the wording of that letter by the then Tánaiste to the banks. It was a guarantee in everything but name.
Do you give that the status of a guarantee?
Question put and agreed to.