Dáil Éireann debate -
Tuesday, 15 Mar 1988

Vol. 379 No. 1

Electricity (Supply) (Amendment) Bill, 1987: Second Stage.

Minister for Energy (Mr. R. Burke)

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

The main purpose of the Bill is to statutorily empower the ESB to promote, form, take part in, or acquire companies and to engage in the wholesale coal trade from Moneypoint and to regularise matters in relation to rates. At the same time the opportunity is being taken to effect a number of minor technical amendments to the Electricity Supply Acts.

The proposal that the ESB be permitted to form companies or to take equity in existing companies was put to my Department by the ESB some time ago. It arose principally from the ESB's experience in the areas of their consultancy and fisheries activities. As Deputies will be aware, the ESB may, under the Electricity (Supply) (Amendment) Act, 1979, alone or with other persons, provide for reward in or outside the State consultancy, advisory and training services. Not only do ESB operations span the full range of power utility activities but their staff design and manage all the facilities and systems for generation, transmission, distribution and sale of electricity. This self sufficiency has been developed by the board from the beginning and their investment in young qualified and enthusiastic personnel has provided them with a platform from which to launch their consultancy activities. In recent years the ESB have had considerable success in securing consultancy assignments overseas. The board's turnover on their consultancy activities for the nine months ending 31 December 1986 amounted to some £7.5 million. This resulted in a slightly better than break-even outcome for the period. Some 200 ESB staff are involved in consultancy activities at present.

The bulk of the ESB's consultancy fees are earned in the Middle East. However, markets are declining in this area due to the fall in oil prices and the completion of major developments. The ESB are now moving to other areas such as Africa and the Far East and they are promoting their services aggressively in Europe and the United States. I am particularly glad to see that the ESB are actively promoting their services in the United States as I feel there is great potential for successful operations there.

Of course the ESB have not confined themselves to the consultancy activities in foreign countries. ESB management of the Moneypoint project has allowed them to develop wide ranging skills which have made them ideally suitable for the management of other projects here at home. A fine example of this is the ESB's achievement in securing the contract in conjunction with G & T Crampton Ltd. to provide project management and management contracting services for the Custom House docks development. This contract will involve the planning and control of the entire work for the duration of the project and its value to ESB and Cramptons is likely to be several million pounds. Management contracting is a relatively recent development and this is one of the first instances of such a project in Ireland. Success with this scheme will, no doubt, assist the ESB in their efforts to secure projects abroad.

The Governments of many of the foreign countries where the ESB operate on consultancy projects require the link between the foreign contractor or consultant and local interests to be in the form of a company with a specified share of local participation. Such an arrangement is often the prime consideration in obtaining contracts. Because no provision exists at present under the Electricity (Supply) Acts to allow the ESB to participate in companies they have, in order to meet the conditions of these Governments for the securing of a consultancy assignment, to negotiate a complex consortium agreement with other parties concerning their respective rights, duties, obligations and methods of payment. The provision now proposed, which will permit the ESB to participate directly in limited companies, will allow for far simpler arrangements to be made in the area of the board's consultancy activities and will enhance the prospects of their securing assignments in certain foreign countries, or of following up and participating in appropriate projects or developments at home.

This Bill will enable the ESB to set up wholly-owned subsidiary companies with limited liability under the Companies Act. Not only will this give the ESB the flexibility which they require but it will also protect and limit the liability of electricity customers, and enable greater focus of financial control so that the ESB's general financial situation is not exposed.

Within the State itself, and arising from the ESB's activities in the fisheries and aquaculture fields the board have been requested from time to time to take equity participation in companies. Because of their long association with fisheries on rivers where they operate hydro-electric schemes and, in more recent years, their interest in the field of aquaculture, the ESB, have built up a considerable body of expertise in these areas. They are, therefore, in a unique position to make a contribution to the small fish operator by providing investment, both financial and technical. However, the ESB have a duty to protect the interests of their electricity consumers from any loss which might be incurred through their participation with other parties in fisheries ventures. The most appropriate means of ensuring such protection, while allowing the board to engage in the venture, would be to permit them to take equity in a limited company established for the purpose of the project.

I would now like to speak briefly about the ESB's contribution to the Programme for National Recovery. The Government have been actively encouraging State-sponsored bodies to develop and diversify their economic employment-creating activities and has asked them for practical proposals to create new jobs. In the foreign consultancy and associated services area the ESB have plans to set up a subsidiary company with overall targets, to be achieved by 1992, of employment of about 500 people with a turnover of £50 million. A subsidiary company is also planned for the further development of their commercial fisheries activities. The ESB have carried out an intensive study of the market potential of sea-farming of salmon and have targeted to reach within five years the production of 2,000 tonnes a year employing 100 people with an annual turnover of £8 million. Under the EC funded Valoren programme the ESB will be developing small-scale hydroelectric facilities at ten locations in counties Kerry, Cork, Leitrim and Donegal over the next five years. The total cost of the scheme will be almost £7 million and over half of this will come from Valoren. It is estimated that up to 20 people per site will be employed during the construction stage.

The ESB have also identified other areas in which they can contribute to the Programme for National Recovery. Since their foundation the ESB have always purchased as much as possible of their goods and materials in Ireland. This support of Irish manufacturers will continue. The ESB have set up a development research unit the aim of which, as a first step, is to identify areas from which new electrical products and services might emerge for exploitation by Irish industries. Because they are closely associated with the community the ESB continually seek ways in which they can get involved in community developments which would help national development. The sale of coal from Moneypoint has also been identified by the ESB as a way of contributing to the Programme for National Recovery. I will speak about this later.

These are just some examples of the ESB's response to the Programme for National Recovery. I have no doubt that the ESB have the competence and the technical expertise to achieve the targets which they have set themselves. The provisions in this Bill will remove any barriers which may have been an obstacle to the further development of the board's ancillary activities.

I see considerable merit in allowing the ESB to participate in limited companies in view of the circumstances I have outlined. At the same time, as Deputies will note from the Bill before the House, I do not intend that the ESB should be given a free hand to engage in any and every company in which they might wish to participate. I am proposing that the ESB's participation in companies shall be subject to certain controls. The primary control is that participation in any company shall be subject to my approval and that of the Minister for Finance, given after consultation with any other Minister with responsibility in the area concerned, for example, the Minister for the Marine in relation to fisheries projects and any such approval shall be subject to any conditions which I say determine to be warranted or desirable.

Those State-sponsored bodies which provide utilities and services were identified in the Programme for National Recovery as areas where the high cost environment now affecting the competitiveness of our economy and the growth of employment could be brought down through greater efficiency and cost containment measures. The high cost of industrial electricity prices here has often been cited as a reason for the uncompetitiveness of Irish industry. Deputies will be aware of the most recent 5 per cent reduction in electricity prices announced in the budget speech of 27 January. While there was in the budget an imposition of a 5 per cent VAT rate on electricity the reduction I have mentioned means that there will not be any change in the price paid by domestic customers, but it will result in a real reducation of 5 per cent for industrial and most commercial customers who can reclaim their VAT payments.

This reduction has brought Irish industrial prices much more into line with the European average and will greatly assist industry in their cost containment efforts. It should help relative competitiveness with neighbouring countries, in one of which a significant rise in electricity prices has recently been announced.

Deputies will recall that the report of the inquiry into electricity prices which was published in 1984 was set up against a background of public complaint mainly from the industrial sector about the high cost of electricity in this country. On the central issue for which the inquiry was established the group found that electricity prices in Ireland for industry were 20 per cent to 30 per cent higher than in Europe generally, with heavy consumers experiencing an even larger price difference, while for the domestic consumer electricity prices in Ireland were close to the average in Europe.

However, in the past three years Irish industrial prices have been reduced by almost 19 per cent and reductions in the domestic tariff have meant that Irish prices are now marginally lower than the EC average. This most recent cut has been made possible because of favourable exchange rate movements — which have a significant effect on ESB fuel costs — falling oil prices, lower interest rates and also as a result of internal savings. I intend to continue monitoring ESB costs in the light of the Jakobsen report and any further opportunities that may arise for a price reduction will be availed of.

There have been enormous developments in every area of the electricity business in this country since the ESB were first established in 1927. As recently as 25 years ago the ESB's electricity was generated predominantly by hydro-based plant. Since then customer numbers have doubled and unit sales have increased seven-fold. The ESB have had to undergo major changes during that quarter century, not merely in order to keep pace with the growing demands for electricity, but to plan for future demands and to ensure the best advantage for their customers.

The ESB have now entered a new phase in their history. The third of the three 300 megawatt generating units at Moneypoint came onstream last year and now almost a quarter of ESB generating capacity is coal-based. This movement into coal and reduced oil dependence by the ESB has added a greater degree of security to the nation's electricity supply. The ESB have, of course, taken the precaution of diversifying their sources of coal supply and this adds a further measure of security.

The ESB are now the largest coal importer in the country and they are in a position to secure large quantities of coal on the world market at very competitive prices. The jetty at Moneypoint is one of the finest in Europe capable of handling the large size ships. Coal can be imported from any part of the world and the ESB have imported supplies from Colombia, the United States and Australia. With this ability to import coal from almost anywhere at the best prices in vast cargo lots and at lowest shipping cost, I am very anxious that the benefits can be passed on to the consumer. I have, therefore, included a provision in this Bill which will allow the ESB to engage in the wholesale coal trading business.

The ESB do not intend to become involved in the direct retailing of domestic coal to the advantage of their ultimate consumers. Any sales of domestic coal by them would be to wholesalers or merchants who should, therefore, benefit from the availability of cheap coal to the advantage of their ultimate consumers. The ESB hope to sell industrial coal directly to very large users and to wholesalers who supply smaller industries. New entrants to the coal trade, which no doubt would help to create greater competition and in turn lead to a lowering of prices, must be welcomed. Studies which I have had carried out in my Department into the benefit to the consumer of allowing the ESB into coal distribution reveal that there is potential, in the long term, of up to 20 per cent cost reduction to the consumer.

I am conscious of the widespread concern that has been expressed about the ESB's involvement in coal trading and the effect it might have on other Irish ports. I share these concerns and to ensure that it will not have a detrimental effect I have included a provision in the Bill prohibiting the distribution of coal by road or rail from Moneypoint. Coal may only be distributed from Moneypoint where it is sold by the ESB for onward forwarding by sea. In this way traffic at other Irish ports will also increase and thus lead to the creation of additional jobs.

I am well aware of the enormous potential of the Shannon estuary and for the development of its marine-related activites. I am confident that Moneypoint can play a major role in this development. As I stated earlier, Moneypoint can accommodate the very largest ships. The main jetty there is the second deepest in Europe, and there are only two other ports of similar size — Le Havre and Amsterdam. It would be a shame if the use of this fine national asset were confined exclusively to coal. I have included, therfore, a provision in the Bill which will allow the ESB to trans-ship other products and substances from Moneypoint. As the ESB develop an expertise in trans-shipping coal I have no doubt that they will be well placed to take advantage of any opportunity that might arise for the trans-shipment of other products.

A provision has also been included in the Bill to enable the ESB to sell any by-product in the generation of electricty. A good example of an opportunity this could open for the ESB is the sale of fly ash. Moneypoint power station produces 200,000 tonnes of ash a year which could possibly be used in the manufacture of cement. While extensive trials would obviously be necessary to determine the suitability of the ash, there is definite potential here for the ESB to provide a source of profit and so reduce their coal processing costs.

Deputies will be aware that the board of the ESB have expressed reservations about the amount of the sums levied on them in lieu of rates and that they have alleged that they were not in accordance with section 7 of the 1982 Act. When I met the board last year I agreed that if it was found that the interpretation of section 7 needed to be supported by some "removal of doubts" clause I would seek its early enactment. Sections 7 and 9 of this Bill now provide the necessary clarification in respect of future and past payments.

Under various Electricity Acts the ESB are exempted from rates on the bulk of their property. Most of this property has never been valued for rating purposes. The Valuation Act, 1988, which was recently enacted, provides for the global valuation of utilities like the ESB and the intention is that when ESB property has been valued in accordance with the provisions of that Act, the exemption from rates on ESB property will be abolished. When rates are payable on the previously exempted property the levy will no longer apply. I have included the necessary enabling provisions in this Bill.

I should like to turn briefly to some other amendments of the ESB Acts for which this Bill provides. The first of these relates to the amendment of section 2 (6) of the Electricity (Supply) Act, 1927, which provides that the position of chairman of the board of the ESB shall be a full time post. It is proposed to change this in order to allow for the appointment of the chairman to be either a full time or a part time one. In other words, the proposed amendment will allow the Government to exercise their discretion as to the type of appointment they make. This will bring the ESB legislation into line with the practice in other semi-State bodies where the terms and conditions of appointment are at the discretion of the Government or the Minister when appointment is made so as to allow for the appointment of a part time or a full time chairman. I would not like it to be taken from this clause that there is anything but a total lack of confidence in the present chairman of the board.

An Leas-Cheann Comhairle

Does the Minister mean there is total confidence in the chairman of the board?

Mr. R. Burke

There is no lack of confidence in the chairman of the board. We have total confidence in him. A further amendment to the ESB's Acts relates to the power of the Minister for Finance to guarantee certain borrowings by the ESB. While in practice the guarantee of the Minister for Finance encompasses the payment of promissory notes made by the board and bills of exchange drawn or accepted by the Board, these particular financial transactions are not, I am advised, legally comprehended by the term "borrowing". The object of the amendment is to statutorily provide for their inclusion under the guarantee of the Minister for Finance.

Finally, another amendment dealt with in this Bill is of a minor technical nature, the intention being to clarify the wording of section 3 (b) of the Electricity (Supply) (Amendment) Act, 1982. May I repeat that the Government have total confidence in the chairman of the board and it is more at his request than anything else that this provision is being included.

I commend the Bill to the House.

Mr. R. Bruton

The present Government have taken a very cynical approach to the cost of electricity. In the budget a couple of weeks ago they imposed an additional burden of £15 million on ESB consumers through the imposition of VAT and the removal of a £31 million low cost development loan the ESB had enjoyed. The net effect of that is that they will probably have to refinance that loan at at least double the cost. The 5 per cent VAT rate effectively robbed the domestic consumer of a price reduction which the Minister had said the consumer was entitled to because of falling costs. To have preached in the Programme for National Recovery about the need to bring down the cost of electricity and then to turn around and treat the ESB in this cynical way — or more exactly to treat the electricity consumer in this cynical way — can inspire no confidence. Far from using the extra revenue they have raised to remove from the ESB the anomalous tax burdens which they now carry, in this Bill the Government intend to copperfasten the excess which the ESB have to pay in lieu of rates which the ESB calculate is about double what they would have to pay under a normal rating system. While the Bill acknowledges that in future the ESB may be switched to an ordinary rating system no time scale has been provided within which that will be achieved. The Government are saying: "Make me virtuous, Lord, but not yet."

Equally worrying is the fact that the Government are continuing to perpetuate the very high hydrocarbon tax which electricity bears on its oil use. The excise tax is double that of any other industrial user and, in effect, the rate of tax on the ESB's hydrocarbon oil is much higher than double because of their ability to bring it in cheap and because up to now they have not been able to claim a rebate on VAT. In effect, the Government are raiding the ESB for funds in this year's budget and perpetuating hidden taxes that amount to about £20 million in excess of what need to be paid. They have not addressed the fundamental issues raised by the Jakobsen report which issued its findings in 1983-84. When we look, in this Bill, at the ESB's proposals to enter into new enterprises, while these initiatives are welcome, we have to ask the fundamental question: how are they doing in their core business? It is recognised that the ESB have had significant achievements in increasing labour productivity in their company, that they have succeeded in switching to cheaper fuels and, as a result, they have modified the cost penalty which existed in 1983-84.

However, despite the sanguine statements in the Minister's speech the facts are that the most recent European comparisons available show that, for the industrial user, the ESB are still 14 per cent dearer on average than the European Community and this is costing the industrial user about £25 million. These are the bleak facts and the Minister citing the fact that ESB prices have come down is not much consolation. We all know that prices are coming down because of falling fuel prices, but the real issue is comparability with our competitive partners in Europe. While there has been an improvement we still have real progress to achieve.

It is regrettable that the ESB have not done anything about the very significant recommendations made by Jakobsen in 1983-84. I refer in particular to four important recommendations which had a critical bearing on pricing. The first recommendation made by Jakobsen was that the ESB should year on year target a price reduction that would bring us closer to international levels. This has not been done by the ESB and we cannot see whether they are making the maximum possible progress in this way as was intended by Jakobsen. Another recommendation that has been ignored was that there should be an independent scrutiny of the ESB pricing strategy. It was shown up in that report that the ESB use very discriminatory practices in charging their consumers. Some of the bad downstream effects of that has been the total underdevelopment of combined heat and power because of the ESB's refusal to pay an adequate price for electricity brought into the grid.

We continue to need this independent scrutiny, which was recommended by Jakobsen, but we have not yet seen it and it is time we did if we are serious, and if the Government are serious, about what they said they were trying to do regarding electricity costs. A third recommendation that has been ignored is the proposal that the ESB should shift to a new system of capital charges. That proposal, while complicated to explain, would mean that at present the ESB consumer would be paying much less for electricity because the proposed system would have meant that in times of low growth and low inflation — as we now have — the capital charges would be drastically reduced and the ESB consumer would have benefited. We are losing out heavily. The price has an excess cost built in by the present practices of the ESB and they have done nothing to remedy that four years after Jakobsen recommended such remedy.

Another example is in the investment area. Jakobsen was unhappy with the approach to investment being adopted by the ESB that had resulted in 67 per cent capacity in excess of peak demand. We now see that excess capacity was even higher, at 77 per cent, at the end of 1986 and probably that has been retained since. Yet, we have not had an open discussion of the ESB's investment strategy as called for by Jakobsen. They called for the publication of the appraisals being done of investment strategy and we have not yet seen them. These are the real issues which need to be faced up to if we are serious about bringing down the cost of electricity and not the cynical lecturing which the Government carry on with and then turn around and impose extra burdens on the electricity consumer. The sooner the real job is faced up to the better it will be for all of us.

The main approach of this Bill is laudable in that it encourages the ESB to exploit opportunities open to them and to take on new undertakings. This is the essence of how we can make our State sector into a more dynamic force in this economy so that not only do they produce at low cost but exploit the available opportunity. Perhaps all the experience and skills of the ESB can be utilised for this country. Moneypoint with its jetty, which is used only to about one-third of its capacity, is clearly a facility that should be utilised. I am glad to see that the ESB are getting the opportunity to enter into this trade and it is encouraging to see them being given the freedom to form companies. It is well known that their inability to form companies has handicapped them, as the Minister has pointed out, in undertaking overseas consultancy and in other areas, too.

It must be said, and the Minister should recognise this — even though he is not here — that if the ESB are to exploit opportunities and are to be innovative in their approach to these opportunities it is only right that there be adequate recompense for those who are involved in these new companies. I would not like to see, at the end of the day, companies formed with the explicit purpose of exploiting a great new opportunity being hidebound by narrow public service pay regulations. If they can perform they should be rewarded for their performance. That is the only way executives can be retained in the State sector to provide the sort of dynamic development we need to get from that sector.

It is a welcome development that the ESB — if they can fulfil their promises — are to bring coal into the domestic market at a price considerably cheaper than it is now available at. At present in the domestic market here in Dublin, far too high a price is being paid by the domestic consumer for coal. Coal is landed in the port of Dublin from Poland at £55 per tonne and by the time it reaches the consumer it cost £117 per tonne, without tax. The consumer pays more than double the price at which it is landed at the port of Dublin. That is not acceptable and if the ESB's entry into the coal market can bring about, as they promised, a reduction of 20 per cent in the cost of coal to the domestic consumer they will have done a good day's work. In this regard they are to be commended.

It is equally crucial that the ESB's venture in coal trading and in any other company they may establish should be entirely at arm's length from their electricity operations. There should be clear fair trading rules in force so that they are not competing unfairly with others in the same market. We must recall that the ESB's past record with some of their ancillary businesses has not been encouraging. For example, they have continued to trade in appliances, despite persistent losses and despite the fact that they are under a legislative obligation to break even in their activities. That is less than the correct way to operate and it means that the might of the electricity consumer is again being used to prop up an excess cost which should not be there. We cannot have that sort of experience occurring again.

It would be totally unacceptable if these new companies established by the ESB were to use as a crutch the fact that the ESB have a captive market of 1.5 million consumers. We in Fine Gael will be determined on Committee Stage to ensure that modifications will be made to the present proposals to put these companies at arm's length. By this I mean that there should not be the ability to give them loan guarantees and subsidies, nor should there be the ability to make favourable pricing deals between these companies and the parent company. It is important, for instance, that the charging out of the Moneypoint jetty should be on the basis of full cost and that the ESB's coal trading subsidiary should not have preferential access to this jetty. This is a very important principle which must be established for the ESB so that they will know when venturing into new enterprises that they will be expected to perform on a full-cost basis and will not have the captive electricity consumer to fall back on.

The coal business is not a bed of roses. Granted the ESB have very significant advantages in being able to bring into Moneypoint very large ships and in being able to buy in bulk. Equally it must be said that the ESB had some very bad experiences in the past in making long-term contracts which turned out to be very costly. Since they intend to double their coal importation immediately to about £100 million and subsequently to a much higher level when Moneypoint is at full operation, they will be exposing themselves to significant risks. If they are to enter into long-term contracts, we must be quite confident that bad decisions by this coal subsidiary could in no way draw the electricity consumer into extra cost. While there are no parallels between this venture and Irish Shipping, the experience of Irish Shipping is a salutary warning that if a company enter into long-term contracts in products which are not central to their core business, they are exposing the company to very high risk. If the ESB are to have a coal turnover in the region of £150 million or £200 million in the medium term, there is no doubt that it is a risky business and it must be conducted on a very sound basis at arm's length from the electricity consumer.

The issue of fair competition must receive more attention than the Minister has given it in his speech or in this Bill. The business of extracting the domestic and industrial fraction from a bulk cargo of coal is fraught with opportunities for cross-subsidisation. Some clear rules must be established as to the cost of a domestic fraction coming from a bulk carrier of coal. If the ESB's coal trading subsidiary have the opportunity to shunt on to the electricity consumer high cost coal fractioned for the generating station in order to give a favourable price in the domestic or industrial market, that would be unfair competiton with those already in the business. It is important that they should be pinned down in some way so that fair trade will be practised by all concerned. There is no doubt that the ESB have very considerable industrial might and if fair trading rules were not in place there would be a danger for those already in the business.

A strong point which must be made is that if the ESB control two very important energy products, coal and electricity, they must be at arm's length from the point of view of industrial relations and stoppages. It would be a tragedy if a dispute in the ESB coal dock should lead to the blacking out of electricity consumers. In the establishing of these companies we should make it clear that these are separate operations on separate sites and that there should not be secondary picketing which would bring out electricity workers as a result of some dispute about coal or vice versa. I hope this will never come to pass but it is a danger of which we must be aware and which should be given due consideration in the establishment of companies. Electricity blackouts result in very heavy costs being borne by the country and there would be serious difficulties if at the time of such stoppages we were also to find that coal was unavailable. This is a situation which plans must be made to prevent.

It is very important that the ESB should see these companies as commercial ventures set up to exploit existing opportunities. I would favour the ESB's setting an objective of being in a position to sell off this company within a period of time, say five years, and to cash in their chips and make a significant capital gain. They would then be in a position to provide seed capital for new ventures. I am convinced that the ESB have the skills and the opportunities to enter into many ventures. They should see this as part of their brief and should not be indefinitely involved in coal trading. I do not see any special logic in the State's being involved in coal trading but I realise that if the ESB were not to exploit this opportunity it might lie fallow. I should like to see the ESB using their skills and expertise to set up companies which would not otherwise come into being and then taking their profits within a few years and setting out on other ventures. That is the sort of dynamic public sector operation we need.

The whole issue of safety in the use of electricity is causing some concern. We have learned from the experience of Dublin Gas how important it is to have a very structured approach to safety in the use of energy products. At the moment there is no such approach to electricity. As the Minister is aware, I strongly favour in the case of gas the establishment of an independent authority rather than leaving it to the company, as the Minister has done, to regulate safety. There is a very clear obligation on Bord Gáis to look on safety as being one of their prime concerns. That does not seem to be the approach of the ESB who have powers under the enabling legislation to set up systems to ensure that standards remain high in the wiring of houses and safety of appliances. This they have not done and this Bill may give the Minister an opportunity to look very seriously at the need to make the ESB activate those sections of existing legislation and so allow them oversee the safety of appliances and wiring in homes. The public feel when the ESB wire and connect up their homes that they have in some way stood over the quality of the wiring but, as has been pointed out in the media recently, this is far from the truth. The ESB in no way vet the standards, have no inspection facility and have not activated that part of the legislation. The time is now opportune with this legislation going through the House for the Minister to address that issue and make it mandatory on the ESB to activate those terms.

I welcome this Bill. It will make a good contribution to achieving a more dynamic ESB but once again I caution that the real business of the ESB is in electricity and they must address much more seriously than they have done heretofore the issues raised in the Jakobsen report which they have so far overlooked. I also caution the Government that their approach should not be the cynical one they have adopted this year, of raiding the ESB for more funds and not addressing these fundamental issues. If they are serious about what they said in the Programme for National Recovery about the importance of competitiveness in electricity prices, these are the issues they have to address. They should not raid the ESB and impose extra costs but rather they should set about resolving these issues.

Mr. P. O'Malley

This Bill is very similar to the one which was circulated in December 1986 by the previous Government but which was not reached due to the dissolution of the Dáil. There is one important distinction between the two Bills, which the Minister referred to, in that this Bill seeks to protect trade in other ports around the country by ensuring that the coal and other products which are transported by ship in and out of such ports will not be adversely affected by the introduction of this Bill. That is an important improvement on the Bill circulated in 1986.

That is a secondary issue because I think the main point at issue is the proposal to allow the ESB to become involved in other trading activities. If this Bill is enacted it will enable the ESB to participate in activities which are outside their main business which, of course, is the generation, supply and distribution of electricity. This raises fundamentally important questions, particularly in the light of the past performance of the ESB where they have involved themselves in ancillary trading activities.

Under section 2 of the Bill it is proposed to allow the ESB to form or acquire companies or to hold shares or others interests in a company and under section 3 the ESB will be allowed to engage in the business of the distribution and sale of substances, including coal, from the board's property at Moneypoint. The Bill also covers less contentious matters such as arranging for the office of chairman to be held on a part time basis at the discretion of the Government and it clarifies the position as regards the payment of moneys by the ESB in lieu of rates.

As I have said, I think the most important aspect of this Bill is the proposal to allow the ESB to become involved in the sale and distribution of coal and other unspecified products through subsidiary companies from the facilities they have at Moneypoint, County Clare. The arguments put forward in support of this proposal seem to be based principally on the fact that the costly jetty and storage facilities at Moneypoint are greatly under-utilised. There appears to be no convincing research available — to me at any rate — demonstrating that there are viable alternative trading opportunities which could be carried out from the jetty apart from a general aspiration that it has potential to replace Rotterdam as a trans-shipment facility. Of course, the whole question as to why this expensive jetty facility was provided in the first place does not seem to be addressed at all. The jetty facilities at Moneypoint cost, I understand something in the order of £40 million and are surplus to the ESB's requirements — certainly to their immediate requirements — and are only about 30 per cent utilised at present.

The case is being made that because the ESB are already importing coal, which they import for their own use, they should extend this operation into the domestic home market, thus increasing competition in that market while, at the same time, developing the Moneypoint jetty as a trans-shipment centre for coal and other products. The ESB argument appears to be based on the fact that a huge volume of imports into this country are trans-shipped through the port of Rotterdam and other European ports and that this business could be transferred to Moneypoint with the consequent result of cheaper import costs into Ireland. There are a lot of assumptions contained in that argument and I hope to deal with them in some detail as I go on but I seriously question, even if those assumptions are true, whether the ESB is the appropriate body to become involved.

The total coal market in Ireland at present is in the order of 3.5 million tonnes and the ESB, since Moneypoint became fully operational, account for some two million tonnes of this. This is imported at Moneypoint through long term contracts which the ESB have entered into with suppliers from the United States and South America. The balance of the coal imports into Ireland amount to approximately 1.5 million tonnes and this is taken in at various ports around the country. Of this 1.5 million tonnes, approximately 76 per cent is classified as domestic coal, commonly known as house coal, and in the region of 24 per cent is classified as industrial coal which would be suitable for use in many high-steam requirement industries in Ireland.

In view of the ESB's proposal to enter the Irish coal market it becomes very important to distinguish between the various types and categories of coal which we would then have available on the home market. The coal imported by the ESB for their own use is of low specification, pit one coal, which is not graded or sized and in the case of the Amercan coal which they import it is high in sulphur content by comparison to the other coals imported. On arrival at Moneypoint the ESB coal is in sizes which range from large lumps down to fine size. As I understand it, the procedure is that this coal is put through a crusher and reduced to a very fine size which is suitable to use in the generating station.

What the ESB now propose doing is screening this coal out to separate the sizes which would be suitable for the Irish industrial market and to a lesser extent the Irish household market. Approximately 10 per cent of what the ESB import, in the order of 200,000 tonnes, would be screened out in this way and the bulk of this would be more suitable for industrial use. The total market for industrial coal is in the order of 350,000 tonnes. Irish Cement, being the biggest direct importer, account for approximately 165,000 tonnes of this. There is also approximately 1.2 million tonnes of house coal imported annually and of this around 10 per cent, or 120,000 tonnes, of small sized industrial coal is generated unavoidably as a result of the natural degradation of the coal which occurs during the shipping and handling stages. Out of a total industrial market of 350,000 tonnes, a total of 285,000 tonnes is already supplied from two major sources, that is the Irish Cement contract with British Coal and the 120,000 tonnes made available through natural degradation when it is being imported and handled. This would leave a shortfall in the industrial market of 65,000 tonnes which is presently supplied by other importers.

The screenings from the house coal imports must be disposed of by the importers at whatever price they can get in the industrial market. This has led to a shortfall in the price of industrial coal over the last few years. Any further significant expansion in the demand for industrial coal in Ireland will depend critically on future movements in oil prices. In the absence of any major oil price increase, sales of 200,000 tonnes of industrial coal by the ESB would be into a market which is already over-supplied. A price war on industrial coal between the ESB and the existing importers would then become likely and the ESB would have difficulty in winning it as they might be forced to sell their coal below cost in an effort to gain market share. Because the bulk of industrial coal is a by-product from the existing importers, their price could fall if necessary even down to a cost equal to the cost of disposing of it. If a price war on industrial coal were to materialise, the effect would be to put up the price of house coal on the domestic market. The major worry about all of this, is that the ESB would not conduct their coal trading activities at arms length from their generating business and, as in some other activities in which they have engaged in the past, there could be massive cross-subsidisation of their coal trading account with profits made from the electricity account. The consequences would be that the price of electricity would increase or that at best there would be no scope for a price reduction, competition in the coal trade would be obliterated and the ESB would then have a monopoly in the Irish coal market together with the monopoly they already enjoy in the electricity market. Consumers would have the worst of all worlds. The ESB's position boils down to the assumption that because they have negotiated long term supply contracts for large volumes of coal which they import into their deep water facility at Moneypoint, they have two advantages, both of which are based on economies of scale. They can buy the large volume of coal at a cheaper unit cost and they can also bring in very large ships of up to 120,000 tonnes and because of that they would have greatly reduced shipping costs.

On first analysis it appears that the ESB would command such purchasing economies given that they would be buying in the order of 2 million tonnes of coal per annum compared with the 1.6 tonnes imported by all other purchasers on a yearly basis. It is important to make the distinction that we are talking here about very different types of coal. The bulk of the 1.5 million non-ESB tonnes imported is of a much higher quality than the lower quality steam coal that the ESB import, so in terms of price we must ensure that we are comparing like with like. The ESB will not reveal at what price they can purchase their coal from their long-term contracts. I understand that they have entered into four contracts for supply of coal to Moneypoint. There is one Colombian contract for 1.8 million tonnes and three separate American contracts for a total of 15 million tonnes and according to the 1986 report of the Oireachtas Joint Committee on Commercial State-Sponsored Bodies it is understood that the price agreed under the terms of the contract is adjusted by an escalating formula relating to labour and commodities prices in the case of the American contracts and apparently tied to the average price of steam coal imported into European countries in the case of the Colombian contract. I would ask the Minister to confirm if the price adjustments in the American contracts are only in an upwards direction as it would have a very important bearing on the bulk of these contracts given that there has been a considerable fall in the price of steam coal in world markets since these contracts were entered into. According to the Financial Times International Coal report in July 1987, the CIF spot price for steam coal at Rotterdam was $31.5 US per tonne for cargoes exceeding 130,000 tonnes in the case of Colombian coal and $26 American per tonne for South African coal in cargoes of 5,000 to 10,000 tonnes. The Minister should indicate whether the ESB contracts are competitive with those spot prices as they are a base which would apply to private sector importers into this country.

In relation to the argument about economies of scale, two other points need to be made. It should be noted that a group of private sector importers purchased from a single supplier under a joint purchasing agreement, a total tonnage which exceeds the tonnage purchased by the EC from any one of its individual suppliers so in terms of economies of scale on a unit cost basis, arising out of the contracts to purchase large volumes of coal, there is no clear evidence that the ESB can purchase coal at lower prices than the existing coal importers. The annual purchase agreement which the private sector have to purchase approximately 770,000 tonnes of Polish coal is for a far larger volume than any of the individual ESB agreements. Where the ESB would have an advantage is that they will enjoy some economies of scale in freighting coal to Moneypoint, given the size of the vessels which Moneypoint can accommodate. However, it has not been established that the ESB can buy coal more cheaply on the international markets. The advantage would lie if the fact that they ship it into Moneypoint at a cheaper cost.

On arrival at Moneypoint we must look first at what is to happen to the large shipment of coal. First there is an added cost in processing this coal. It has to be screened out into sizes suitable for the domestic market; it has to be washed and it then has to be reloaded to another ship and shipped to another port. The freight economies achieved in getting the coal to Moneypoint in the first place are quickly dissipated as the coal must be transported by ship from Moneypoint to other ports instead of being shipped directly in the first place. Trans-shipment costs from Moneypoint to other Irish ports would substantially offset or even negate the freight economies initially gained. One shipping source has indicated that if a regular trade could be established from Moneypoint, freight rates to the Irish east coast ports would be between £4 and £5 per tonne, thus the total freight element of bringing American coal into Moneypoint and from there by coasters of up to 3,000 tonnes in size, into Dublin, would be about £8 per tonne which is actually £2.50 per tonne more than the current freight rates for Polish coal coming directly into Dublin.

I cannot see that there is a niche in the market for the ESB to supply coal; except if they resort to what Deputy Bruton referred to, the cross-subsidisation of their coal trading account. There is no evidence that they can buy coal more cheaply on the world market. Whatever economies they can achieve in terms of the volume they can bring into Moneypoint, it is clear that the cost advantages could be quickly eroded when the coal is subsequently shipped to other ports. Apart from these points there is another important point relating to the intention of the ESB to become involved in the Irish coal market, and that has to do with the environmental consequences of burning parts of this coal cargo either in domestic fires or at other industrial facilities throughout the country.

The sulphur content of the American coal is much higher than that of the Polish coal at present being imported into this country and it would not be suitable for the domestic market. I am advised that it could not be sold for industrial or household use in this country. It would be perfectly all right for it to be burned at Moneypoint generating station because the stack heights which stand at 220 metres high were designed to ensure that air quality would not be adversely affected by the use of this coal. In other words, the stack heights at Moneypoint are sufficiently high to handle a wide range of coals from different sources with varying levels of sulphur content. This would not apply to houses and industrial facilities which have low chimneys and have to comply with conditions of planning permission imposed on them relating to sulphur content of the coal they can use at those facilities. I would like the Minister to comment on this. If the ESB go to the trouble to penetrate the Irish coal market, is the product they would be bringing on to that market unsuitable in the first instance anyway? The passing of the Air Pollution Act, 1987, and the creation of smokeless zones impose severe restrictions on the quality of coal which can be used in future and, of course, the demand for smokeless fuels will grow.

I note in passing that section 4 of the Bill enables the ESB to engage in the manufacture of any product or substance manufactured from coal and this, of course, could include smokeless fuels. Maybe that is part of the long term strategy at Moneypoint but, if so, the ESB should not become involved in that kind of diversification. They would be better advised to concentrate on improving their core business.

Even if it could be established that the ESB's proposal to enter the Irish coal market would result in cheaper coal prices, it is not appropriate for the State to increase its involvement in the Irish energy market. Allowing the State to enter the coal trade would extend the very substantial degree of market power which the State has already in the energy sector and which it exercises through a range of subsidiary companies such as the ESB, An Bord Gáis, Bord na Móna and the Irish National Petroleum Corporation. There is no justification for State intervention in the Irish coal trade. The State is justified in intervening in a market only where the market mechanism itself has failed to work and it is necessary to control monopolies, it is found there is a social need that is not being catered for by the private sector, or there is a failure to take advantage of market opportunities which are deemed of national importance to the Government such as insuring maintenance of essential supplies. Clearly this is not the case as far as the Irish coal trade is concerned.

I would like to deal at some length with security of supply and perhaps to a lesser extent with the conditions that prevail in the coal trade. I have covered some of that ground already. First, vast reserves of coal are available which are sourced in a wide variety of countries, and the greatest guarantor surely of security of supply and of competitive pricing in the coal market is its relative abundance in many countries around the world. If we want to talk about security or energy supply we need to look no further than the ESB themselves. Dislocation in energy supplies to the public has been caused much more frequently by industrial disputes within domestic energy suppliers than by the actions of any foreign Government. The Chief Executive of the ESB stated in evidence in 1986 to the Oireachtas committee that few industries possessed as much industrial muscle as the ESB. We saw that muscle being exercised in the power cuts in 1987 and in preceding years.

One can argue strongly, therefore, that allowing the ESB to enter the coal trade would not only make the supply of coal to the public more vulnerable to industrial relations dispute, but would also concentrate more power in the hands of the ESB and with more of the national energy market in the ESB's hands the public would become more and not less vulnerable to supply disruption. If the ESB were to gain a strong foothold in the Irish coal market, the consequences could be disastrous in terms of the stranglehold the ESB would have on a major part of the Irish energy market, considering that they have a monopoly already on the electricity side. At present coal is imported by a large number of private importers to several ports around the country and it is widely dispersed, unlike oil reserves which are concentrated in the Middle East.

Latest forecasts suggest that at current consumption levels existing coal reserves could last for over 200 years whereas proven oil reserves have an expected lifespan of 33 years at present consumption rates. Such large reserves of coal effectively preclude the type of "cartelisation" of the market which oil producers attempted during the seventies and early eighties. Coal is an extensively traded international commodity. There is a well developed spot market for it and there is no monopoly or cartel operating in the Irish market. As I have pointed out, although the major importing companies engage in a joint purchasing agreement for the importation of coal, that arrangement ceases on the arrival of coal into the country. The coal trade in Ireland is serviced by some 35 existing importers through 16 ports around the country and there is a considerable amount of entry and re-entry in and out of the market which guarantees competitive pricing.

If it were believed that the coal trade engaged in price fixing I would suggest the appropriate response surely would be the introduction of legislation banning such collusion and not the measure we have before us here today. Clearly there are no grounds at all in terms of market monopoly or security of supply arguments for the State through the ESB to become involved in the Irish coal trade.

I have posed the question: is it more appropriate for the ESB to concentrate on their own core business? Many critical reports have been published highlighting the inefficiencies in the company who produce electricity at prices which have greatly affected our industrial competitiveness. Like Deputy Bruton, I accept that the ESB are making some improvements in the management of their operations, but the questions of overcapacity and overmanning have still to be resolved. As Deputy Bruton pointed out, in the year 1986-87 the ESB nominally had sufficient capacity installed to meet demand level three quarters higher than the peak demand level which occurred that year.

I accept that some improvements are taking place and some accommodation has to be made for the ESB's arguments that Ireland requires a higher level of reserve capacity because we do not have an inter-connector with any other country and we have a low consumer density on the distribution network. Even allowing for such arguments, the excess capacity is very high, and any industry finding itself in that position would seek to raise sales of their core products. That would be the first thing they should do in a relatively static economy like ours here. Increased penetration of the energy market by one fuel can be achieved only at the expense of other fuels, so if the ESB are successful in increasing penetration of the coal market this surely will be at the partial expense of electricity sales. To that extent the ESB would be competing against themselves.

It is also appropriate to look at the ESB's track record where they have engaged in commercial trading activities in direct competition with the private sector. Their record has been very poor, particularly in appliance sales, repairs and installation contracts. Despite these activities, having been heavily cross-subsidised with revenue from electricity sales, they have been shown over the years to be unprofitable. The 1986 Oireachtas Joint Committee on Commercial State-sponsored Bodies recommended that, in view of their poor trading performance, the ESB should divest themselves of their ancillary trading activities particularly in the appliances area.

What confidence can one have in the ESB's ability to trade profitably in the coal market given the market conditions I have outlined, particularly in view of their poor performance in terms of both their core business and existing ancillary trading activity? What guarantees have we that we will not have heavy cross-subsidisation of their coal trading accounts if they enter that market? Anyone can become competitive if his trading account is subsidised, but this is not true competition. It will have the effect of putting out of business many of the 35 companies now operating in coal importation and concentrating a greater share of the energy market in a State company, the inevitable effect of which will be to increase prices.

I would suggest that any discussion about greater competition should be turned back on the ESB. They hold a monopoly in the electricity business. We have very high electricity prices here. We should be looking at ways of opening up the core business of the ESB to more competition. There has been a trend in this direction internationally and we have seen, only in the last week or two, the plans announced for the privatisation by the Central Electricity Generating Board in the UK.

It can be argued with justification here also that competition in electricity generation could lead to greater efficiency and cheaper cost to the consumer and that rather than extending the State role in the energy market, we should be looking at ways of encouraging private sector investment in this area. Instead of that what this Bill proposes to do is to give the State, through this utility company, the ESB, who already have a monopoly in one sector of the market, an opportunity to involve themselves in another sector of the Irish energy market, which is in direct competition with them, and this particular utility company have a poor record in terms of their core business and, in particular, in terms of the ancillary trading activities in which they have engaged in the past.

I have already outlined why I believe there is no rationale for the ESB trying to penetrate the Irish coal market, assuming they they do so on an equal non-subsidised competitive basis with other coal importers. The market volumes are not there. There is no obvious price advantage to the consumer and there could be serious environmental consequences arising out of it.

The ESB accept, privately anyway, that the Irish coal market is only incidental to their main objective, which is to develop Moneypoint into a major trans-shipment centre. They say that they have identified a lot of business that could be taken from the port of Rotterdam and elsewhere.

On the question of the coal trans-shipment through Moneypoint into the Irish coal market the ESB have made the case that instead of the coal which is destined for Ireland being first routed through Rotterdam and from there to an Irish port, it could first be shipped directly to Moneypoint and then on to its ultimate destination. But crucial to that whole argument is the assumption that coal destined for Ireland or for Irish ports is first unloaded and then reloaded at Rotterdam, and that is not the case. The vast bulk of coal shipped into Ireland is shipped direct anyway and it does not pass through Rotterdam or any other trans-shipment centre. The coal arrives in Ireland directly from its country of origin and it is estimated that up to 90 per cent of all coal arriving at Irish ports has been shipped there directly.

So, if there is very little trans-shipment of coal at present, then the ESB case for importing coal through Moneypoint for the Irish market is put further in doubt. What I would like to know is where is the evidence that there is a large potential market for the trans-shipment of coal or indeed for any other product like grain or fertiliser through the port of Moneypoint? What facts and figures have the ESB, or indeed the Minister, given us here today to convince us of this scheme?

All I am aware of is that there is a £40 million jetty at Moneypoint which is only 30 per cent utilised and, laying aside the question of why the ESB commissioned a jetty with that kind of surplus capacity in the first place, a feasibility plan of some sort, however basic, should be laid before the House to enable one decide whether the ESB or any other State body should not incur even further expense by providing additional unloading facilities in order to carry out a trans-shipment business. If any trans-shipment business is to be carried out at Moneypoint, millions more pounds will have to be spent providing conveyor systems and unloading facilities at the jetty which do not exist there at present, and that point is accepted by the ESB. It would be a different story if the ESB or some other State agency such as CTT or the IDA had clearly identified real market opportunities in the trans-shipment business and a proposal was brought forward to develop this business on a joint venture basis between the State and the private sector. If there was a good market for coal trans-shipment to Europe through Moneypoint, coal producers should be asked to put up substantial capital to develop the facilities which I have already said will cost several million pounds, and this is the approach that the Government intend taking in relation to the Whiddy and Whitegate facilities where external funds are, apparently, going to be spent by the producer to get him a better footing in the European market for his product.

Instead of that, we have the possessive and arrogant attitude of the ESB in relation to the jetty. The chief executive, in evidence to the Oireachtas Committee, recognised that the jetty facilities at Moneypoint were under-utilised, but he confirmed that the ESB had taken a policy decison to use it for their own purposes and that they did not want anyone else involved in that jetty. In other words, if it had to be more fully utilised, the ESB would achieve greater throughput by going into the business of importing bulk cargoes for sale to third parties. Even if the ESB were prepared to consider this on a joint venture basis, I still do not believe it is appropriate for them to become involved, and they should have their priorities restated for them because they appear to be straying into all sorts of trading activities which are unconnected with their main business and, as I have said already, they do not seem to do that very well.

Moneypoint is undoubtedly a fine deep-water facility, but where is the evidence that it can replace Rotterdam as a trans-shipment facility? Rotterdam's success as a port is based on the fact that it is geographically well placed to serve a hinterland which includes major industrial centres and it has a population of 150 million people within a radius of 300 miles. It has good coastal shipping services and, in addition, more than £230 million has been spent in recent years in the reorganisation of the general cargo sector and computerised traffic control systems. Where is the business plan that shows us that Moneypoint can take that business away from Rotterdam? The proposals in this Bill are more likely to take business away from Irish ports on which the State has spent some £55 million since 1982. Although the Bill provides for goods to be trans-shipped from Moneypoint by sea to other ports in the State, there are certain weaknesses in the Bill which could give rise to loss of trade and jobs in other ports. Section 3 (2) does not guarantee that the trans-shipment requirement will continue in the future. Also there is nothing in the Bill to prevent lorries being loaded at Moneypoint jetty, driving on to a ferry, going across the estuary or upriver to Killimer and delivering their cargo to their ultimate destination by road.

The Minister should comment on those points. With the exception of sections 5 to 15 of the Bill which are mainly concerned with tidying up effects or lack of clarity in the existing legislation the Progressive Democrats will oppose all sections of the Bill and will be voting against this Bill on Second Stage.

Mr. Spring

My party will be supporting this Bill on Second Stage. We will be looking at the amendments on Committee Stage. There may be some amendments from the Minister at that stage. The fact that we are supporting the Bill will not come as a surprise, given that the Bill as it stands was largely drafted while I was Minister for Energy.

In broad terms, we welcome the principles inherent in the Bill. The first principle I wish to deal with is that a semi-State body such as the ESB should be free to set up enterprises outside their main area of concern. I also want to say something later about the other main aspect of the Bill which seeks to clear up any doubts about the ESB's liability for rates.

We have always believed that companies like the ESB should be free to compete on level terms with other companies in the private sector, and should not be inhibited from engaging in any operation which would help to strengthen their overall viability. Other semi-State companies, such as Aer Lingus, for instance, are already engaging successfully in enterprises outside their immediate scope of activity, and there is no good reason that the ESB should be excluded from such broadening of their horizons.

Fears have been expressed in some quarters that to allow the ESB to engage in commercial distribution of coal would have damaging effects on the private sector. I do not accept that such fears are based on reality — in fact, I believe that the operation the ESB have in mind has been somewhat misunderstood, and this is what has given rise to the fears expressed.

As I understand it, the distribution operation will be a wholesale operation, conducted by sea. I see no reason why this venture should not lead to cheaper coal, and more jobs rather than fewer, in all aspects of the handling and sale of the product. However, having said that, I would emphasise that my party, when they come to consider the Committee Stage of the Bill, will be examining carefully the attitude of the Minister to this question of a threat to jobs. The use of the ESB's bulk purchasing power to bring cheaper coal to Ireland is a desirable initiative. There would not be much point, from the perspective of the economy as a whole, if the people at present employed in coal distribution were simply to be replaced by different people doing the same work. The benefits of a new and cheaper source of energy must be carefully channelled to ensure the maximum positive benefit to the economy.

There is no reason why, with co-operation and consultation, this should not happen. Wholesale distribution by sea should lead to extra jobs in every port where coal is landed; the benefits of cheaper coal should lead to extra jobs in retail distribution; and the spin-off effects of cheaper coal should have positive benefits for job creation throughout industry. In order to ensure that all this happens, it will be essential for the ESB to enter into co-operative agreements with the private sector and I, for one, would have no objection to that.

One of the reasons, of course, why this proposal has sparked off a certain amount of fear is because the ESB have not made it sufficiently clear that they are prepared to co-operate with the interests already legitimately involved in this trade. There is a major onus on the ESB, and I believe they must accept it, to ensure that they do not use the very large muscle they are acquiring in this legislation in any unfair way.

As one who has had experience, I can testify that the ESB are not always the easiest body in the world to deal with. In fact, as I understand it, the principal reason it has become necessary to legislate to force the ESB to pay their rates is precisely because they have taken a unique view of their responsibilities in that regard. The present Minister, I know, has had considerable difficulty dealing with the ESB over this issue, to a point where I understand he came close to sacking the board after he had been a relatively short time in office.

Most of us may take the view that the ESB exist to provide an essential economic and social service to the people of this country but it has always seemed to me that the management of the ESB have great difficulty in accepting that view. They seem sometimes to believe that it is they, and they alone, who have the right to determine what level of service should be provided and what should be charged for it. In saying that, I should emphasise that I intend no criticism of the many dedicated people who work in the ESB, who, it seems, do share a commitment to public service which is unparalleled.

Any of the thousands of people who suffered the loss of electricity in the storms and hurricanes of the last year or so, and who were rescued from that situation by the tireless and often courageous work of ESB repair crews, will be prepared to testify to that spirit of public service. But by the same token, the hundreds, if not thousands, of people who have had electricity cut off because of non-payment of bills — especially those who have suffered other losses, including the loss of their jobs, as a result of the recession — will be able to testify that ESB policy in this area takes little account of such circumstances. All of us in this House have had experience of people who have been unfairly treated, and subjected to indignity, if they have fallen into difficulties with their ESB bills.

As Minister for Energy for three years, I succeeded on three separate occasions in persuading the ESB to reduce their prices, for industrial and commercial consumers. These reductions always followed negotiations in which, it has to be said, both sides fought their corner with great tenacity. I have never be able to understand, and I will never be able to understand, why the ESB seem to have so little interest in reducing prices. I would have thought that the ESB would see it as one of their primary objectives to deliver electricity at the cheapest possible price but the reality of my experience is that they do not necessarily see it that way.

I imagine that the Minister did not find the going any easier when he approached the ESB earlier this year for a price reduction. It was, of course, essential for him to secure a 5 per cent reduction in price, as otherwise the iniquitous imposition of VAT on electricity in the budget would have been exposed immediately. As it was, the Government were able to hide this new tax from the public by neutralising the effect of the tax with a price cut. The neutralising effect is temporary, of course — in the medium term, the price of domestic electricity will be driven up by this measure. It is safe to assume that a 5 per cent VAT rate on ESB charges represents the thin edge of the wedge since electricity is now the only commodity that attracts VAT at that rate.

Those who will suffer from this new tax are people on low incomes, already struggling to cope with domestic ESB bills which are the highest in Europe, despite the reduction of the last few years. It deserves to be said, in the context of this debate, that a tax on the most commonly used form of energy is not compatible with the so-called concern of the Government for the poorest in our community. I have no doubt whatever that if the Minister was sitting on an Opposition bench when a tax like this was introduced, he would be leading the charge against it. He would be arguing that while the £10 million in extra revenue will be absorbed by the ESB in 1988, in 1989 and subsequent years it will, in the main, be people on low and middle incomes who will have to pay.

The use of the ESB as a tax-collector is an underhand way of dealing with the problems of this State. The other exercise carried out in the budget, of requiring the ESB to repay £31 million in borrowings this year, is equally underhand. It is fairly typical of the approach of this Government, going back to the days of VAT at the point of entry, that they would engage in trick-o'-the-loop financial gimmicks like this. Instead of taking a measured and controlled approach, which would have yielded a substantial increase in revenue over several years, the insistence on procuring one lump sum in 1988 means that the Minister for Finance will have to find a new source of revenue next year, to replace the £31 million that will not be available then.

To get back to the main purpose of the Bill, the proposal to begin wholesale distribution of coal, there is another issue that raises its head here, and that is the environmental issue. The ESB have never been forthcoming about the environmental hazards that may be associated with Moneypoint, and there will be many who will argue that any policy which leads to the cheaper availability of coal has unacceptable environmental side-effects. Certainly those who suffered through the smog which lay like a blanket over Dublin in the earlier part of this winter will have reason to be concerned about this issue. It does not necessarily have to be that way. One prerequisite is that the ESB should stop treating those who are genuinely concerned about the environmental aspects of their operations as nuisances and should start to be more forthcoming about the real story.

As Minister for Energy, I assured the public that the ESB had put very effective monitoring procedures in place to measure the environmental impact of Moneypoint. I went further and gave a commitment that no information available from that monitoring would be kept hidden, and that all the data would be available to the public, in order to fully assess risk and take remedial measures if necessary.

The monitoring of Moneypoint emissions has been going on for some time now, and I have yet to see any information being made public. I believe most Members of the House would support a call on the Minister to see to it that all available information is made known — I feel reasonably certain that the ESB, left to themselves, will not be too forthcoming. I look forward to the Minister's response to this point.

If coal is going to be more widely used as a result of this legislation, it is essential that we fully understand what the impact of that is on our environment, and that we are prepared to make the investment to ensure that the use of coal on a wider scale is compatible with the overall welfare of our people. It would be a tragedy if we embraced the undoubted economic advantages and ignored the risk of side effects.

In that connection I welcome the recent initiative by a company in the private sector who have launched a range of smoke-reducing back boilers, and I deplore the derisory allocation of resources in the budget for scheme of financial assistance towards the cost of smoke control measures. It will take many millions of pounds to ensure that smoke control is a reality, and an allocation of £250,000 is grossly inadequate. Smoke and smog are killers — they attack people who are vulnerable, and they also add to the range of pollutants that are destroying our capital city.

Before concluding, I would like to mention a number of opportunities that I feel have been missed in drawing up this legislation. Whenever the point has been made to the ESB that there are ways in which they can contribute to economic developments through different pricing structures for disadvantaged regions or industries, the response is always the same — the legislation prohibits them from that sort of positive discrimination. It is the case that the legislation governing the ESB obliges them to construct tariffs on a non-discriminatory basis. I believe that the time has come to look at this again. For instance, it would offer a major impetus to industrial development on the western seaboard if it were possible for the ESB to operate a price structure offering cheaper energy to industries setting up there.

Likewise, I would have wished that the Minister would have taken the opportunity, in moving this legislation, to set out a safety code for the installation of electrical fittings in domestic and industrial dwellings. The fact that we are totally unregulated is out of line with other countries in Europe and I will be calling upon the Minister, possibly by way of amendment in this Bill, to ensure that a proper code of electrical installation is set out for this country to regularise the present chaotic situation which exists in relation to the ESB connecting domestic and industrial buildings without any proof of the qualifications or the ability of the contractors who have installed the electrical fittings. This should be done. Certainly I shall be asking the Minister to examine this in the course of Committee Stage.

Overall I welcome the principles enshrined in the Bill. I look forward to Committee Stage discussion and to receiving assurances from the Minister when replying. If the attitude of the ESB is correct, they can become again a major contributor to our economic development. As a major enterprise, employing thousands of dedicated and highly-skilled people, they have a lot to learn about some of the things that would render them even more successful, for instance, customer relations. However, I have every confidence that the provisions of the Bill can be a big factor in adding to the strength of one of our most successful semi-State industries.

Mr. McCartan

I welcome the opportunity to say a few words on this Bill. Indeed it affords us another opportunity to examine the performance of one of the most important semi-State bodies. This body has contributed remarkably to our economic development, a body which, in its times, has been revolutionary in that contribution.

In recent months we have had occasion to examine the roles of CIE and of B & I. In those debates it was interesting to note that the issues were presented in a rather obscure way by Government in pursuit of a policy to which I do not believe they are fully committed. Equally it was interesting to listen to the reaction of Fine Gael, in a shadow-boxing kind of way, they not having been prepared to address the importance of the companies I have mentioned and their role. Then we had to listen to the incredible charge of the Progressive Democrats in their anxiety to do down cornerstones of our economy, on this occasion, the ESB. I am reminded of some of the remarks and of the opposition to the establishment of the ESB in the early years after the foundation of this State, in particular when they undertook, within a few short years of their inception, what was recognised internationally to be a major feat of engineering, the establishment of the Ardnacrusha station. At the time there was opposition to that proposal. The scheme courageously introduced and guided through this House by the then Minister for Industry and Commerce, Deputy McGilligan, was opposed by the farmers' party of the day, now so ably mimicked by the Progressive Democrats, the Irish centre for Electrical Engineers and a variety of business interests. Mr. Heffernan, the then leader of the farmers' party, said of that scheme that the people of this country were very conservative with regard to new ideas, that they did not take to them as do people in other countries. The same sentiments could be attributed to the unbelievably misnamed Progressive Democrats in their reaction to the provisions of this Bill. The Workers' Party welcome the Bill as constituting a progressive step. When one considers the revoluntionary contribution of the ESB to our economy and life generally, it is all the more surprising that any politician could come into this House and suggest that we should not allow that body develop in a competitive manner. The Progressive Democrats are the apostles of competition. Their notion of free competition is that every opportunity be laid at the feet of private enterprise. But dare one suggest any development of State enterprise, when they are the first to call a halt. Dare anybody suggest that State or semi-State companies be allowed progress at all; we are told that it amounts to unfair competition.

It was suggested here, in support of the ongoing campaign of the Progressive Democrats against the State economy, that the ESB should be privatised, should be scaled down or forced back into their core activity. Here I am referring to a Dáil committee examining this matter of their non-core activities, the secondary activities of the ESB and the instance used to make that case, that of the retailing of electrical appliances. There was no regard whatsoever to the role of the ESB in the area of consultancy and supply of services, first recognised by the World Bank when the body applied for funding for the development of the Turlough Hill scheme. At that stage the World Bank investigated the activities of the ESB, recognised their potential and recommended them for consultancy work in the Philippines. Since then they have been invited worldwide to continue their consultancy work even to the extent of becoming involved in private enterprise in the United States.

There has been also the role of the ESB in management services and development which has been completely ignored by the party who want to suggest that the ESB have a poor track record in ancillary works and endeavours. They have ignored completely the role of the ESB in fisheries and aquaculture development. In the course of his introductory remarks the Minister said that within five years it was hoped to have increased output in that area to 2,000 tonnes, employing 100 people with an annual turnover of £8 million providing employment in ten locations in the west. There was no reference whatever to that as evidence of the potential of this remarkable semi-State body and their achievements.

It is suggested that privatisation should be considered because there are things happening elsewhere in Europe that indicate that competition might be a good thing but which ignore totally the real history of the ESB. For example, when Ardnacrusha was built there was then an investigation of the private service industry to ascertain who, among them, had the capacity or the interest to develop the State network needed to deliver the current generated at Ardnacrusha. Nobody could be found then, forcing acknowledged conservative politicians to realise that the ESB would have to take on the job themselves, which they did very successfully. People tend to forget their achievements in the years of scarcity immediately after the Second World War. They tend to forget how quickly the rural electrification scheme was developed by the ESB, one which cost at the time the remarkable figure of £80 million. Twenty-seven million pounds of that was provided by the State, the ESB raised £53 million to electrify and convert every home in the country into comfortable dwelling places. There is no capacity for competition here with regard to the delivery of electricity current or energy at any level. There has never been another company that has suggested it was interested or in the business of developing or delivering electricity current anywhere.

I challenge the Progressive Democrats or indeed anybody else — in the climate of talks about privatisation in this area — to name one proposal mooted publicly or privately in the chambers they frequent, or to give one instance of somebody coming forward who is prepared, on a competitive basis, to take on the work or scale of commitment of the ESB to date.

The first five sections of the Bill are crucial and eminently reasonable. At least we have the consent of the Progressive Democrats to allow the other ten sections to go totally unremarked. The ESB, without legislation and against difficulties, have proved that in a number of areas they have the expertise, the capacity and the willingness to develop and diversify. These areas are consultancy and management services, fisheries and aquaculture and coal supply. However, they have been hampered by company law. What is proposed here, with around the House agreement — because it was originally proposed by the previous Government and has been thankfully put on the table very quickly by the present Government — is a rectifying of that situation. It is proposed that the ESB be allowed to do what many other progressive and successful semi-State companies are doing, to get into the competitive market and develop and diversify sources of revenue. How can anybody with one jot of commitment to job creation and a vibrant economy suggest that that should not be done? I find the position of the Progressive Democrats utterly unprogressive and ridiculous. We support this initiative and hope, in the areas in which there is ministerial reserve on the provisions of the Bill, that that reserve will not be allowed to hamper development of the initiatives. It must be recognised and acknowledged that there is a climate of privatisation and privateering being generated, primarily by some inward-looking political interests and by those in the private sector out there who are anxious to cream off the easily made profits without the major commitment of State funding and investment. In implementing this legislation and reserving to the Minister the right of control on decisions, I urge the Government not to bow to that kind of obscurantist approach, but to allow the ESB the opportunity to develop in the way that they seek to do.

One of the most important aspects of the Bill and of the intentions of the ESB in the near future is a development into the wholesale coal market. This is important for a number of reasons and is to be welcomed. In the first instance, the proposal is to base development on the Moneypoint jetty. This facility, one of the best in western Europe, is currently underutilised and the ESB must be commended for seeking ways and means of utilising it to its full capacity. The suggestion that it become a major throughport and depot for the distribution of coal obviously should be followed. The added provision under section 3(2) of secondary delivery by sea to other ports within the country is, again, eminently sensible. Clearly, it is designed to avoid undesirable environmental effects of increased road traffic, coal dust and so forth, is the western counties surrounding Moneypoint and, in addition, to protect jobs in the docks of the lesser ports that at present receive coal on a direct basis. It is clear that if Moneypoint is allowed to develop it will have an impact on the trade of some of the lesser ports.

I ask the Minister to respond at the conclusion of this debate to the question as to whether, if we are imposing this requirement of secondary routing to Irish ports, it might also be made a requirement that Irish registered ships only be employed in this tramping coastal work. Perhaps he might consider putting down such an amendment. There is obviously a clear need to protect the Irish shipping industry as much as possible. It has come under incredible economic attack in the recent past. I would hope that some consideration of preference be given in this regard. This further step is logical.

A second very important aspect in the involvement of the ESB in coal wholesaling is that it should lead to a reduction in the price of coal to the consumer. One of the basic principles of private enterprise is competition. The introduction of the ESB into a competitive market is to be welcomed. I look forward to a tackling of the near monopoly enjoyed by CDL, for example, in the Dublin area in the delivery of coal. This company have been able to maintain an unreasonably high price for their coal simply because there is no major competitor to confront them.

The next important aspect of this development is that it will help the Government to take more immediate action in addressing the problem of air pollution. Undoubtedly, there is a major problem in Dublin city areas such as Ballyfermot, Crumlin and Rathmines. On some occasions, smoke levels in Ballyfermot have been five times the EC safety level. Air pollution has been steadily increasing since the mid-seventies. The belief of The Workers' Party is that the ESB, in getting into the whole area of coal importation and distribution on a wholesale basis, should concentrate on smokeless fuels, in particular, anthracite. There is a major initiative available of joint Government-ESB activity there. CDL have indicated that with the help of a major British supplier they will try to tackle the demand that will arise for smokeless fuels like anthracite in the coming years, This is not a benign initiative on their part. They recognise that Government, along with determined local authorities, will tackle the need for the introduction and imposition of smokeless zones in cities and provintial towns. They are clearly girding themselves for the task ahead. However, unlike Deputy Spring, I am not at all enamoured by the CDL response, the device of the double burner that they claim will reduce smoke emissions by 70 to 80 per cent. It will not, it is a con. Whatever the improvements on the emissions from smoke-creating fuel, there will still be smoke emission.

If we are seriously in the business of tackling air pollution in our major urban and provincial areas, the only way is by the introduction of smokeless fuels and not of smoke reducing devices. The use of anthracite and other smokeless fuels is the only way to tackle the problem, if we are still to rely on the open fireplace. This is an area in which the ESB can take the initiative as the whole market is completely underdeveloped. The major coal distributors have exploited the easy option of bituminous smoke emission fuel because it gives a bigger return and because its source is closer to home. In taking the initiative here, it is expected and hoped that the ESB will help to reduce the impact on cost to the consumer.

Dublin Corporation have undertaken a survey of parts of Ballyfermot and intend, by the end of the year, to introduce a smokeless zone order for an area in Ballyfermot. The Government have allocated a grant, the major portion of which will be deployed to that area, because it is the only one which was surveyed. I accept that the money made available will be sufficient to fund the uptake for this year and I am hopeful that with the tripartite intervention of local authorities, the ESB and Government funding, we can accelerate the development of smokeless zones in urban areas and that real effect will be given to the clean air legislation. However, serious consideration must be given to the fact that smokeless fuel costs more than smoke emitting fuel. The ESB should get involved and lead the market so that, in conjunction with the Government, they can ensure that consumers will be able to buy smokeless fuel at a reasonable price, not heavily over the cost of current smoke emitting fuel. Coupled with the grants schemes, I have no doubt that full effect can be given to this legislation.

The ESB have performed remarkably well over the years despite major difficulties often placed in their way by the Government in previous terms of office and by the Coalition Government. In the context of all these difficulties, their expertise has perhaps not been appreciated at home as it has been abroad. The ESB have undertaken consultancy contracts in a wide range of countries, Bahrain, Egypt, India, Iran, Lesotho, Sudan, Saudi Arabia, Nigeria, the Philippines, Malawi, Tanzania, Zambia, Switzerland and, in the heart of private enterprise, the United States of America. Foreign consultancy contracts have made a contribution of more than £5.6 million profit on a turnover to date of £50 million. The curious thing is that the ESB have not been allowed to undertake this kind of consultancy work at home. It has been resisted just as Ardnacrusha was resisted by the precursors of the Progressive Democrats back in 1927. The Association of Consulting Engineers oppose any effort by the ESB to develop into consultancy work at home. In 1977 the then president of the Association said that the growth of inhouse design facilities in State and semi-State organisation must be stopped and allowed to run down to a purely operational level which would allow a limited, if not total, involvement of private firms in those areas which are at present denied them.

The argument has been made again and again that the semi-State sector should not expand and that all areas of ancillary activities should be made available to the private sector so that they can exploit them for their own ends. We reject that argument and I hope the Government will also reject it in promoting the provisions of the Bill. There is no room for the double think or the double edged approach to the whole question of the expansion of State and semi-State bodies. We must give unequivocal support to them and be prepared to say that the Bill is an aggressive expansion of our semi-State and State enterprises.

We hope that the Bill will be just the first step in a programme of diversification and expansion of the role of the ESB. It will enable the ESB to participate in companies and it will provide for consultation with Ministers before approval of such participation. I make an earnest plea to the Minister that, in carrying out those consultations, undue hindrance and obstructions will not be put in the way of directors on the board of the ESB or their workers in seeking to expand and contribute.

There is no doubt that the Minister's office will be inundated by advice from the private sector, their local representatives and political supporters, who will preach about free enterprise, unfair competition and the need to allow the small man to survive. I hope the Minister will remember the commitments he gave, in promoting this Bill, to the ESB. I hope he will also remember the incredible contribution the ESB made to the economic life of the country, without State funding or assistance. They should be allowed to go a little further, a step which will reap remarkable returns and which will profit the economy in due course.

One of the major criticisms made in the debate has been about the unreal cost to the consumer and industry of electricity. The point must be made that in this area the ESB are not a free agent. They are used indirectly by the Government as a taxpayer and a tax collector. It must be remembered that a very heavy import duty is imposed on bituminous fuel oil, the duty on which yielded £10 million approximately in the previous year. In addition, the ESB are used to collect taxes indirectly from the taxpayer. The Government cannot face up to taxing other productive — or not so productive — areas of the economy and are constantly intent on taking it from the PAYE consumer.

The ESB are also obliged to pay excessive, exorbitant prices for turf and for natural gas. They paid £80 million for natural gas over and above what Bord Gáis Éireann paid to Marathon for the very same product. The Government used BGE to extract £80 million from the taxpayer for Government revenue. The ESB are forced to borrow from the European Investment Bank so that the Government can utilise that money at the preferential rate of 3 per cent. All of this amounts to a hidden tax of £100 million, or more, per annum collected or paid by the ESB who, in turn, are obliged to pass much of the burden on to the consumer because the board do not have any other means of dealing with that. Those who plead and complain about the high or unreal price of electricity to the consumer should be told that it will in some way be tackled by the ESB becoming even more competitive, expanding more and becoming more revenue generating through the provisions in the Bill.

I hope the Bill is seen as a way of removing all the obstacles which have prevented the board operating as a competitive commercial company making profit, paying off some of their huge borrowings, lowering the cost of electricity and generating new jobs and new wealth. The board have never been a burden on the Exchequer and there can be no argument against allowing them to compete with private commercial companies at home and abroad. If this is done The Workers' Party hope to see the board in a position to enter into joint ventures, or other operations, with some of the companies in our economy to build and operate, for example, a lead and zinc smelter. That area of diversification has not been suggested in the debate but clearly it is an area in which the board could contribute in a revolutionary and remarkable way, as they have done since their foundation. The debate has given us an opportunity to underline that contribution. I hope Deputies in their contributions will remember that remarkable history of revolution in the social lives and economy of this country. I must say that such a revolution could not, and would not, have been undertaken by private enterprise interests. I welcome the Bill and we will be supporting it.

Mr. D. Fitzpatrick

I welcome the Bill because I regard it as legislation which will enable the potential of the ESB to be harnessed for the purposes of national recovery. For more than 60 years the ESB have had a very clear mandate, to supply electricity to the greatest possible number of people at the lowest possible cost and at the same time utilising our natural resources as fully as possible. This they have done and in the process the board have over the years provided employment not only in their own organisation but in other supply organisations, the major one being Bord na Móna. At a time when many organisations felt that the sacking of staff was the only answer to their problems the ESB, while inaugurating a programme of voluntary redundancies for those over a certain age, explored the potential of consultancy work abroad based on the expertise they had developed. That has been an enormously successful programme and has not only earned substantial sums of money for this country, particularly in the Middle East, but also enhanced the national reputation.

On an entirely different front, that of fisheries, the ESB have pioneered fish farming and salmon and trout rearing here. It was largely because of the resources they have built up that others have been able to enter that field. In the past the ESB have been limited by enabling legislation and restricted in what they can do but the Bill will enable the board to broaden their horizons and not only to develop other desirable activities on their own but to invest in and support other worthwhile projects. The expertise developed by the ESB in all aspects of engineering, civil, electrical, mechanical, electronic and computer, is an enormous national resource and the freedom to utilise this fully for further development is a major step forward not only in the history of the board but of the country.

One aspect of particular importance is that of coal importation. We have effectively had a cartel operating here for many years in the importation of coal. That cartel has tended to favour Eastern bloc suppliers. The ESB, in order to service the Moneypoint generating station, have built at Kilrush what is now the most modern coal handling plant of its kind in Europe. The board have made it clear that the plant is capable of handling huge tonnages of coal carried in large bulk carriers in addition to their own needs. That means that coal can be imported from any source at an extremely economic price. It would be undesirable if the ESB embarked on retailing coal but with this facility available another channel of supply is open to retail coal distributors. That should give them the freedom to break loose from the embrace of Polish big brother.

In the course of his speech the Minister said he was limiting the transfer of coal from Moneypoint to the sea routes, it would be barged around the country. He has banned the transport of coal from Moneypoint by rail and road. Those familiar with the roads to west Clare will know that they are not capable of taking heavy loads of coal. However, I should like to ask the Minister to have another look at the prospect of transporting the coal by rail. Our rail network is under-utilised and CIE have bulk carrying facilities which are not utilised all year round. I am referring to the trains which transport fertilisers. In my view it would be easy to convert them for the purpose of transporting bagged coal. On Committee Stage I hope the Minister will deal with the matter.

I hope the ESB will take a lead in regard to the importation and distribution of smokeless fuel. In Dublin city, with the advent of backboilers in the last ten years, we have a great health problem due to the amount of smog and sulphur dioxide in the air, particularly during the winter months, from November to January. In those months we get coal inversions over the city. One can literally cut the smog with a knife on a winter's night. The number of admissions to respiratory units in Dublin hospitals through their casualty departments rises dramatically in those months. That cannot be good. Smog is causing an enormous drain on the health resources of the city and I hope the Minister will announce a new role for the ESB in the prevention of respiratory diseases by the importation and distribution of smokeless fuels. I commend the Minister, and the Department, on bringing the legislation before the House. In my view it will open up new opportunities for the ESB. That can only be of benefit to the country.

Mr. Enright

That very famous book, Death of an Irish Town, was written by John Healy about the town of Charlestown, County Mayo. In it the author described the boarded up houses, the “for sale” signs growing dusty in the windows and the ravages of emigration on Charlestown and across the countryside. At the time he awoke the conscience of the nation and the effect of his book lasted for many years. A new vitality, energy and vision spread across the face of Ireland. With the passing of time some sections of the population grew soft with affluence and people looked for the soft option, the quick buck and so on. It is my view that over the last number of years we have been silently and slowly drifting backwards into a state of lethargy. It is wrong that that should be allowed to happen. It happened in the forties and fifties and we should not allow it to happen in the eighties and nineties. Simple and major mistakes are often made because insufficient research and study is carried out on particular projects. There is not enough research carried out on the possible results from certain actions. I may be unique in this but I am opposed to this Bill. In my view it is a very serious mistake. It is wrong, and it is wrong for quite a number of reasons which I will outline. It will damage both our economy and our environment.

In the clearest possible voice, I am calling on the Minister to stop at this stage. I urge him in the best interests of the country to withdraw the Bill before it is too late. My reasons are as follows. First, there is the cost factor: can the consumer buy this coal at a cheaper rate from the ESB? I do not accept they can and the argument has not been made that the consumer can buy the coal at a cheaper rate. Secondly, I shall raise an argument in regard to the environment. I listened with interest to the previous Deputy who spoke on this matter. I believe our environment will be seriously damaged and this will lead to health problems for asthma sufferers and those who suffer from chest and bronchial problems. I believe it will aggravate many of those problems. My third reason for opposing this Bill is its effects on employment prospects. This Bill will lead to the ESB importing coal into Ireland in direct competition with Bord na Móna and Bord Gáis Éireann. Bord na Móna employ about 6,000 people across Ireland. Finally, it will affect our ports. Those are my basic reasons for opposing this Bill and with your permission, a Cheann Comhairle, I will now develop those arguments.

I fully support every effort made to provide the consumer with good quality fuel at a reasonable price and of a type that does the least possible damage to our environment. Energy costs in Ireland are high and every positive effort must be made to bring about a reduction. This is a clever Bill, that is how I would describe it, but I think it is too clever by half.

The Bill has wide-ranging ramifications. The two most important sections of the Bill are sections 2 and 3, which seek the most far-reaching powers. Section 2 gives the ESB power to establish, promote or form a company and to acquire, hold or dispose of shares or other interests in a company. It gives the board either total or partial control of a company. Section 3 empowers the board to distribute and sell coal in or outside the State. Where transportation of the coal is required from the board's property at Moneypoint it shall initially be transported therefrom by a ship to a port or harbour in the State. The word "initially" is described in Chambers Twentieth Century Dictionary as follows: “To begin, to start, or to introduce.” Let us take the word “initially” in this Bill, I would like a simple answer to a simple question: why bother putting in the word “initially”? There is no necessity in the Bill to use the word at all, if the ESB and the Government intend to have the trans-shipment carried out always in the future by ship. If they intend to do otherwise, the word “initially” has some meaning. After an initial period of three weeks could the ESB then decide that the remaining transportation could be done by road? Let us be generous. Perhaps the ESB will extend the period to six weeks or two months: after this period can they decide there is no necessity to continue transporting by ship and instead choose to transport goods by road? I want to know why the word “initially” is used? It has all the appearances of an attempt to allow the ESB total discretion in the mode of transport at some point in the future, either shipment by sea or transport by road.

I join with the other speakers who have paid tribute to the ESB. The ESB are an Irish semi-State body set up by the Irish Parliament and, as an Irishman, I am very proud of their record of achievement in the past. The ESB are one of the major employers in my constituency. They are one of the major employers in the midland region. Over the years they have provided a high quality supply of electricity. There is no questioning the quality of electricity and everybody has been happy with it. The supply of electricity has been almost totally uninterrupted. They have guaranteed this supply with very rare exceptions and I think everybody in indebted to them. When problems arise as a result of breakdown, storms and so on, their staff go out in hail, rain and snow, night or day, and make every effort possible to restore power. I pay tribute to the staff, to their loyalty to the board and to their country. At worker and management level the ESB have a very dedicated staff.

I am also proud that the ESB have been able to go overseas on a consultancy and agency basis and carry out work of a very high standard. Their work in Africa and Third World countries is such that they have made major inroads in developing these countries. I am not against the ESB being granted powers to enter into some companies. I see immense benefits in certain areas and I would be in favour of the ESB being allowed to form companies or enter into some companies. However, I object to them being granted the powers to import coal.

The ESB have a total monopoly of the generation and supply of electricity in Ireland and this has led to the cost of electricity in Ireland being among the dearest in Europe. The cost of electricity has certainly led to problems for industry, agriculture and the consumer. The project at Moneypoint has cost the taxpayer £720 million and included in this figure was the sum of £40 million for a jetty. The ESB are not agreeable to this jetty being used by the private sector. It is under-utilised at present and, therefore, the ESB have a problem. Their answer to this problem is to use this facility to flood the country with cheap supplies of coal from America, China and Australia. In my view this will certainly cause problems for employment in other areas. If the country is flooded with these supplies of coal, Bord Gáis Éireann and particularly Bord na Móna will be affected. The management of the ESB are dumping this problem on the desks of Bord na Móna and An Bord Gáis. By dumping this coal they are doing away with many jobs for Irish men and women. It is wrong that this should be permitted by this House.

I want to examine the cost factor. The ESB state that the consumer will be able to buy cheaper coal. Moneypoint is a long distance from the major population centres. The coal brought in by the supertankers will be landed at Moneypoint, unloaded, screened and washed. It will then be reloaded on to smaller ships and brought to other ports. There the coal will have to be unloaded again. The ships carrying the coal from Moneypoint to Dublin will have no backing delivery. By that I mean it is unlikely the ships will have any cargo on their return journey to Moneypoint and this will lead to an increased cost factor.

I have not had an opportunity of seeing the contracts, but I must refer to the ESB's coal purchasing policy to date. In the period 1980 to 1981, the ESB entered into contracts for the purchase of coal and a question mark remains over those contracts even today. These were long-term contracts concluded at a time when coal prices were high. I understand there was a price adjuster clause upwards included, but no price downwards adjuster clause. If this is the case — and I am subject to correction — it was a bad deal. As I said, I have not seen the contracts but I have heard this said. If the Minister can prove there was a price adjuster clause downwards, I withdraw what I said. In the best interests of everybody, this matter should be clarified.

The ESB have been involved in a number of commercial operations such as appliance sales and appliance repairs. Over the 12 years to 1986 appliance sales amounted to £86 million and on that sum, a loss of £5.8 million was sustained. Losses amounted to £900,000 in 1984-85 and £520,000 in 1985-86. In regard to appliance repairs, there were losses of £3 million on sales of £14 million recorded over a 12-year period of trading. Some of these figures may have been subsidised by transfers from the ESB's general electricity account, in other words, there may have been cross-subsidisation.

In regard to installation contracts, a very nominal profit was returned. A report of inquiry into electricity prices in 1984 stated that given the long term trend of unsatisfactory performance, they recommended that the ESB divest themselves of appliance trading, installation trading and appliance repairs business. I disagree with that now because in the last number of years the ESB have made genuine efforts at reorganising their sales and repairs departments. The point I am making is that to date the ESB's record in some of these areas would not inspire people to believe they would be able to buy very cheap coal for the consumer. The danger is if they do not buy cheap coal and they make a loss, the cost will revert to the consumer. That is a very real danger which should not be overlooked.

I would like to deal with damage to the environment. Everybody in this House this evening should seriously assess the damage more coal fires will do to the environment. Air pollution is at its worst when atmospheric inversion occurs. This is caused when a cold layer of air close to the ground is covered by a higher layer of warm air. The smoke which passes into the atmosphere cannot escape between the boundary layer of the two air masses. This very serious pollution problem can be exacerbated by domestic coal fires, industrial fumes and traffic fumes. Anybody will tell you that the major cause of air pollution is coal fires.

Over the years we have had major air pollution problems in Dublin. As far back as January 1982 there was serious air pollution in the city when there was severe smog. Two consultant physicians from St. James's Hospital, Dr. Luke Clancy and Dr. Ian Kelly, carried out a study into pollution in Dublin, which was published in the Irish Medical Journal 1984. They noted a marked increase in the number of patients admitted to St. James's Hospital suffering from respiratory diseases and they said that the mortality rates were twice the average for the month. There is a lesson to be learned from that.

Last year we had the worst pollution ever. We heard hourly bulletins on the radio about smog and air pollution and the harm it could do to people with chest problems, people who suffered from asthma, elderly people with breathing problems and so on. These people were warned to stay indoors. Even so, in many cases the smog seeped through the windows and those people's lives were put at risk.

What are we doing tonight but extending smog and air pollution. It is very close to lunacy to generate more sales of coal when we should be going in the opposite direction and trying to encourage people to use clean fuel, smokeless coal or something like that. We have to move in that direction. On December 9 the smog was such that it reduced visibility to less than 50 yards in Dublin. There were warnings that the death rate would double for the weak and the old. The EC pollution level was exceeded on many occasions in December. That was one example and it was a bad one. The Government have made an effort by enacting the Air Pollution Bill which will improve and rectify the problem. The Government are now trying to introduce regulations that people are not allowed to smoke on buses. Why undo the good that has been achieved over the last few years with this particular Bill which will create greater coal sales? Try to imagine the city of Dublin with increased coal sales of 50 per cent. Try also to imagine Cork and Limerick and the smaller towns of Ireland with increased sales and increased usage of coal. It is unwise and wrong and I am opposed to this Bill for environmental reasons.

I referred earlier to the cost of building Moneypoint, which was £720 million. The then Tánaiste, Deputy Spring, answered some questions in the House some of which I asked. Further questions were asked by Deputy G. Brady of Fianna Fáil, by Deputy Reynolds, now Minister for Industry and Commerce and by Deputy Collins, now Minister for Justice. Everyone was concerned and this is a fact because I have the Official Report here for 4 December 1985. They were concerned about the emissions of acid rain from Moneypoint. Why were they concerned in 1985 and not concerned in 1988? The problem is still the same only it has got worse. We are not happy that the problem is getting worse; we are adding fuel to fire to make it even worse. I do not know where we are going. The then Opposition spokesman on Energy, Deputy Reynolds, was upset that we were not conforming to the recent EC Directive. In the Official Report, 4 December 1985, Vol. 365, col. 1121 the question asked was: "Will the Minister confirm that if the ESB were to carry out the terms of the recent directive of the EC the cost would be in the region of £300 million and £400 million..." The point I am making is that when Moneypoint was being built it was necessary to provide scrubbers or cleansing equipment which would have cost £300 million to £400 million to install. For one reason or another they were not put in.

Let there be no mistake about it, acid rain in Germany, France, Switzerland and Belgium has destroyed forest after forest. I saw at first hand the damage caused by acid rain to all those forests. Some 50 per cent to 60 per cent of these forests are dead. In Ireland the ESB have been trying to rectify the problem but the problem is being compounded by the emissions that are likely to arise from acid rain. We are further compounding a grave problem and I ask why. I am opposed to the Bill. In the name of commonsense, even at this late stage — and I am probably in a minority in what I say — I ask the Minister to put that Bill on the long finger. Because of developments over the years this Bill will prove to be unnecessary and if implemented it will prove to be unwise. In the interests of everybody I ask to have this Bill withdrawn. It is a serious matter and it is a matter about which I have the gravest reservations.

I am opposed to this Bill for a number of reasons. I take an interest in what is happening in energy matters because the livelihoods of so many people in my constituency are affected by energy production. The small villages and towns in Counties Offaly and Laois are affected by the developments in the ESB and in Bord na Móna. Throughout Counties Laois and Offaly there has been a great spirit of co-operation and harmony between the ESB and Bord na Móna. Both of these semi-State bodies have worked in close co-operation and have done enormous good for the midlands.

In the thirties, forties and fifties life in Counties Offaly and Laois was hard for many people who eked out an existence on agriculture while others had jobs cutting turf at different periods but there was a poor standard of living for those people. Nevertheless, they were a hardworking thrifty people and they came through those bad times. In the small villages employment prospects were poor and the emigration trail was described in John Healy's book Death of an Irish Town in which he said “No-one shouted stop”.

It is no accident that Offaly in the sixties, seventies and eighties became a force in the sporting arenas. We won all-Ireland finals in football and hurling, we won them at senior level, junior level and at minor level. Similarly, in regard to boxing and sport of any form we were able to hold our own with the best and beat them. This was due in large measure to the employment opportunities generated by the ESB and Bord na Móna. That is why I see the importation of coal as a direct threat to the people I represent.

There are 6,000 people employed in Bord na Móna, about 4,500 on a permanent basis and about 1,500 on a seasonal basis. If this Bill is passed and we start to import coal from America it will create jobs in the coal mines and in the coal fields in America but we will lose jobs in the bogs of Counties Offaly, Laois, Roscommon and Galway. Why give jobs to America in the coal fields and take them away from the Irish boys who want to work at home? Why drag them out to America where they would be illegal? We are providing jobs for them in America and depriving them of jobs at home. This Bill is wrong and it is a form of madness to create jobs across the world while we are depriving our own people of the same jobs. We must reassess the situation and the sooner the better.

Bord na Móna had two difficult years in 1985 and in 1986 owing to the bad weather. This year Bord na Móna had also had a problem because of the mild winter and it has led to sales difficulties. Bord na Móna are a company of whom the people can be proud. They built briquette factories and brought scientists and industrialists from Northern Europe and Russia to see developments here. The late Todd Andrews, one of the founder members of Bord Na Móna, had the foresight and intelligence to see a future for our bogs. It is wrong now to turn our backs on those bogs and try to take away jobs. Basically that is what this Bill will lead to.

The ESB showed tremendous imagination and vision in building their generating stations across the midlands and at Ardnacrusha. They now have plans to close Portarlington electricity generating station because a supply of turf is not available. I want to put a simple question to the Minister and the advisers in his Department. How is it that we are able to transport coal 4,500 miles across the sea, yet we are not able to transport turf across Offaly to Portarlington? There must be a simple answer. If we are able to transport coal from America, China and Australia, surely we should be able to transport turf or peat over a relatively small distance? Why not at least modify the power station to some extent in order to keep it open?

Successive Governments have spent huge sums of money in developing our ports. Although I represent two inland counties, I have welcomed this development. No particular region should have a dominance. A major element of the business which justified the expansion of these ports was the importation of coal. The bringing in of smaller shipments helped exporters to avail of competitive rates on the return journeys of these ships. Is it seriously believed that another State monopoly by using the unique jetty facility at Moneypoint will serve the country better than the investment which has been made at many other ports around the country? Every effort must be made to ensure that the existing ports retain some business. Ports such as Dundalk, Drogheda and Dublin will be seriously affected by the Moneypoint operation. A wider geographic spread of points of entry would serve the country best.

Several briquette factories in my constituency have stockpiles which are competing with coal for a market share. Recently Bord na Móna carried out research which proved that their fuel is a clean one. The investments they have made in their briquette factories are a national asset and should be regarded as such. They are producing a clean, indigenous fuel for Irish households. The distribution of coal from Moneypoint will seriously undermine this industry and many of the jobs connected with it.

I put it to the House that this type of ad hoc proposal by the ESB highlights the serious lack of planning in relation to energy. As far as I am aware, there is no plan for the provision of our energy needs now or in the future. The country has stumbled from crisis to crisis in regard to energy policy without any coherent plan for securing long-term supplies.

What is the position regarding natural gas? How long is it expected to last? Will it last for ten, 15 or 20 years? Somebody must have precise information and the general public are entitled to know it. I do not know whether it is planned to extend the pipeline to Britain or Northern Ireland. I am not recommending it but I am saying that some consideration must be given to these matters so that plans can be made.

What is the role of our indigenous energy producers such as Bord na Móna, the private turf producers and Bord Gáis? It is high time we had a national energy plan so that those involved in this very important industry would know where their future lies. What plans have the ESB for the development of the Moneypoint facility? We have seen ad hoc planning which is a waste of effort and damaging to the various interests within the energy industry. I call upon the Government to set down a plan stating this country's energy requirements for the next 20 years and the sources which will provide that energy. This I am quite certain is within the competence of the staff and personnel in the Department of Energy and the other people involved in energy production in Ireland.

I am opposed to this Bill but it is very likely to get steamrolled through. I do not believe it should be steamrolled through. It should be delayed until a plan has been produced by the Department of Energy following consultation with the other interests involved. It should at least be delayed until that plan is produced. I will then sit down and examine that plan in as fair and reasonable a light as I possibly can but it is important that this Bill should be delayed. I am totally opposed to it and I think it should be withdrawn. As in John Healy's book Death of an Irish Town I am calling “stop” here tonight.

Mr. McCoy

This Bill undoubtedly contains many good points. Many speakers have already spoken about the achievements and the development of the ESB since they were founded in 1927 and we in the Progressive Democrats concur with everything that was said along those lines. We also welcome the provision enabling the ESB to form companies in the consultancy field, where they have had great success, and in the advisory and training areas, where they have also had great success, and to provide with EC aid new hydroelectric installations, especially in the west. The formation of companies which would assist the ESB in the dissemination of their consultancy or advisory and training services should be explored in every way and should be welcomed by this House.

What we object to is the provision in the Bill to extend to the ESB the power to import and distribute coal from Moneypoint for commercial and domestic use. There are a few points in the Minister's speech which I would like to touch on. The Minister stated that coal can be imported from any part of the world and that the ESB have imported supplies from Colombia, the United States and Australia and that with this ability to import coal from almost anywhere at the best prices in vast cargo lots and at the lowest shipping costs, he is very anxious that the benefits should be passed on to the consumer. That has not happened to date. It is well known that the ESB's contracts are costing almost double in dollar terms for coal, which is low grade, being landed at Moneypoint as against high grade spot market coal at Rotterdam. Therefore, it is untrue for the Minister to say that.

The Minister also stated that the ESB hope to sell industrial coal direct to very large users and to wholesalers who supply smaller industries and that new entrants to the coal trade who, no doubt, would help to create greater competition which in turn would lead to a lowering of prices, must be welcomed. Certainly it is to be welcomed if they can buy coal at prices which would make them more competitive than those traders in the market at present, but the facts show that is not the position.

The Minister further stated that he is conscious of the widespread concern which has been expressed about the involvement of the ESB in coal trading and on the effect it might have on other Irish ports. He went on to say he shares these concerns and that to ensure it will not have a detrimental effect he has included a provision in the Bill prohibiting the distribution of coal and other commodities by road and rail from Moneypoint. As was pointed out by the previous speaker the word "initially" is contained in the Bill but notwithstanding this that kind of undertaking gives no guarantee to any Irish port.

Coal can be landed at any jetty which has no overheads. There are many fishing jetties and piers the length and breadth of the Shannon estuary which have no overheads and there is nothing to stop anybody from landing coal at those jetties and piers. To say that this provision will protect Irish ports does not stand up to scrutiny. Coal can be landed at up to 100 different jetties around the country. This undertaking offers no protection for any port. I accept that the Minister has given that undertaking in good faith but I believe he will have to think again.

We believe that the ESB should be kept out of the domestic coal market and should concentrate on their remit to provide electricity at a competitive international price and stay away from the cross-subsidisation which would enable the company to undercut the well established private coal suppliers in this country. The Electricity (Supply) (Amendment) Bill, 1987, proposes to give the ESB the authority to import and distribute coal through their Moneypoint jetty on the Shannon estuary. The purpose of the Bill should be to allow Moneypoint to compete with Rotterdam and the other large ports as a trans-shipment point for bulk cargo loads of coal and other commodities.

I believe it is very naîve to expect ships to dock at Moneypoint for the trans-shipment of coal and other commodities for delivery all over Europe since this could be done more economically by having the same ship call at ports on mainland Europe. Indeed, coal intake at Moneypoint in the recent past has only been part shipments of bigger consignments of coal which went on to Rotterdam. It is untrue to tell this House that vast loads of coal are being unloaded at Moneypoint. The reality is that the coal being unloaded there is part shipments of larger lots which then go on to Rotterdam and other ports in Europe.

It was argued that the port could be made more viable by allowing it to enter the domestic home coal market and this should be looked at in terms of the size of the coal market. At present coal can be bought on the spot market in Rotterdam at half the price it is costing to deliver it to Moneypoint. It is difficult to see, therefore, how the ESB would be able to make any money out of this operation. On the other hand, the Minister for Energy, Deputy Burke, is reported as saying that the coal will be cheaper for the Irish consumer as a result of this legislation by up to 20 per cent in the long term.

Calls were made in the House this evening for the ESB to get more involved in smokeless fuels but the reality is the coal which the ESB hope to sell on the Irish industrial and domestic market comes to about 10 per cent of the coal landed at Moneypoint after being screened and washed. The strategy of the ESB is to go direct to the industrial customer and to the domestic coal distributor and I am informed that talks are already taking place. The domestic coal market is in the order of one million to 1.3 million tonnes per annum and the industrial coal market is in the order of about 250,000 tonnes.

It is hard to see how that market could be supplied with the washings which amount to 10 per cent only or 200,000 tonnes of the two million tonnes currently being imported at Moneypoint. Even if all the coal were to be imported through Moneypoint it would only account for about 40 more working days at the jetty. Further coal washing and screening facilities would have to be installed together with trans-shipment floating docks.

The idea seems to be that the coal for which the ESB have long-term contracts, from Colombia and the USA, would be screened and washed and the larger lumps would then be sold commercially in Ireland. The existing coal importers in Foynes and other ports throughout the country can import much higher quality coal far more suitable for the domestic market at cheaper rates than American coal. There are many technical aspects relating to the coal at present used in Moneypoint which makes it unsuitable to other domestic and industrial applications. The other unspecified commodities which the Minister may direct from time to time are obviously bulk commodities such as feed and fertiliser. This type of activity, underwritten by the State, is an obvious threat to the ports around the country who have built up their business over the years by hard work and shrewd investment.

If the State is now to be allowed to use a jetty which is far too big for its own purposes in order to have an unfair advantage in entering the domestic market, surely this is against all the pious attitudes of the Government of the last 12 months, in cutting out the waste and making things pay their way. It seems that the long term contracts which the ESB have for both Colombian and American coal have proved to be very expensive. In looking at the price of this coal, I have seen a specification which has been offered to industrial coal users here. The British thermal unit or the BTU content of this coal is far lower than the BTU content of the domestic coal which is currently being imported. In terms of heat it is a question of paying for what one gets.

The other aspect is that at the moment much of the American coal is in excess of 3 per cent in sulphur which is about four times higher than the domestic coal being offered at the moment on the Irish market. Many people have spoken about the effect of smog and carbon dioxide emissions. If we allow such quality coal to be burned, it will be a poor lookout for people with asthmatic complaints. This type of coal may be fine for industrial application in places such as Moneypoint where there is a stack 200 metres high so that sulphur dioxide can clear the atmosphere and pollution will not be caused in this country. It is sobering to think about pollution that comes here from other countries. It makes one think that we should be far more careful about pollution that we ship to other countries through sulphur dioxide emissions. We should not have dual standards here. If we are asking the nuclear energy people in Britain to put their house in order we must play our part and curb emissions from Moneypoint or anywhere else. We must be seen to play our part. We cannot have one law for ourselves and another for international countries.

This Bill seems to have heralded the re-entry of the State into private industry. The Government are using taxpayers' money to have an unfair advantage. This will also be a very distinct danger to the port of Foynes, first, in terms of unfair advantage and, secondly, in the extension which the ESB may be allowed into other commodities.

We have the most expensive electricity costs in Europe. I congratulate the ESB on making stringent and continuous efforts to reduce costs but it is sufficient for them to employ all their energies in the generation of electricity and in getting costs to the same levels as European costs. If we cannot generate electricity at anything like European costs, how can we tranship coal from Moneypoint to other destinations in Europe at a profit? The high cost of electricity in the first place indicates the high costs of the raw material. If the cost of the raw material is too high now how can it be lower in the future? People will argue that entry into the coal business is a natural extension for the ESB because of the jetty they have at Moneypoint. The ESB have the two best intakes of fuel oil in Tarbert and in Dublin, so why have they not entered into the fuel oil market? It would be the same logic and it might seem a very good idea. For their own reasons they have chosen not to go into that business.

There have been many rumours in relation to what this Bill might do. There is no doubt that the Bill has many good aspects. These aspects relate mainly to the technology which the ESB have learned because of the generation and distribution of electricity. It is a very poor justification to say that the ESB should get into the coal business as a marginal activity just because they have a jetty at Moneypoint. We are talking about a very small market. At this stage we are trying to bring the forces of the State into contention with a market which is being adequately served.

In relation to coal other speakers have said that a cartel has operated here. If this is so there is no doubt that others can enter into the market without coming through Moneypoint with coal. To suggest that the ESB can import coal more cheaply through Moneypoint and thereby give an equal quality coal in terms of pollutants and British thermal unit content to the consumer is wrong, as this cannot be done. What is being done at the moment may be expensive in terms of a cartel but we should let market forces take their course. If the ESB can distribute the coal more cheaply, after a while every distributor will be buying cheaper and better coal from the ESB. The cost of importing coal and the cost of distributing it are two distinct things and one cannot say that because it can be imported competitively it will be distributed cheaply. When everybody is buying the coal the situation will still be the same for the consumer.

Mr. Kavanagh

I have just a few comments on this Bill. The Bill relates to four basic operations which will be brought into force when it is passed. It will enable the ESB to promote, form, take part in or acquire companies and it will enable them to sell and distribute by sea any product or substance including coal. It will enable the office of chairman of the ESB to be held on a part time basis at the discretion of the Government and will remove any doubts concerning amounts payable by the ESB in lieu of rates. All of these matters are important and I agree with practically all of them but not without some comment or query.

The Minister dealt at some length with the operations of the ESB. Their consultancy activities abroad represent one of the overwhelming successes of that company apart from their traditional role of producing energy for this country. Many of us have had the experience of going abroad as a Minister or public representative and we are aware of the tremendous admiration in which the ESB are held throughout the world where their activities are known, particularly in places like the Middle East where they have the highest reputation. Anything we can do through legislation to improve that activity we should take advantage of.

The Bill provides that the board may promote and take part in the formation or establishment of a company. This provision will give the ESB the additional flexibility they require to pursue these activities abroad and in some instances here at home.

In respect of their ventures other than the production of electricity and energy, fish farming here has been one of their great successes. Because of its close association with water power and hydro stations on the Shannon and elsewhere, fish farming has been a natural part of the board's activities. As agriculture has taken off since our entry into the EC, aquaculture has been promoted by the previous Government and carried on ably by the present Government and I am glad to say the ESB have been one of the companies foremost in that activity. Both the public and private sectors are becoming increasingly active in that area in a number of joint ventures. We see a great increase in exports in this area and obviously foreign currency for us emanate from companies like the ESB, Carrolls and others involved in the salmon farming industry. The Bill provides for greater flexibility in that kind of area because the company will be enabled to take part in joint ventures with other companies and set up their own companies. One can only applaud the Bill for that.

All Members of the House seem to have some difficulty with the main purpose of this Bill which, we all must agree, is to enable the ESB to import coal and to sell and distribute it in the country for other commercial users. The Minister's speech would give the impression that this is a reasonable extension of the ESB's activity; having set up the Moneypoint coal fired station, it would seem that a natural extension of the activities of the ESB would be distribution of coal. A number of questions have been asked which require answers from the Minister in this respect.

As far as I know coal imported for the Moneypoint coal fired station will be an industrial low grade coal and will be burned without washing, screening or very much treatment. A number of suggestions have been made that it, therefore, will cause additional pollution and we must ask the Minister about that. The Bill seeks permission for the ESB to distribute coal to other markets in the State and to come into opposition with other coal importers. If this is a low grade coal, is it the intention that the ESB will import higher grade coal for the domestic market irrespective of the type required for their own operation at Moneypoint? Will a proportion — 10 per cent was mentioned by the previous speaker — of this coal imported for Moneypoint be available for domestic and industrial users? Will this Bill allow importation for domestic use? That is not clear from the Bill. If the coal is of the one grade only, will screening and washing facilities be available at Moneypoint so that coal can be sold on the domestic market?

The Bill provides that this coal will be distributed not by road but by boat to the various ports. Looking at the Bill without reference to the Minister's speech, it would seem that this coal could be removed by boat from the port nearest to Moneypoint, maybe across the estuary, maybe up as far as Limerick, and moved from there by lorry to any part of the country. It seems that such activity could take place if this Bill is passed in the form in which it is set out here.

In the 27 harbour authority ports importation of coal forms a considerable proportion of the business. The Minister wishes to allay fears of harbour boards and harbour commissioners that the passage of this Bill with the requirement that coal from Moneypoint has to be distributed by boat will affect adversely the traditional trade through ports. I represent a county which has two harbour authorities, one in Arklow and one in Wicklow. The tradition has been to import coal through these ports for domestic use in the immediate areas. Is this trade to be jeopardised by the passage of this Bill? Are the dockers in these ports to lose out because of the passing of this Bill? Certain ports can be used as distribution points for this coal. The Bill does not provide that the present 27 ports must be used. It does not say how many or if any have to be used in the trans-shipment of the coal from Moneypoint or the further distribution of the coal for use within the State other than that being used at Moneypoint.

It is important that we get these answers because there is concern around the ports here as to how this Bill will operate in regard to coal importation. It has been the tradition for small ports to import our coal requirements, and this tradition goes back to the foundation of this State and beyond. It now appears that that tradition might be coming to an end with the passage of this Bill. Employment is at risk. The Minister has a responsibility to answer some of those questions that I put to him in this respect.

The Minister promises consumers a 20 per cent reduction in the price of coal in the long term. But it is not quite as clear as that. The Minister said that studies he had carried out into the benefit to the consumer of allowing the ESB into coal distribution revealed that there is potential in the long-term of a 20 per cent cost reduction to the consumer. This does not mean that the price of domestic coal will be reduced by 20 per cent in the long term. It is the use of the coal imported by the ESB and used for purposes other than burning in the domestic fireplace that may bring about a reduction of 20 per cent. This is one of the areas that I hope the Minister will clear up in replying to this debate.

I dealt with what I think is a concern for Irish ports. The Minister does say that he shares that concern, that he has included the prohibition of distribution by road or rail from Moneypoint. That point needs to be cleared up.

Pollution has been mentioned. I hope that the equipment that could have been put in place to reduce sulphur pollution and other pollutions will be put in place in Moneypoint to ensure that our level of pollution will not show a huge increase. We do not have great polluting factories here. The setting up of this one power station will result in our contribution to the level of pollution in the EC being increased by almost 100 per cent or more. That increase is minuscule compared to Britain or other Community countries, but it will demonstrate to other countries in the Community that we in Ireland have not the same concern for our environment if we, by our own Act, show a huge increase in pollution because we do not involve ourselves in the expenditure on equipment to reduce it. I am sure that that equipment would attract some money from the EC to ensure that the pollution could be reduced. The Minister should inform the House if he is endeavouring to ensure that the pollution risk is reduced to a minimum.

I will move on to the part of the Bill dealing with the office of the chairman. It is stated in section 6 that the chief executive or the chairman will have his remuneration and allowances decided by the Minister for Finance. That is a standard requirement in most Bills of this nature. I wonder if the Devlin review body league table will apply to the job. The ESB chief executive occupies the number one position in that league table so far as his remuneration is concerned. Does this section mean that that position is being taken out of that league and considered as an exception to it? There has been some talk about the position of the new chairman of Bord Fáilte being tied down in the past because of the rates of pay. Will there be a general round of increases for public officials who are chief executives? Some say it is overdue, but it will be interesting to see if, as a result of this inclusion in the Bill, there is some new thinking in that area.

The points in regard to the payment by the board to the Minister for the Environment of moneys in lieu of rates and the rating of property of the board in section 8 are interesting. The recent Valuation Bill was computed only a few short weeks ago, has made the ESB liable for rates on its property. That, I am sure, is a cost factor for the ESB. In another part of the Bill the Minister points out that the cost to the consumer of electricity has come down by 5 per cent while at the same time VAT has been applied at the same level which cancels things out. Will this change in the rating of property of the ESB add to the cost of electricity and, if it does, by how much? We all welcomed the reduction in the cost to the consumer of ESB charges in the budget. But then there was an increase in VAT. We all know that the more permanent of these two changes in the cost of electricity is the VAT change. The vagaries of the cost of oil and even the cost of coal will have a far greater effect on the cost to the consumer of electricity than perhaps will the change in VAT. We know that once VAT is in at 5 per cent it can vary upwards; it is unlikely to vary downwards unfortunately.

To go back to rates on ESB property, I would like to know now will this change, whereby the exemption has disappeared from property within each of the counties, mean that ESB property within each county will now pay rates to the local authority in which that property is? Will the local authorities, who are very badly strapped for money at present, find a new commercial income from the ESB, or will the Minister perhaps reduce the rates support grant by the amount which would be paid by the ESB? I hope the Minister will tell us that this removal of the exemption from rates on ESB property means that the hard strapped local authorities will get some benefit from this Bill.

In my county of Wicklow the ESB have erected 168 pylons, much to the annoyance and dissatisfaction of most of the residents. It is also of concern to many of the people who live within close proximity to these high tension pylons and to the wires that will be strung along them. The people are concerned not only about the payment of moneys to the local authority but also about the health and the environmental aspects of the erection of these pylons in a beautiful county, such as Wicklow. It will be interesting to see if, as a result of this Bill, some compensation will be paid to the county for the damage done to the environment there. Are we going to see some return by the ESB to that county over the years? Such return would be some compensation for the rate exemption being removed from property within that county but it would certainly never remove the environmental damage that this line of cables and pylons has imposed on the county.

We are waiting for the Minister for Health and the Minister for Energy to tell us if there is a health problem involved. At the county council meeting yesterday we had a reply from the Minister saying that the wires will not be energised until the health aspects have been totally investigated. In the meantime the Minister might tell us if some compensation will be paid to the county for the erection of these pylons, each of which costs the equivalent of the cost of two bungalows — about £70,000. When one takes into account the wire that stretches between the pylons the cost must be phenomenal. I hope there will be a good return to the local authority.

As I have said, I am concerned about the questions relating to coal and also about the return to the local authorities following the removal of the exemption on rates. I will be looking forward to some answers in those areas. I hope we can be satisfied on the pollution aspects of the operation at Moneypoint and that we can be satisfied that the distribution of this coal throughout the country will not render small ports non-viable — they are almost non-viable at present. I hope some of these points will be cleared up before we decide whether we can support this Bill.

Mr. J. Bruton

It is important to recognise that the consumer is not getting great value when buying coal at present. Coal is imported at a cost of £55 a tonne and the consumer has to pay £117 a tonne for it, that is a mark-up of £62 a tonne. When one compares that with the mark-up on peat briquettes which is £32 a tonne, one sees that there is almost twice as big a mark-up on coal. I do not believe the handling costs are twice as great. Obviously, therefore, there is justification for bringing competition into the coal distribution trade and that is one of the purposes of the Bill.

Unlike the Progressive Democrats, whose spokesman has contributed to this debate and who are opposed to this Bill, I am not opposed to the idea of the ESB becoming involved in an area which has been previously the exclusive preserve of the private sector. I have no reservations about this. It is quite reasonable so long as there are adequate safeguards to ensure that the competition between the public sector company and the private sector company is fair. This Bill does not provide sufficient safeguards in this regard. Our concern is to try to have better safeguards against abuse of the privileged position that the ESB enjoy in general, to their advantage in the coal area where they do not have a monopoly.

The ESB are a huge organisation and are, in so far as their main product — electricity — is concerned in a monopoly position and able to make substantial moneys in that area. What many people are afraid of is that they will use that financial muscle to cross-subsidise the operations of the coal importing business which this Bill is allowing them to establish. That is not acceptable because it is not fair competition. We could ultimately end up with a situation where the ESB could, in the short term, use their financial muscle to eliminate virtually all other coal importers. Then the situation would be even worse than it is now and it is extremely bad at present because, as I indicated earlier, a very large excess profit is being made on coal imports. We could end up worse as a result of this measure unless there are adequate safeguards to ensure that the ESB do not abuse their position.

There are two provisions in this Bill that I find particularly hard to see any justification for. One is section 2 (5) of the Bill which refers to the ESB setting up a company. I have no objection to the ESB setting up a company or to public sector companies becoming involved in new fields of endeavour. That is perfectly reasonable so long as the safeguards are adequate. What I find hard to understand, however, is that, having set up a company, the ESB would be allowed, under this Bill, to lend that company money. The ESB may be many things but they are not a bank. They have not been established as a bank. Furthermore, they can lend that company money, and I quote from the Bill: "on such terms and conditions as it may determine". In other words, the ESB could be lending money to a company, set up in any area of activity, at 2 per cent. Such a company would be in competition with ordinary private sector companies who might have to pay the going rate of a 10 or 15 per cent interest rate. That is not fair competition. I cannot understand how the Government can insert a section that will allow the ESB to act as an exclusive, privilged banker for their own "pet" companies. If the ESB want to go into the banking business and lend money to everyone, and if they are in such a healthy state that they can do so, I have no objection that I have a very strong objection to their becoming exclusive, privileged bankers and setting rates of interest at their choosing — lending money to their own babies that have been established supposedly to compete on fair terms with other people.

Furthermore — and this is even worse — the Bill provides that the ESB can guarantee the payment or repayment of loans. What that means is that it is essentially a State guarantee. All of these companies will be established virtually on the same basis as the State because the ESB cannot be allowed to collapse by the Government who, in turn, guarantee their borrowings. Then one has the position that any company it establishes, which is supposed to be in direct and fair competition with somebody in the private sector will probably — indeed I am sure the Bill would not contain this provision if it were not to be used — be in a position in which its borrowings are guaranteed by the ESB, in other words, essentially guaranteed by taxpayers. Therefore, there will be two companies in competition, one set up by Deputy Cullen and one by me. Deputy Cullen's company happens to have a shareholding in the ESB and my poor company, in the same business, has none. Deputy Cullen will get a loan at 2 per cent from the ESB whereas I will have to go to the bank and borrow money at 10 per cent. Deputy Cullen's company has been told: do not worry about it, you can borrow as much as you like, the ESB guarantee to repay all loans in your new venture, your creditors, anybody you get into trouble with the ESB will look after. The ESB will look after Deputy Cullen's debts as far as his company is concerned. How then would my company have a chance of competing with Deputy Cullen's in those circumstances? Mine would have no chance at all.

I ask the Minister of State present representing the Minister — who, significantly, is not here to listen to this debate and has not been here for the past hour and a half — what is the justification for giving these supposedly free-standing muscular companies a State guarantee against default on their debts, money loaned at any old terms the ESB may determine, in competition with others? That is not fair or justified in any way. Frankly, I cannot see why we should not omit section 2 (5) completely. I do not believe there is any need at all for it.

The National Development Corporation was the subject of much controversy. There were many, including the present Taoiseach, in Opposition who opposed its establishment. Indeed the Taoiseach said that if and when he came into office he so objected to a State enterprise company, which was going to take equity in companies he would abolish it. I might point out that the provisions of the relevant Act contain an explicit prohibition on the National Development Corporation lending money to any of the companies they establish. They are specifically precluded from giving guarantees on the repayment of borrowings to any of the companies they establish. What they are encouraged to do is to put in risk capital. I have no objection whatever to State companies putting risk capital into other State companies, whether it be at the rate of 51 per cent or 49 per cent, as long as it is genuine risk capital which is liable to be lost if a company goes down. I see no problem whatsoever with that.

It is significant that nobody suggested at any stage — and Members will remember that there was more than one stream of political thought represented by the then Government — that the National Development Corporation should have the power to lend money to their subsidiaries or to guarantee the repayment of their subsidiaries' debts. The National Development Corporation were clearly envisaged by all as being a corporation confined solely to equity investment. I cannot understand why the ESB should not be similarly confined. Why should they get into the banking business? Why should they get into the business of guaranteeing the debts of companies? What effect will it have on the management of the ESB's coal subsidiary? What effect will it have on any other subsidiary they might establish because there are virtually no restrictions placed on them under the provisions of this Bill. They could get into the airline business. They could decide to get into all forms of commerce or activities. They are perfectly free to do so under the terms of the Bill. One must ask: what effect will it have on the management ethos of the company if the manager knows that it does not matter what mistakes he makes his debts will be picked up for him by the ESB? That is bound to have a bad effect on the management ethos in that company. I do not understand why the Government decided to provide for this.

I might add that it is extremely important that the Competition Policy Directorate of the EC should take note of the provisions of this Bill. They should take note of the fact that there will be a possible breach of the Treaty of Rome in circumstances in which a new enterprise is being established to enter into competition with an existing one in terms of interest rates where one has the benefit of a preferential system of borrowing of money and a State or ESB guarantee by a State company ultimately guaranteed by the taxpayer. Certainly it is important that the provisions of section 2(5) be drawn to the attention of the Competition Directorate of the EC in order to ascertain from them whether this is fair. I can say here and now that I will draw this provision to the attention of Commissioner Sutherland and the other commissioners who might have some role to play in this matter. I do not believe it is right that this sort of thing should happen. I would hope that the EC — who are very concerned to build a genuinely free internal market here — should not lend themselves to the type of provisions contained in this subsection.

I might refer to a number of other aspects of the operations of the ESB which warrant some explanation and additional study. The ESB Annual Report is a very interesting document. Its authors are to be complimented on the clarity of its presentation. However, it does reveal some rather embarrassing information as far as the ESB are concerned. The ESB operate a system whereby they sell and repair appliances and I have to tell the House they are losing money on this operation at a rate that is of no minor concern. For example, in regard to appliance sales in 1985-86 their losses amounted to almost £500,000; they were £10,000 in the first nine months of 1986. The losses incurred on applicance repairs in 1986 amounted to £525,000, and those figures are cumulative. Therefore in respect of appliance repairs the ESB have lost over £1 million since the beginning of 1985 and over £500,000 on appliance sales.

There are occasional references, even here in the course of the Minister's introductory remarks, to the Jakobsen report on electricity costs and the need to do something about them. It is equally interesting to note that the Jakobsen report recommended that the ESB should stop being involved in appliance sales. Why are they doing it? Why are they continuing to sell and repair appliances given that they are losing money? Why? How long have they been doing so? For years and years they have been in this business and, for years and years, have been losing money. Despite the fact that independent experts were brought in and reported to the ESB and the Government back in 1984 contending that they should stop, the ESB continue to sell and repair appliances and lose money month after month.

What does that do to others who are in the appliance repair and maintenance business? They cannot afford to go on losing money daily like the ESB. They would go out of business if they functioned in the same fashion as the ESB are functioning in this regard. Is this going to happen in respect of the companies who will be created under the Bill? Are we going to have a repeat on a larger scale of this continued loss making activity which is neither in the interests of the public sector nor in the interests of the development of a strong vibrant State sector.

Nobody, not even the most forceful and sincere advocate of the public sector, would ever justify public sector companies continuing to say in a business in which they were losing money year after year. Nobody advocates that, so why do the ESB propose to do it? What does it say about management control in the ESB that this sort of thing can continue? Is the appliance division of the ESB to be the role model which the new companies to be set up under this Bill will follow? Will they be told: "So long as you do not lose any more than the appliance and repair people are losing, you can continue on because we are used to losing money and it is part of our corporate ethos that we should have a few charitable operations on the side who lose money because it gives us the feeling that we are fair people and we are not greedy". I hope this is not the way they will operate. The ESB do not have a magnificent track record in taking tough decisions in the commercial field. Now otherwise could they have continued with this appliance repair business for so long?

There is another interesting set of figures in the annual report which indicate a reluctance on the part of those in the ESB to take necessary decisions. This is in regard to some of the parts of the generation——

An Leas-Cheann Comhairle

I am sorry Deputy Bruton but could you indicate the year of the annual report from which you are quoting?

Mr. J. Bruton

It is for the year ended 31 December 1986. I think it is the most recently published report. Can the Minister tell me what is the price to the consumer per unit of electricity at present?

Minister of State at the Department of Energy (Mr. Smith)

It is 7.2p.

Mr. J. Bruton

We have the interesting situation in which the ESB have a number of stations who are generating electricity at a cost that is three times the cost at which the ESB sell that electricity on to the public. They have been doing this for years. I want to quote from the annual report of the ESB.

Mr. Smith

I do not want to interrupt the Deputy but he should have been here to hear Deputy Enright.

Mr. J. Bruton

I listened to him on the monitor.

Mr. M. Higgins

The private suppliers of turf burning stations will be very grateful to the Deputy. A few of them are in his own party. They will be very interested——

Mr. J. Bruton

In what?

Mr. M. Higgins

——in the Deputy's remarks about non-cost effective electricity generation from turf burning stations.

Mr. J. Bruton

I do not have any concern to protect inefficiency in the private sector or in the public sector.

Deputies

Hear, hear.

Mr. J. Bruton

I see no reason why anyone should espouse public sector loss making because it happens to be in the public sector any more than one should espouse loss making, just because it happens to be in the private sector. I made it quite clear in my opening remarks — which I am glad to say Deputy Higgins was here to listen to — that I am in favour of profit making public sector activities and in favour of the basic principle in this Bill of the ESB setting up subsidiaries to go into business. I am not opposed to that. What I am opposed to is cross-subsidisation and inefficiency. I am sure that should apply in any good private sector company and I am sure there are the same sort of defects in large private sector companies also.

Mr. M. Higgins

The farmers' party in their day said that electricity would never catch on.

An Leas-Cheann Comhairle

Deputy Bruton should be allowed to make his case without presiding over the shadow of any other Deputy or party.

Mr. J. Bruton

At least they had the freedom to form a party in this democracy. There are other parts of the world where farmers were massacred simply because they were farmers.

Mr. M. Higgins

Indeed.

Mr. J. Bruton

That is not a role model I would wish to follow.

An Leas-Cheann Comhairle

Can we return to the ESB?

Mr. J. Bruton

Yes.

Mr. M. Ahern

Before sparks start to fly.

Mr. J. Bruton

The up to date information I have is that the price of electricity is 7.2p per unit. The station at Bellacorick is producing electricity at 7.4p, Allenwood at 13.7p and a network of sod turf stations at 25.5p. The station at Rhode is producing electricity at 8.5p and Arigna at 7.5p. Those are most of the stations which are producing electricity. Most of them are sod peat stations but some are milled peat stations. They are all using up a non-renewable resource to produce electricity at a price that is higher than the price at which that electricity can be sold on to the consumer. If, as undoubtedly there is, employment being given in each of these stations and because there are — to take Deputy Higgins's favourites — people employed in the private sector who are supplying turf to these stations I have to ask what, in real terms, do these jobs cost the rest of the public? Would we be better off giving people the money and saying to them. "We will not use any turf this year but we will give you half of the amount it would have cost us if we had produced electricity with the turf"? It might be a more sensible arrangement to give people the cash and not put them to the bother of engaging in an activity which is intrinsically uneconomic.

One should look at the alternatives which exist. I am aware of other methods of using turf on a commercial basis which do not require the same level of subsidisation and which perhaps would give just as much valuable employment in the areas concerned. Perhaps now that they have the freedom to set up companies and go into areas other than electricity generation, the ESB should say to themselves: "We have problems in these areas but we have some form of social responsibility for the people we have been buying turf from to generate electricity which costs us three or four times as much as what we can get from the public for it so perhaps what we should do, now that we have the freedom to set up enterprises, is to find alternative enterprises for these areas and establish, close to where the existing employment is being given, activities which will be free standing and economically commercial and not uneconomic like the activities that are there at present."

I recognise that the ESB, for good or ill, have been engaged in this activity and cannot simply walk away from Bellacorick, Cahirciveen, Allenwood or any of these other areas. Certainly they should try, to the best of their endeavours, to find other more economic ways of giving employment to the people concerned. I hope that in a non-subsidised way and simply on the basis of ordinary equity investment the ESB will consider, now that they have the power to do so, setting up alternative economic activities in those areas within their broad remit, presumably, though not necessarily, peat-using or peat-related, to give employment to the people concerned.

There is another matter to which I should like to refer. It is the valuation of ESB capital. The ESB are a very rich company until you look at their debts. I suppose that is true of many of us. The ESB have generation equipment which is valued at £812 million; they have transmission equipment valued at £216 million and distribution equipment valued at £420 million. Their total assets at 31 March 1986 come to £1.5 billion. The total net assets had fallen by £200 million by December 1986, which is rather odd. It would be interesting if the figures were given of the relative changes in the valuation. Presumably it is mostly straight line depreciation which is the cause of this reduction in the valuation of the ESB assets.

The sad part is that the total borrowings of the ESB are £1.3 billion. This major utility owe as much as they are worth, which is not a very healthy situation. Most businesses should operate on the basis of having borrowings approximately no more than one-third of what the business is worth. The main reason for their unhealthy situation is pretty obvious. The ESB made a mistake, a very big mistake in over-estimating the necessity for electricity generating capacity and in building Moneypoint station. There is a huge excess of capacity over peak demand. There is not much point in trying to reinvent history or to change what is irredeemably the case.

However, I would like to raise the possibility of the ESB rearranging their assets position. I am not going to suggest any ideas that the ESB could be privatised, but there is the possibility of their selling off certain parts of their assets in order, as any prudent business would do, to bring the level of borrowing into a better relationship with the value of their assets, given the present rate of interest. It would be virtually impossible — and indeed very unwise — of the ESB to contemplate the sale of any of their transmission assets. It is essential that one operation should control the transmission of electricity. There could not be a situation in which the grid was not in sole ownership of one publicly accountable body. There is nobody better suited to this role than a body with a statute and with the responsibility and traditions of the ESB.

I suggest that we should look at the possibility of some of the generation assets being sold to people who might wish to buy them on a contract under which they would sell electricity into the grid to the ESB on agreed terms. This creation of difference of ownership between generation of electricity and transmission is not at all unreasonable. It has been pointed out that, for instance, you have private people producing peat and selling it to ESB generating stations. If the ESB can buy some of their raw materials from the private sector, as they do in the areas mentioned, what is the ideological or practical objection to their selling the generation to the private sector and buying, not just the fuel but also the electricity from the private sector?

I ask the Minister of State if the ESB's generation assets are actually worth £818 million. If they are not, perhaps the accounts should be changed because they give a misleading picture as to how much the ESB might be able to raise if they were to sell some of these assets. I realise that the valuation of the capital assets of the ESB is at cost, so if you had a cost overrun and the ESB built, as they did, a power station at twice what it should cost and later discovered that they did not need that generating station at all, it appears on the ESB books as being worth not even what it should have cost but what it actually cost, even though it is worth nothing to them now because they do not need the electricity that is being generated. The ESB accounts should, in regard to valuation of capital assets, have two sets of figures, one of which would give a historic cost valuation of the capital assets and one a notional market price or a "value to the ESB" valuation of the generation assets. Otherwise, there is no basis on which one could start even to assess in this House whether there might be some sense in the ESB actually reducing their exposure by selling some of their assets, particularly generation assets.

If a generation asset in the hands of the ESB, such as a particular generating station, is not worth ten per cent a year to them and they meanwhile have debts of £1,300 million, surely it would make sense for the ESB to sell those assets and use the money to reduce the debt. Unless the assets are making more than ten per cent, or the going rate of interest, they should not be held in the ownership of the ESB. It would be more sensible for them to be sold. The ESB are obviously going to have the whip hand. There might be people worried in this House at the idea of private interests becoming involved in electricity generation on the basis that electricity is so important that we could not afford to have any company, other than one totally committed to be accountable, involved in generating electricity. That should not be a worry. As I propose it, the ESB should remain the monopoly owner of the transmission system.

Therefore, any private sector officer coming in to buy a generating station from the ESB would have only one customer to whom he could sell his electricity. Presumably, the ESB would not sell all their generating stations, only those which would raise a fair amount of money. The ESB has over capacity anyway so they would hold all the cards. They could tell the private buyer that if he took an asset off their hands for a certain amount of money they would guarantee a market for the electricity and that they would buy so much per annum from him. The ESB would only buy so much and they would not care if the excess power was used to grow lettuce. They could also stipulate that if the contract was broken the ESB would not buy any electricity from them. If the private buyer became "bolshi", so to speak, about some matter and was not producing electricity in the desired way, the ESB would be entitled to break their contract and to buy from someone else.

The debts of the ESB amount to £1.3 billion and really form part of the national debt. If it makes sense to try to reduce the national debt by imposing hardship on people in hospitals and in the educational field, surely it would be sensible to reduce the national debt by rearranging the ownership of some of the generating stations selling to the ESB grid? Of course, that would involve private sector capital on reasonably fair terms and obviously very good guarantees would have to be given on both sides for this to work. At any rate, this should be examined, although it may not be workable. It is not possible to say whether it could work because the figures in the ESB report for the valuation of these potentially saleable assets are completely inflated. They are not valued in relation to the ESB but in terms of historical cost. Will the Minister ask his colleague, Minister Burke, to consider in respect of next year's annual report introducing in the table that deals with the valuation of ESB assets, a separate line which would give an indication of the valuation of these assets as they relate to the ESB?

I was interested to note the following figure in regard to the statement of capital assets of the ESB. The ESB made capital investments in nine months of 1986 of £99 million. I did not hear the speeches of Deputy Pat O'Malley or Deputy Richard Bruton but I am sure they referred to the very high level of overcapacity in the ESB at present. If that is the case, why did they spend £99 million and on what? What sort of investments were these? If there is that degree of overcapacity, they should not have been spending anything, least of all £99 million. Even though there has been overcapacity for the last four or five years, in the past 12 months the ESB spent £171 million. Since the beginning of 1985 the ESB spent somewhere approaching £300 million more on top of all they spent before. What is the justification for this, given that electricity generating capacity is their main business and that they already have too much of it? What did they spend all this cash on? We are entitled to answers.

We should also get further information on the performance of the ESB in so far as their borrowings are concerned. There is interesting information in their annual report: it is done graphically which enables one to see it clearly. It indicates that the ESB are showing an increased loss in regard to currency. They borrowed money in some unsatisfactory currencies and are suffering losses as a result. The pink portion of the page shows their net borrowings and the purple line above that shows their currency losses. The space occupied by the currency losses is getting larger——

An Ceann Comhairle

Perhaps the Deputy will give a reference.

Mr. J. Bruton

It is graph No. 4 on page 41 of the annual report for the year ending December 1986. As I said, it shows very substantial currency losses and it would be interesting if the Minister could give us information on how those losses compare, proportionately, with the currency losses of the Government. Perhaps the Government have suffered just as many currency losses, proportionate to their total borrowings, as the ESB. If that is the case, I will make no criticism of the performance of the ESB. However, if there is evidence that the ESB have suffered proportionately more currency losses than the Government, relative to their borrowings, then there is every reason for the House to be concerned about the management of their over-large borrowing portfolio by the ESB——

Mr. M. Higgins

The House should be concerned about how much they paid to the Irish commercial banks——

Mr. J. Bruton

I would not make that distinction. I never considered the purpose of tax to be punishment and the idea that one should recommend punitive taxation for anyone is contrary to my view of the way the world should operate. Unfortunately, some people believe that taxation is a method of punishing people whom you do not like. I think that system was used in the Roman Empire, with relative lack of success. It should not be used in this jurisdiction.

I should like to pursue a number of other points with the Minister, including the non-implementation of the Jakobsen report. The amortization rules for the ESB were recommended to be changed in that report and it was also recommended that there should be an explicit pricing target set for the ESB by the Government and indeed for the ESB by themselves. It appears that these recommendations have not been implemented by the Government or the ESB. It was also recommended that there should be a number of changes in regard to generating electricity relative to peak demand. A very distinguished international figure, Mr. Jakobsen, was brought in from Denmark to chair an expert body to make a number of recommendations on how electricity costs could be reduced and it is disappointing, to say the least, that the ESB have not acted as they should in this regard. I will come back later in greater detail to this point.

One further point I wish to make is in regard to the operation of the new companies the ESB are to be free to establish. It should be an essential prerequisite to the setting up of these companies that the Restrictive Practices Commission be asked to draw up a code of fair trading rules which would apply to the operation of the ESB in the coal trade. The Minister for Industry and Commerce should take the initiative in the interests of fair commercial operations of asking, in respect of the coal trade, the Restrictive Practices Commission to draw up, as they have power to do in this area, a set of fair trading rules so that everybody will know that there will be no cross-subsidisation.

Debate adjourned.