Eric J. Byrne
Question:10 Mr. E. Byrne asked the Minister for Transport, Energy and Communications if he will make a statement on the recently published annual report of the ESB for 1993.
Ceisteanna—Questions. Oral Answers. - ESB Report.
While there were a number of significant achievements in many areas in 1993, the financial performance of the ESB was disappointing. The ESB recorded a net deficit of £21 million in 1993, the first such deficit in four years.
The deterioration in profits is principally attributable to an increase in operating costs which arises mainly from the effects of devaluation of the punt in early 1993 and the introduction of a number of provisions for known future liabilities, in accordance with standard accounting practices.
Overall, however, the financial position of the company is strong, with net assets increasing by 7 per cent, up from £826 million in 1992 to £884 million, in 1993 and the debt-equity ratio now stands at a very respectable 52 per cent, compared with a debt-equity ratio of 81 per cent in 1983. The ESB has also reduced its currency exchange risk by significantly increasing the Irish pound content of its debt portfolio. There was a steady increase in the number of customers and sales of electricity and demand for electricity increased by 4.4 per cent compared to 1992.
When and by how much does the Minister intend to increase the price of electricity? Does he intend to do to the ESB what he has done to the other State companies under his control? How many ESB workers does he intend to put on the dole?
I am aware of the Deputy's propensity to ensure the ESB gets a price increase regardless of what the consumer thinks.
I am merely trying to get information.
I will give the Deputy information in respect of the present position. A tripartite cost competitiveness review of the ESB involving my Department, management and unions is taking place to ascertain in what way we can ensure competitiveness of the company in terms of international standards given our peripherality and the importance for our economy of keeping down costs. The recommendations of that review should be published in August or later.
We will be considering an increase or a decrease in the price mechanism of the ESB in the context of its size and the necessity to maintain maximum efficiency. We are talking about a captive market involving one major operator. There is a responsibility on Government and the company to ensure that cost increases are not passed on to the customer because the customer does not have an option of getting his or her electricity cheaper anywhere else. In the context of a monopoly supplier, we must ensure that costs are not passed on. Prior to consideration of any such proposal, we would have to ensure that the company is efficient enough to absorb such increased costs. That is the purpose of holding a cost competitiveness review.
The ESB has been seeking an increase for some time but that has not happened. Had a price increase been acceded to on every occasion on which it was sought our economy might not be as competitive as it is. Energy costs have been a major factor in stimulating competitiveness in our economy. One must not pass on costs to the consumer before being satisfied that a full review of efficiency has taken place. It is in the interests of the consumer and the economy in general that costs are not passed on in a captive market position.
May I take it from the Minister's reply that he is telling the ESB consumers — who will be relieved — that there will not be an increase in the price of electricity? In regard to electricity supply, is it true that it is the Minister's intention to allow private companies to compete with the ESB for the supply of electricity and that in so doing it is his intention to allow those companies to purchase electricity at cost from the ESB, to distribute it through the ESB network and, effectively, to act as an electricity brokerage system competing directly with the ESB without carrying its overheads?
The Deputy may not take it that there will be an increase or decrease in the price of electricity until the cost competitiveness review is completed and we are in a position to make rational decisions. A reorganisation of the ESB is taking place based on the McKinsey recommendations which I approved this time last year. I intend to introduce an electricity Bill early next year when the necessary legislative provisions are in place. It is envisaged that there will be transparency in the generation, distribution and supply of electricity of the ESB. Individual cost centres will be set up to monitor efficiency and assist the ESB, as a corporate body, to deliver the best possible service to the consumer. A peat fired electricity generating station is proposed and I have to consult with Government in that regard when tenders for the building of that station will be considered.
Is the Minister aware of the comments of the chief executive at the publication of the annual report of the ESB that it would be seeking a price increase? As was the case yesterday with the TEAM Aer Lingus workforce, the Minister is capable of being very macho when he wishes. Will he, in his inimitable macho style, instruct the ESB that no price increase will be sanctioned in view of the negative effect it would have on employment and competitiveness and the hardship it would impose on householders who cannot afford an increase in the price of electricity this winter?
I note the Deputy's populist appeal. It is not a question of being macho, but of stating the facts.
The Minister was jumping for them today.
I know who is jumping and it is not me. I am aware of the statement of the chief executive. Not only will the ESB be applying for an increase, it lodged an application with my Department some time ago. As Minister I am responsible, on behalf of the shareholder, to ensure that price increases are not always passed on to the captive customer. A cost competitiveness review and a capital expenditure review are being undertaken in an effort to ascertain in what way we can maximise the use of the existing plant which would result in deferred capital expenditure and reduce costs in the future. In fairness to the ESB, it must also assess its investment plans and projections for the future and be able to finance them. We have to make decisions on the basis of what is necessary and prudent and in the best interests of everybody concerned. As soon as those reviews are completed we can have a rational discussion at Question Time and I will not pre-empt their outcome.
Is the Minister aware of the Government's commitment to low inflation? Today I heard Mr. Conlon say he was seeking an increase in bus and rail fares and now there is a request for an increase in ESB bills. Can the Minister not get a grip on the semi-State bodies, tell them that Government policy is one of low inflation and that increases will not be given? Will he assure the House that he will protect the interests of consumers and thoroughly resist any proposed increases?
I note the Deputy's attempt to be macho. It was not convincing, but he is doing a good job. The question of semi-State bodies is a separate matter. However, applications for price increases will be made and should be properly considered. As said by Mr. Conlon and others, the semi-State bodies have to pay the Programme for Competitiveness and Work rates, incur costs, maximise efficiency, look to their revenue capacity and how it can make a bigger contribution given the public service obligations imposed upon them. Compared with the rather sheltered view the Deputy has of the semi-State sector — I know he is not a great friend of that sector — I would have a far more balanced approach and the consumer can be sure that I will uphold their interests in dealing with proposals that have come before me, all of which will be justified, if necessary, in due course.