asked the Minister for Energy whether he views the present procedure used by the ESB for providing for depreciation charges and amortisation as satisfactory; and the impact he foresees that these practices will have on the future trend of electricity prices.
Ceisteanna—Questions. Oral Answers. - ESB Depreciation Charges.
69.
The ESB charge depreciation on their assets at different rates in accordance with accepted accounting conventions. The details of these are given fully in the notes to the accounts of the Board. In regard to amortisation, the ESB have for a long number of years, followed the practice of making extra provisions (additional to depreciation) in the form of an amortisation fund to ensure that they will be in a position to meet their heavy loan repayment commitments as these fall due. Again, details of these are given in the accounts. These are satisfactory and prudent arrangements and it is not seen that they will, of themselves, cause any notable change in the medium-term trend of electricity prices. Any such changes in electricity prices would be more influenced by labour and fuel costs. In the report of the inquiry into electricity prices, under the chairmanship of Mr. E.L. Jakobsen, a recommendation was made that both the amortisation and depreciation charges should be replaced by an inflation adjusted depreciation charge together with a specific growth related capital fund. Action has not so far been taken on this recommendation which, however, appears to relate to clarity rather than a change in substance.
Are we to understand that the Minister is happy with the present application of amortisation charges? Is the practice of charging amortisation carried on by other energy agencies under his aegis? Will he comment on the newspaper discussion during the summer of a difference of opinion between him and the chief executive on this issue?
If the Deputy puts down a question on the latter matter, I will be delighted to answer it. The Deputy is aware that amortization is directly related to outstanding borrowings and will decrease as the debt falls. It is not a question of being satisfied or otherwise. This is something which is specific to the ESB and relates to the 1927 Act. The report's recommendation was aimed at making the ESB's provision for capital expenditure more transparent. There was no suggestion in that report that the ESB were overproviding for capital expenditure by their present procedures. It is important to remember that point.
Does the Minister regard the present situation as satisfactory?
There has been a suggestion about making it more transparent and I will follow up on that.