Dáil Éireann debate -
Tuesday, 15 Jun 2004

Vol. 587 No. 2

Electricity (Supply) (Amendment) Bill 2004 [Seanad]: Second Stage.

Minister for Communications, Marine and Natural Resources (Mr. D. Ahern)

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

The purpose of this Bill is to raise the ESB's statutory borrowing limit with the aim of facilitating the ESB's current major infrastructure investment programme. The ESB's existing borrowing limit stands at IR£1.6 billion. This is equivalent to €2.03 billion and has remained unchanged since 1982. The Bill proposes increasing this limit to €6 billion to take account of the reality of today's economy.

Management of the finances of the ESB is a matter for the board and management of the company. Towards the end of 2003, it became apparent that the existing borrowing limit was beginning to act as a severe constraint on the company. The company recognised that if it was to accomplish its significant capital programme, it would need to rely more extensively on its borrowing capacity and that it could not continue business as usual within the confines of the existing limit.

The ESB's borrowing level is at €1.9 billion, which is very close to the existing limit. While the company is employing tight management of its cash outflows, the remaining cash balance is expected to be exhausted within a matter of weeks. This is, of course, based on the assumption that there are no unexpected demands for cash within that period. The urgent passing of this legislation is therefore essential for the company to continue to operate effectively.

Before going into the detail of the company's investment programme or of the Bill's provisions, I will refer to the ESB's financial results for 2003, which were published since this Bill passed all stages in the Seanad. As Deputies will be aware, the results revealed a healthy financial position in the company, with turnover up by 9% on the previous year. Profit after tax was also up on the previous year at €249 million with a resulting declared dividend of €67 million. It would be easy to make the assumption that these figures represent excessive profits, but this would be to ignore the complete picture.

The level of profits must be viewed in the context of the size of the company, which has fixed assets of nearly €5 billion. As mentioned earlier, the company's level of debt currently stands at €1.9 billion and this debt, which is set to increase over the coming years, needs to be serviced. The level of profits also needs to be viewed in the context of the company's capital expenditure programme.

To put this expenditure programme in perspective, in 1982 when the borrowing limit was last set, the annual capital expenditure for the ESB was approximately £200 million, which is approximately €254 million. This year, the approved annual capital budget is approximately €1.4 billion, nearly six times what it was in 1982. This is an all-time high for the company and reflects the enormous range of infrastructural development being undertaken at this time. It should be noted, however, that the ESB sees this trend reaching its peak this year and then taking a downward turn over the next five years. By 2008, the company expects its capital spend to be approximately €650 million, about half the current level. This will bring the company back in line with its more normal spending patterns.

As regards the proposals before the House today, I would like to put some perspective on the existing and proposed limit figures. The sum of €2.03 billion in 1982 terms is now approximately equivalent to €4.31 billion. The ESB has advised that its borrowings will increase to nearly €4 billion by 2008. Facilities of €1 billion are required for liquidity purposes. It is intended that these facilities will not be drawn down unless absolutely necessary. It is also proposed to factor in an additional €1 billion, thus bringing the limit to €6 billion in total.

Given the ever present pressures on Oireachtas time and on Government legislative programmes, the proposed limit is reasonable and prudent. It should be remembered that the current statutory limit had sufficient headroom built into it to cover the company for the past 22 years. It is envisaged that the actual requirements and the projected headroom built into the proposed new limit should meet the company's needs for the foreseeable future.

The ESB's debt strategy is designed to: ensure there is sufficient liquidity in the company; ensure flexible terms and conditions consistent with the achievement of the corporate strategy of the company; minimise the cost of debt while optimising the debt mix; develop strong relationships with a key group of banks; and ensure a diversity of funding sources. The ESB has many sources of financing including the European Investment Bank, syndicated facilities and bilaterals, leases, the private placement market and non-recourse financing. This range of different sources provides the company with the ability to avail of the best terms and keenest rates on offer. Keen funding rates underpin a more cost-effective capital expenditure programme.

The private placement arranged by the company in the United States last December has given the ESB a significant financial boost. The deal, which provided the company with $1 billion in finance at keen rates, is intended to fund major improvements in the power infrastructure in this country. The private placement market was an attractive option for the ESB because of the range of maturities and the competitive interest rates available. Two major banks, namely, ABN AMRO and Barclays Capital, jointly arranged the financial deal with principal participants being insurance companies and some pension funds. The very positive response of the private placement market reflects the ESB's high international standing and can also be seen as a vote of confidence in the Irish economy.

The ESB also entered into a separate €500 million revolving credit facility at the end of 2003. The facility, which was co-ordinated by the Royal Bank of Scotland, will be drawn on as and when necessary to ensure liquidity is constantly available and will therefore assist the ESB's overall funding programme. As I mentioned earlier, the main purpose of the increased borrowing limit is to fund the ESB's current major infrastructure investment programme. The proposed level of capital expenditure between 2004 and the end of 2008 is expected to be nearly €5 billion. This is designed to meet the strong increase in demand for electricity in the Irish market and will support development of the national economy.

In 2003, the ESB invested more than €650 million in the network infrastructure in Ireland. The replacement and upgrading of almost 17,000 km of distribution network was completed and a record 77,000 new customers were connected to the system. For 2004, the company has a target of more than 20,000 km of network renewal scheduled for completion. The most recent forecast from the company for new connections in 2004 is that over 80,000 new customers will be connected to the system.

The renewal and investment in the ESB's generation portfolio both here and abroad is continuing in line with the company's corporate strategy. During 2003, agreement was reached on the closure of the old peat-fired generating stations at Rhode, Shannonbridge, Lanesboro, Caherciveen and Bellacorick. Their decommissioning will take place as two new state-of-the-art peat stations at Lanesboro and Shannonbridge come into production later this year and early next year, respectively.

The ESB's international investment programme promotes the good reputation of the company among global energy utilities. Two major international power generation projects are expected to come to fruition shortly. These are the new 400 MW plant which will be commissioned in early 2005 in Coolkeeragh, County Derry, and a new 750 MW plant in Amorebieta, near Bilbao in northern Spain, which is due to be commissioned later that year.

A decision on the future of the coal-fired station at Moneypoint will have to be made over the coming weeks. The ESB is considering what commercial decisions it should take as an investment of around €360 million would be required for emissions cleaning technology to ensure compliance with environmental obligations and maintaining the plant in operation for the long term. If Moneypoint is not to be upgraded to comply with the new environmental requirements, it must close by around 2011 and an alternative electricity generating plant, probably gas-fired, would have to be in place by that time. It has long been recognised by both the company and the Government that if the company is to justify major new investment in Moneypoint it must be in the context of benchmarked best practice in all respects. In this regard, I understand that agreement on a best practice agreement for the plant has now been reached locally between management and workers. I commend all the parties involved for their efforts in ensuring a swift and positive outcome on this issue, which is a prerequisite to securing the future of the plant.

As I explained during the debate on this Bill in the Seanad, it was originally the intention to include the borrowing provision contained in this Bill in another new Bill called the energy (miscellaneous provisions) Bill 2004. However, the Attorney General subsequently advised me that a Bill dealing solely with the ESB statutory borrowing issue would be more appropriate in view of the time constraint on getting this new legislative provision enacted. Hence, the legislation before the House today. The energy (miscellaneous provisions) Bill 2004 will now be published later this year.

The Bill before the House is a short one with only two sections. Section 1 is the main provision and gives effect to the change of limit to €6 billion by amending section 4(4) of the Electricity (Supply) (Amendment) Act 1954. This section of the 1954 Act was originally amended when the borrowing limit was raised to its current level of IR£1.6 billion by the Electricity (Supply) (Amendment) Act 1982. The new subsection (4) repeats exactly the wording of the existing subsection (4), except for the change from the amount in pounds to the new higher amount in euro. Given the nature of the amendment and the size of the provision, the Office of the Parliamentary Counsel felt it more appropriate to re-state the subsection in its entirety with the new higher amount included as appropriate. I agree with this approach as it facilitates a clearer understanding of what is being proposed by all who will read this Bill. Transparency and clarity of understanding are key tenets of the Government's White Paper entitled Regulating Better and the approach being taken in this Bill is in line with those tenets.

Section 2 provides for the Short Title, collective citation and construction of the Bill and is a standard drafting provision.

The ESB is one of our major State companies in terms of its sheer size and the manner in which it impacts on the day-to-day lives of every citizen and on the whole economy. Throughout its existence, the company has delivered its essential services to the country to the highest standards of public service. The company is now adapting itself to meet new challenges presented by a changing business environment brought on by market liberalisation and the demands of competitiveness and environmental change. I am confident the ESB will continue to serve the Irish people with the same level of commitment and professionalism it has historically displayed in providing the country with a high-quality electricity supply and infrastructure.

I hope the foregoing provides Deputies with a clear understanding as to the background and need for this Bill, the early enactment of which is now a matter of urgency for the ESB. I commend this Bill to the House.

Mr. Coveney

I thank the Minister for his comprehensive explanation as to why the Bill is being brought forward. I am glad to have an opportunity to speak on it. I have not been in the House for a few weeks, therefore I am glad to be back in business today.

Mr. D. Ahern

I should have congratulated the Deputy on his victory.

Mr. Coveney

The Minister is fine. I was not trying to invite such a comment.

Mr. Broughan

I second the Minister's congratulations to Deputy Coveney.

Mr. Eamon Ryan

I too congratulate Deputy Coveney.

Mr. Coveney

Will the Minister be glad to get rid of me?

Mr. D. Ahern

Not at all.

Mr. Coveney

The purpose of this Bill is clearly to raise the ESB's statutory borrowing limit of £1.6 billion, which is approximately €2 billion, and has remained unchanged for 22 years. The thinking behind this Bill is to facilitate an upward revision of that limit to accommodate the increased borrowing requirement of the ESB at this time in order to fund an extensive capital expenditure programme. The new figure proposed in the Bill is €6 billion. As has been noted, there are no Exchequer implications for increasing the limit.

On the face of it, this seems like a sensible approach but it is an opportunity to discuss in some detail the energy market in general and I have some concerns in regard to significantly increasing the borrowing limit available to the ESB. I will structure my comments around those the Minister made a number of months ago at a committee meeting. He stated that similar to the situation in most other countries, energy policy in Ireland is governed by three core policy objectives. They are ensuring the development of an efficient and properly regulated energy market to support Ireland's economic competitiveness and which provides customers with a choice of energy sources and supports economic growth, ensuring security of energy supply and ensuring that energy supply and use are environmentally sustainable.

I shall comment on how far down we are in regard to achieving any of those objectives and the present state of play? On the aim of an efficient and properly regulated market, we have had liberalisation of the energy market during the past five years. What has it produced for us? The promise was that it would promote competition, reduce prices, increase choice for the consumer and business and, most importantly, increase efficiency of energy generation and distribution in Ireland. Unfortunately, the result has been few new entrants into the market and those who have come in have had to be invited, little choice for the consumer and business, although there is some, a significant increase in the cost of energy and inefficiency problems within ESB plants in the generation of energy. Perhaps we need to reassess what the Government can do to take a more proactive approach towards promoting competition within the energy sector. Competition has not yet worked because the bottom line is that the customer has not yet got the rewards.

On the question of supporting economic growth, another of the Minister's first core policy objectives, perhaps the most significant concern of IBEC, ISME and others, certainly as outlined to me, is the increase in the cost of energy. The reality is that we must take a more aggressive approach towards facilitating competition which, ultimately, will be the way to reduce costs. Some outside factors affect the cost of energy, such as the cost of oil, but there are others ways to ensure efficiency and a reduction in costs to the consumer. Every time the ESB applies to the regulator for a price increase we are told it is the last big increase customers will see, but six or eight months later another big increase is sought. When will this stop? Small and large businesses and households cannot continue to have increased energy costs as witnessed during the past 18 months to two years.

There is still huge market dominance within the energy sector from the ESB and that is understandable. The transition towards a liberalised market will take some time. People may ask the valid question whether by facilitating a significant increase in the borrowing capacity of the ESB we are just feeding the potential for an increase in the dominance of the ESB within the marketplace? Now it can increase its capital investment significantly because it can borrow much more money in Ireland and abroad. Will the ESB become a more powerful and more dominant player within the Irish energy market? That is not a reason to support the Bill, but I support it as does the Fine Gael Party. If the borrowing capacity of the ESB is being increased significantly, are other measures being taken to ensure the problem of market dominance is addressed in the ESB within the energy market? Perhaps the Minister will comment on that issue.

Another area about which I am concerned relates to efficiency, the final area of the first core policy objectives of the Minister. I raised this matter previously on Question Time. The efficiency of many of the older ESB plants is a problem. Perhaps this makes the argument for the need for the ESB to be allowed borrow more money to invest in its plant. Certainly, during the past three to five years the efficiency of ESB plants, using the standard measures, whether to look at the down time of plant or whatever, in regard to energy generation has been a problem and the graph is going in the wrong direction. The Minister, as the largest shareholder in this State company, needs to apply pressure to ensure that figure is watched carefully. We must ensure the ESB generates electricity in as efficient a manner as possible, even if it has dominance in the area of generation.

Turning to the second core objective, ensuring security of supply, I welcome the Minister's announcement some months ago concerning the promotion of the idea of a new east-west interconnector between Wicklow and Wales. However, I have a concern. There are two 500 watt interconnectors which have the potential to provide up to 1,000 MW of electricity coming into Ireland, should it be needed for security reasons. The project makes much sense for other reasons but primarily for security reasons. I have a concern about a private investor and operator owning and running that infrastructure. When discussing the possibility of the ESB being privatised, the Minister stated clearly that he was opposed to the privatisation of the transmission and distribution systems. He said he believed that infrastructure, such as wires and pipes, are critical national assets and should remain in State ownership. What he is saying, and I agree with him, is that we should never sell the national electricity grid.

Surely an interconnector is only an extension of the national grid linking Ireland's grid to the British grid. That is a slight over-simplification of what the interconnector is but, in essence, that is what it is. Does it not make sense for that to be a piece of State infrastructure in the electricity market rather than allowing a private operator to own, run and control that interconnector into the future? I continue to make the case that State investment in and State management of that interconnector would be a good investment and would be a good value-for-money spend.

Continuing on the theme of security of supply, I wish to deal with the need for a proper fuel mix in the production of energy in Ireland. The Minister mentioned coal and the Moneypoint plant. My views have not changed on this. We need to keep coal in the energy mix in Ireland even though it is a dirty fuel. If Moneypoint was changed over to a gas-powered station it would not make sense in terms of security of supply. We could be overly vulnerable to the international price of gas, which may be a real problem when gas supplies run out in Europe and we may be reliant on Russia for the supply of gas. Even though I prefer that coal would not be a fuel source for large energy generation because it is dirty, it is a necessary part of the mix for the medium-term at least. As the Minister said, we need to make the necessary investment to upgrade the facility at Moneypoint to minimise the emissions from that plant and to benchmark that upgrade to ensure that the emissions from coal power generation will be minimised.

Gas is a very efficient and clean source of power and the sooner we bring gas ashore on the west coast, the better. The new peat power stations are a big improvement on the former stations, but I am concerned by the thought process that commissioned the building of two new peat power stations, when in the not too distant future we will seek to replace peat as an energy source, because it is a finite resource and there are much cleaner ways of producing power than burning peat. Obviously a change cannot happen overnight, because a great many jobs are dependent on the peat industry. We need to discuss how peat as an energy source would be replaced over a phased period.

Mr. D. Ahern

: That is Fine Gael policy.

Mr. Coveney

The Minister may check it. I think it is healthy to put my thought out for discussion. We should consider over a phased period replacing peat with biomass, which is far more efficient in terms of CO2 emissions. Wood biomass is neutral in terms of carbon emissions. While it offers huge potential as a crop that can be grown on both set-aside and bogland, I take a cautious approach towards it because of the transition period that is required in phasing it in and the discussions that will be required with Bord na Móna.

The final element of the energy mix is the renewables, that is wind, wave, tidal and a whole set of other clean fuel sources. I believe Ireland is dragging its heels, as the rest of Europe, particularly northern Europe, moves ahead with ambitious targets. We have been warned in the media a number of times that we may have capacity problems in not being able to provide enough power for the economy. The interconnector is a potential answer, but the bottom line is that we need to attract other interested parties, as well as the ESB, to generate electricity in Ireland and to compete with it. Viridian and Eirtricity are such companies but we need more competition.

The final core objective of the Minister is to ensure that energy supply and use are environmentally sustainable. This comes back to the last point, which is the lack of initiative in Ireland on renewable sources of energy. As I have said a dozen times, we have a number of natural competitive advantages, but there still seems to be no ambition in Government in this area. Only the AER schemes have been of any consequence, and up until AER VI, they have been by and large a failure on the promotion of wind energy. Under AER VI, we will probably have a significant build in wind energy projects across the county, which is welcome. We should be much more proactive in bio-fuel technology, replacing diesel with biodiesel for example, again providing a new crop that can be grown on setaside land and replacing petrol with ethanol, providing new and exciting possibility for land use as well as much cleaner fuel.

We are not breaking new ground. The technology already exists. Whether one looks west to the United States or east to Germany or France, the industries already exist. We have only to copy what they are doing, but we do not seem to have the ambition to do that. In last year's budget, there were minor tax breaks for a small number of pilot projects in bio-fuel and biomass, in spite of the fact that wood biomass plantations would grow more efficiently in Ireland than in any other EU country and that we have more consistent and stronger wind speed than any other EU country and very suitable tidal conditions for power generation.

The Bill has provided a useful opportunity to make some general comments on the energy market. What is being proposed, on balance, is worth supporting. The ESB is a good company that has served Ireland well and has provided a consistent supply of energy which is fundamental to the marketplace. The ESB has requested to increase its borrowing capacity and what is being proposed is not unreasonable. I am happy to support it.

Mr. Broughan

On behalf of the Labour Party, I welcome the Bill. The Minister has explained in detail the background to the Bill and the necessity for its speedy passage through the Oireachtas. I know that all Stages were taken in the Seanad during one afternoon. Given the liquidity of the ESB, it is imperative that the Bill is passed as soon as possible so that the ESB can increase its borrowing to €6 billion.

The ESB has made a massive capital investment. A few months ago I, together with my Dublin city north side and west side colleagues, were briefed on the expansion of the network on the north side and west side of Dublin. In my constituency an additional 15,000 to 20,000 homes and several thousand businesses will be built in the next five to ten years, necessitating a massive expansion of the network. We welcomed the briefing on how the additional moneys being generated by the ESB, through its core business activity and its loan facility, is being invested in the Dublin network. The chairman, Tadhg O'Donoghue, pointed out recently that there has been a quantum leap in electricity demand of approximately 41% in the past ten years, the era of the Celtic tiger, and there is a projected consistent rise in electricity demand over the coming years.

The Minister has explained why it was necessary to recast section 4 of the 1954 Act in detail. It is interesting in that context that a few months ago he seemed to react with consternation at a successful public placement by the ESB on the New York market. Several Sunday newspapers, including The Sunday Business Post, reported that he was livid and hopping mad when the ESB secured additional liquidity in the region of €850 million by this placement.

Both the chief executive and the chairman explained in detail at the time the efficient manner in which the ESB, as a national semi-State company, could secure additional resources and pointed out the various parameters of the management of the company's financial resources and its successful construction of the electricity network which has been the backbone of our economy for 80 years. It was necessary to minimise the cost of debt through the company's strong relationship with several banks, especially the European Investment Bank to which the Minister referred, and the company was able to take advantage of several maturities and competitive interest rates on markets such as New York with banks such as ABN AMRO and Barclays Capital. There was a reasonably consistent and prudent approach to the additional financing of the company in that placement last December. If true, the Minister's consternation was misplaced.

There are powerful forces in our society which would like us to travel the Eircom route with the ESB and electricity generation and distribution, which my party believes would be a disastrous mistake to be avoided at all costs. I am therefore glad to hear the Minister reiterate the statements he made on the key assets of the ESB at a recent meeting of the Oireachtas Joint Committee on Communications, Marine and Natural Resources and that he has no intention of privatising them.

I omitted to congratulate my colleague Deputy Coveney on his recent magnificent election to the European Parliament. As a result of his achievement and that of Proinsias De Rossa in my party, and of all our colleagues in the local elections we may have a new Minister for Communications, Marine and Natural Resources in the autumn who might have a different point of view and we ought to reflect on this.

The Labour Party firmly believes the ESB is a key national distribution network and its key assets should remain in public ownership. We should avoid a disastrous outcome such as we saw with regard to broadband and which we have discussed many times with this Minister over the past two years. We must learn from the telecommunications experience. The Minister has clearly outlined the financial background to the Bill and to the extension of the borrowing limits and other credits available to the ESB. I warmly welcome the projected €4 billion of capital expenditure on investment over the coming years, and the €650 million which was spent last year on 7,000 kilometres of distribution network. I add my congratulations to those of the Minister to the ESB and its 8,300 staff on their achievements over the past 80 years.

Like other Deputies I am an avid reader of Electric Mail and follow as closely as possible the key developments which the company has pursued in recent times. It has taken many innovative steps such as the commitment to the all-Ireland market about which the chief executive Pádraig McManus spoke in the context of the deal with Northern Ireland Electricity, the Ballylongford station, and the long-standing achievements of ESBI in the English market since 1992 where it recently purchased a major power station at Southampton with the capacity to generate 800 MW of electricity. Its support for the all-Ireland market and recently for the two islands interconnector indicates that the ESB is prepared to deal with the competitive market which will develop in these islands.

We have often raised issues concerning wind power, especially the disappointing failure to advance its role in our electricity generation mix and some of the problems which have arisen in County Mayo and elsewhere. One of the fundamental problems is that the market in the Republic is very small, approximately the same size as Kent in England. There were problems with the expected expansion of renewable energy and the 2010 target. It is to be welcomed that we can look to a larger energy market for the future. Denmark, which has a splendid track record in the use of wind power and produces the equivalent of 60% of the total Irish electricity generation output, is part of a much wider, larger and greater electricity grid than ours. It is to be hoped that this development and the recent decisions on the grid code will allow wind power to take up the role which it merits in the future development in the market.

On this Bill, I asked the Taoiseach a couple of weeks ago why the House did not have a Green Paper on electricity generation and the energy market two years ago to which all parties could have made an input. There could have been a process by which the Oireachtas Joint Committee on Communications, Marine and Natural Resources would have been involved with the Department in bringing forward some of the most advanced ideas for the development of our electricity market. Instead we are bringing forward this Bill, which I support, to extend the borrowing capacity of the ESB but we are unsure of the future shape and structures of the electricity market. The Minister occasionally comments on how he foresees the market but does not give us any considered views, as he did in his opposition to privatisation of the national grid, perhaps under pressure from the Labour Party and other parties in the House.

A few months ago, Deputy Eamon Ryan and I tried to table parliamentary questions in respect of the grid code for wind but the Ceann Comhairle rejected them on the basis that it was a matter for the Commission for Energy Regulation, CER, and Mr. Tom Reeves, who is responsible for deciding these issues, which are vital for the future of our country and our economy. It is completely inappropriate that Members cannot discuss any aspect of the future evolution of the electricity market.

I deeply regret that the Minister, Deputy Dermot Ahern, has not seen fit to provide a frank exposition of the likely evolution of the market, as he sees it, and how the structure will develop. There are many areas he has not addressed in that regard which, therefore, makes matters problematic in terms of the future development of energy markets here.

There are far more pressing issues relating to electricity generation and supply than those dealt with in the Bill. Some people might inquire whether there should be a statutory limit on borrowing or whether the level of such borrowing should be left to the commercial discretion of the members of the board, particularly in light of the ESB's achievements in our economy in recent years.

There are many fundamental issues which have not been addressed. The cost of electricity in Ireland has risen rapidly in recent years. The trend is much more pronounced here than in other EU member states. As a result, Ireland has moved from being about the EU average in terms of electricity prices to having the second highest priced electricity in the Union. Apparently, Italy is the most expensive country in this regard. There has been a series of price hikes, amounting to 29% in total, in the past couple of years. These hikes were approved by the CER. As regards the price increase which is in the offing, all the Minister, Deputy Dermot Ahern, will state is that the ESB will have to find more efficiencies within its structures to bear the additional cost of oil and deal with some of the other issues that have arisen.

The position for commercial and industrial users is particularly acute. Spokespersons on energy in this House have been made aware of widespread criticism of the increase in prices. Organisations such as the Small Firms Association and ISME have constantly pointed to this as a key reason behind the need for a much more efficient energy market. Electricity is important to Irish industry, particularly in terms of our history as a location for computing and data centres, chip manufacturing, etc. I welcome the Minister's recent statement that national competitiveness will have to be a key element considered by Mr. Tom Reeves. Energy inputs have a key role in that regard.

Householders would have expected that with liberalisation of the market and deregulation in recent years, they would receive far lower rather than far higher electricity bills. There appears to be an incredible inconsistency as regards the development of so-called competition in this country. The problem of high prices has been exacerbated by a recent Government decision. The Minister for Finance, Deputy McCreevy, who, we have heard, is in his last few months as Minister for Finance and who a massive majority of Fianna Fáil voters believe should be moved sideways as soon as possible, saw the ESB as an easy target from which to grab huge dividends of almost €40 million and €70 million last year. This fact provides some of the background to the Bill because it meant that the ESB had to seek higher prices and a higher borrowing limit.

The generation of electricity and the necessity to have the most efficient system relating thereto should be more important than a Progressive Democrats-inclined Minister for Finance who is simply anxious to balance books no matter what happens, even to the poorest households in this country. The latter often try desperately to pay electricity bills with the help of MABS, organisations such as the Society of the St. Vincent de Paul and community welfare officers.

The Minister has a key responsibility, before he leaves the Department, to spell out what has gone wrong with the introduction of a so-called electricity market. He cannot say that the model the Government has adopted has worked. That model has resulted in severe price inflation and problems in respect of the maintenance of the capital equipment of the electricity grid.

These are important issues and we could have expected that they would have been addressed in this debate. As before, however, on the brief occasions during Question Time, etc., when we have had an opportunity to discuss the electricity market and developments in electricity generation, the Minister has refused to provide a broad idea of how he intends matters to develop.

We believe that the role of the ESB in terms of the national grid is critical. Like other Deputies and spokespersons, I spoke to representatives of the company in recent times in terms of its role in maintaining public control of the key national electricity infrastructure. We must ask whether the statutory instrument of 2000 which established the national grid has been adhered to. I do not support the director of the Competition Authority who, like many others, wants to break the ESB up into a series of different companies. My reasons for this were outlined in my earlier comments regarding the telecommunications break-up.

I commend the 8,300 staff of the ESB who have dealt with some of the difficult issues to which I refer with determination and confidence during the past four to five years. They currently own just 5% of the company. To defend the interests of those workers, trade union leaders put forward far-reaching demands in recent times. It is normal and necessary that trade unionists should protect the workers they represent. However, the interests of our nation require that this company should not be privatised and should not take the route followed in respect of Eircom. I commend the staff on their tremendous confidence. The role of this semi-State company in the history of this country cannot be over-emphasised. Throughout the 1920s, 1930s and 1940s, when many parts of Ireland did not have electricity, this valiant and determined company created a basic infrastructure. It has kept pace, in good times, with the economy, though only just barely in recent years. The programme of action for competitiveness and transparency, PACT, agreement is extremely important in that regard. I wish the management and staff of the ESB well in the future as developments occur relating to some of the issues to which I refer.

There were many other matters with which the Minister, who, unfortunately, is not present in the Chamber, might have dealt. I refer to my question about the preferred or successful bidders — Aughinish Alumina and Tynagh Energy — for two recently announced generating stations and the reports received about these companies.

Many people see the recent price rises as the core problem in the energy market. Households have suffered most in that regard, as is evident from successive significant increases in recent ESB bills. Meters were not adjusted to reflect the increases in 20,000 low-income households and, as recently as a few days ago, it appeared these householders would be responsible for the shortfall. The community and public service role of the ESB is significant and must remain so. The closure of 27 ESB shops also impacted on low-income families in terms of securing electrical products at competitive prices and interest-free credit. Unfortunately, the Minister has not addressed these issues.

Security of supply is of the utmost importance. A number of imported stand-by generators had to be used by the ESB in successive winters to keep pace with the needs of our developing economy. Much of the difficulty in this regard has arisen from the convoluted and unsuccessful way in which liberalisation and deregulation has been implemented. The precarious nature of the electricity supply gives rise to concern. I welcome the east-west interconnector and the all-Ireland market which I hope can give us the necessary security in future. We must at all costs avoid the disastrous events in North America which began in Ontario and southern Canada and spread into the north-west United States, and the similar events in Italy and Austria where one system knocked out other systems. That should never be permitted to happen here. That is a key responsibility of the Minister, the ESB, the national grid and the distribution company, and I would have welcomed some comment from him in this regard.

A major contributing factor to the problem is that plant was allowed to decline. The significant investment being undertaken will increase the capacity of generators from 77% up to the required level of 95%. This area needs to be urgently addressed. I welcome the security of supply which the Bill will provide to the ESB.

A lengthy debate has taken place on wind power. Environmental and ecological disasters have occurred at Derrybrien and other locations. There have also been problems regarding the grid code and security of supply from wind. The Minister has considerable responsibility after AER VI to try to ensure we move to a position where instead of being bottom or close to bottom of the league for electricity generation from wind and other renewable energy, Ireland will see an improvement in its position. The Minister has a significant responsibility in this regard.

The Minister has had little to say on other renewable energy such as solar heating, biomass or any other energy sources that might be available to us. I accept that a White Paper was produced a few years ago, but in recent times we have not had any dramatic policy announcements. When one looks back at the Minister's announcements in his first year in office, it is regrettable we have achieved so little in the intervening period.

With those caveats, I welcome the Bill which is necessary to provide for the infrastructural needs of the ESB. I urge the Minister, especially in advance of the major electricity Bill he is always promising us, to share with us his thoughts and those of the Department regarding the future structures of the electricity market. I welcome that, like us, he appears to have learned the lesson of what happened in the telecommunications area and is trying to ensure we do not go down the same disastrous road. Having said that, the Labour Party warmly welcomes the Bill.

Mr. Eamon Ryan

I wish to share time with Deputy Finian McGrath.

Acting Chairman (Dr. Cowley)

Is that agreed? Agreed.

Mr. Eamon Ryan

My colleague, Deputy Broughan, said it was unfortunate the Minister was not present to hear what he had to say. It is not unfortunate; it is typical he is not here to listen to what we have to say. It may be a small matter for discussion whether we should issue €4 billion to a specific company. It may not be of much concern to the Minister to know the opinion of Opposition spokespersons who work on a committee dealing specifically with this issue.

It is another example of the arrogance that characterises the Government. A Minister asked yesterday for an example of the Government's arrogance. This is an example of arrogance towards this House, the Opposition parties and the people. Perhaps I would not feel so strongly about this if it were not typical of the Minister for Communications, Marine and Natural Resources in the past year. There is not a single occasion on which he has attended a Second Stage debate to hear what Opposition spokespersons have to say. In some cases we could have spent a year or two devising policies and opinions. We have something to say, yet the Minister never stays to hear what it is.

Mr. Broughan

He is training to become Minister for Finance.

Mr. F. McGrath

Or watching the European championship.

Mr. Eamon Ryan

I find it remarkable. I do not know what he does. Perhaps he will read this speech at some stage or somebody will raise the matter with him. I am glad at least the Minister of State at the Department, Deputy Browne, is present, as my Labour Party colleague had the Minister of State with responsibility for looking after Donegal who would have had no interest in what we have to say. It is disgraceful and is worth commenting upon. I would be interested in hearing an explanation from the Minister for his non-attendance during the contributions of spokespersons from the Labour Party and the Technical Group when he concludes the Second Stage debate. I am tired of speaking in the Chamber when the preparatory work I have put into my speech and in shadowing the Minister to provide a balance and offer different ideas is disregarded by the Government. I hope that will change sooner rather than later.

I disagree with my Fine Gael and Labour Party colleagues because I do not agree with the Bill. I have serious concerns about what we are doing in passing it and in what we are doing in regard to the development of the ESB. The Bill should be concerned with our plans and strategic vision for the ESB and how we want to see the company develop. I do not know the Minister's plans because he has not set out any, but I would extrapolate that it is his intention to let the company be. He is providing it with an extra €4 billion to invest as it sees fit and allow the generation, transmission and distribution of electricity to continue on the basis of the status quo. The status quo is not where we should be; we should not be happy with it.

In a recent committee meeting the Minister acknowledged that the desired split of the ESB, between the transmission network company, which I believe was meant to be called Eirgrid, and the rest of the company, has not taken place. He said humbly that he could not do anything about it because of some industrial relations difficulties surrounding the issue. I am not sure what those difficulties are. It is remarkable that a Government that can relocate the civil servants of the State throughout the country on the apparent whim of the Minister for Finance cannot divide out two separate and distinct wings of the ESB. This has significant implications for the development of the electricity market in this country.

The situation is an example of the status quo being left in place. I am told that the difficulties concern industrial relations and the pay and conditions that would go with the separation into two companies. It is understandable that employees would have concerns. However, there is a wider issue with regard to working conditions in the company. Workers in the rest of the economy must look at ESB conditions and only wish they could get a job in the company.

The Minister described the recent deal with regard to Moneypoint as a positive development. It is for the workers involved. Basic pay rates at Moneypoint appear to me a multiple of what is typical for other industries, similar craft work or similar industrial enterprises. I do not object to the deal. I understand the workers negotiated for the best position and they are getting that. However, I must ask whether the Government is right in allowing the ESB have this special status, as it appears to me, within the overall industry and overall working and labour conditions in the country.

It seems there is special treatment of ESB workers and of executives within the ESB. I question whether that status quo is equitable. Is it correct for a State company to treat one group of workers so favourably in comparison with so many others who work for the minimum wage or for salaries that do not even add up to the overtime bonus or severance packages granted to certain workers within the ESB? While this question may not go down well in union circles, it is an issue the Minister should address. I urge him to respond and explain the reason for this situation.

The status quo in the country is also seen in the breaking up, deregulation and part liberalisation of the electricity market. As a consequence, we have seen significant price increases amounting to 23% in the past two years. We have gone from a situation where we were below the European average in terms of electricity prices, to being significantly above them, especially in the area of industrial use which has economic consequences. There is no doubt that the liberalisation model that has been adopted has caused that significant price increase. To attract the new capacity we need, the new marginal cost had to be one that would attract a new private investor and it is therefore much higher. The operators in the industry gain in profits from that new higher marginal cost and, not surprisingly, last year the ESB made after-tax profits of €249 million. The dividend to the State was €67 million.

I wonder whether it is the Minister of Finance who is directing this status quo policy. He may see this dividend as a convenient stealth tax. Effectively it is a tax on one section of society which goes into the Government coffers. This is possibly the explanation for the status quo or the “let it be” attitude to the ESB strategy the Government is following.

The Government is also letting matters be with regard to our environmental performance. One of the most remarkable comments I have heard in my two years in this House is the comment from the Minister for Communications, Marine and Natural Resources that we were victims of our own success in the development of renewable energy. We were setting the world alight with 200 MW of wind power. Could that be believed when we only thought we would get 20 MW a year? Every other country in Europe increases its capacity by thousands of megawatts of wind power each year with only half the wind we have. The Minister's comment was an incredible example of his arrogance and inability to listen. His inability to come in to this Chamber and hear what other people say is so complete that he sees our miserable performance in the development of renewable energy as a sign of success. It was a remarkable statement.

I agree with Deputy Coveney with regard to our abject failure in the development of biomass and bio-energy products. This is another example of where the status quo is unacceptable. In a country with a fantastic climate for such products and where farmers are running out of markets where they can get decent prices for their new crops, we should be leading the world. However, yet again, we are last. We have small experimental projects on farms here and there when we should, like other countries, be leading the way.

One final issue in terms of the status quo concerns supply and generation policy and three or four characteristics relating to it. The most remarkable characteristic is the incredibly poor performance of the ESB’s existing plants which operate at something like 76% capacity. This is, by international standards, a mortification. The ESB is excellent at going round the world advising developing and other countries on how to run their generation systems. If the Vietnamese power company, which is receiving advice from the ESB, or any other power company ran at a capacity level of 76%, the ESB engineers, who are bright and excellent, would point out that it was a disgraceful performance. However, we cannot get more than a 76% supply from our plant, which has huge implications for the price we pay for our electricity. The real problem is providing for the peak hours. In circumstances where only 76% of our plant is working at any one time, we are paying very expensively for our peak power supply.

We are also having great difficulty getting a new supply into the country and have only had one major new plant in recent years. When the regulator came before our committee, he said that if we have further difficulties in that regard, he will commission the ESB to build a new plant. In other words, we will be returning to a day when a centralised State control of the operations is in place. Perhaps that is the way to go. However, I would like to know whether that is the policy. It is because the Minister is not present or because he does not discuss the issue or listen to us that we do not know the policy for the running of the ESB.

This Bill legislates to allow the company spend €4 billion of borrowed money. It will be able to borrow the money at a much cheaper rate than its competitors because of the arrangements we set up, which is perhaps fair and right. We should also ask how this money will be spent. I get no sense that the Government will have a real say in the company as to where and how the money is spent or that it will give direction or look for measures of performance on how it is spent.

The company must make a significant investment in the grid and I welcome that. I would like to see that investment structured in a manner where we provide grid capacity to areas from which we will get future supply. In this country, those areas are the west, the north-west and the south-west, which have significant wind resources and an amazing wealth of untapped energy. We should spend our €2 billion investment in the grid building lines to that power source to ensure we can develop it. We can grow wealthy and increase employment from that position. However, we are not doing that but providing where the demand is.

There is no clear direction from this Government as to how we should structure this investment or how we should monitor the management of the expenditure of the money. We have quite happily for the past 20 or 30 years stepped back and allowed the ESB run our electricity generation system. That was a successful policy. The ESB was run by bright and talented people, mainly from Kerry, over those years. We stood back and allowed them run it. As long as they could provide electricity cheaply, that was a successful strategy.

In a European context, however, when markets are being liberalised and we are meant to open our market and have half done so, that is not necessarily the cleverest strategy. It is certainly not a strategy to which we should just hand over €4 billion without setting out a policy commitment as to how we want it spent. It is that lack of policy and that incredible failure by the ESB over the past 20 years to invest in renewable alternatives and to start becoming a world leader in tidal power, biomass, wind and other products that one must criticise. I am reluctant to give the same people another €4 billion given their dismal failure record in investment in areas in which I want them to invest.

I can be critical of the company but I am primarily critical of the Government which did not give direction to the company. It was happy as long as the lights were on and the price was reasonably cheap. It did not have any real thought for the future. That attitude is no longer good enough.

I want to see significant investment in the area of energy saving. Intelligent circuitry could be in every house and small business. This would allow people to switch off their machines, such as their fridges, during the peak hours around 6.30 p.m. when everyone comes home and turns on all their devices. It would allow a household to decide intelligently that the peak hour electricity is very expensive and is when the most clapped-out ESB plant — Tarbert — is turned on to provide for it. This is very expensive electricity because that plant is only running for that particular period. We should invest in the cleverest of electronics which allows householders to avoid that high cost by turning off their machines and using them instead at 2.30 a.m., in the afternoon or in the valley periods. This would be a start to levelling out our demand for electricity and would be the smartest investment at present. However, I do not hear the Minister or anyone else from his Department pushing that as a clever investment strategy. The €4 billion invested in that direction would make a significant difference to the environment, economy and electricity market.

I wish to make three final points with regard to the structure of the system. It seems to me the proposed new market structure, the localised, marginalised pricing system, if that is the correct acronym, will not work and will not be introduced. I have spoken to a number of people in different quarters and it seems the complexity, difficulty and substantial cost involved in the introduction of such a system means it will not happen. I do not get any sense of direction from the Minister as to that fact. He does not wish to comment. He has a fantastic system in his ministry. Not only does he not appear in the House, he has the system of regulators which look after the different departments while he stands back and says it is nothing to do with him. From what people in the industry say, I believe the new proposed system will not work and a different one will be required. I would like to hear a direction from the Minister as to what system he thinks will be viable and how we should proceed in that regard.

This may be controversial and may be where I would disagree with my colleagues, Deputies Broughan and Finian McGrath, I think we must examine the structure of the ESB. I do not think the status quo is the correct way to go. There are three possible choices which we can make. There could be a return to the centralised control system which, in an electricity market the size of Ireland, is regarded by many people as the most intelligent and the one that works best. Over the 20 years when we left it to the clever Kerry people to run our electricity system, they did a good job. I do not think the European Union will agree to that proposal and that will rule it out as an option, even though it might be the most intelligent option. I would like to hear the Minister’s view on whether we should be doing that. In those circumstances it is fair for us to hand out €4 billion because competition would not be affected and other companies would be disadvantaged in the process.

A possible alternative to bring in competition is to split up the ESB generating companies into three or four smaller companies, but not the network, which should never be touched, nor the supply company. I favour a third option which I will develop on Committee Stage with the Minister if he is available. A system of management contracts being issued for the generation stations could be considered. A management contract could be offered for one or other of the stations. The contractor could bid into the market and be allowed to innovate, expand and mainly operate the company as efficiently as possible. Our generation rate could then possibly rise above the present 76%. I will return to tease out this option on Committee Stage which I hope happens and which I hope the Minister attends.

We have a political problem regarding our electricity market and a serious problem for consumers because the price is rocketing. We have a bad problem with emissions because large amounts of CO2 are being produced. The Minister has made a conscious decision. While he has done something on broadband and is flush with success in fisheries, I think he plans to do nothing in the area of energy. He has decided the Taoiseach is sensitive to any unpopular decisions and does not wish the Government to be seen to be doing too much. It is a case of batten down the hatches. It may be a dysfunctional status quo but it is not worth taking the political risk to do anything about it. That is my reading of the Government’s energy policy, even though energy policy is one of the most important areas. The Minister needs to change that. I apologise to my colleague for being late.

Mr. F. McGrath

I thank the House for the opportunity to speak in this debate. Before I deal with the details of the Bill, it is important to recognise the important and valuable work of the ESB. It has a proud record of service and a history built on compassion and service to the people. Long may that continue. It is essential that this national resource is protected, nurtured and developed in a way that suits our citizens and its customers. This national gem must be supported in a practical way and that is the reason I support this legislation.

In the past our people did not have electrical power in their homes and many died in poverty and from the cold. That reality should not be forgotten. The ESB played a significant role in saving lives.

The purpose of this Bill is to raise the ESB's statutory borrowing limit. It will facilitate the major infrastructure investment programme being undertaken by the ESB. This includes significant investment in renewing and upgrading the electricity network. The statutory borrowing limit stands at €2.03 billion and has remained unchanged for the past 22 years. The new Bill proposes raising this limit to €6 billion to take account of the reality of today's economy. I welcome this proposal.

Management of the finances of the ESB is a matter for the board and management of the company. The board has discharged its fiduciary duty prudently down through the years, with some minor exceptions. Towards the end of last year, the ESB became more acutely aware of the constraint which the existing borrowing limit exerted on the company. It became apparent that for the company to accomplish its significant capital expenditure programme, it would need to rely more extensively on its borrowing capacity and that it could not continue business as usual within the confines of the existing limit. The ESB's borrowing level is now very close to the existing limit. The urgent passing of this legislation is therefore absolutely essential for the company to continue to operate effectively. That is the reason I support this Bill.

While dealing with the ESB and the wider issue of public services in general, the lesson from recent elections is that people are demanding quality services and saying "no" to the quick buck brigade who seem to be obsessed with their privatisation agenda. This obsession is reflected in the Government and particularly in the Cabinet. They must be stopped in their tracks. As legislators, we must be the watchdogs for organisations such as the ESB.

Its record speaks for itself. The ESB was founded in 1927 as a statutory corporation in the Twenty-six Counties. It is 95%-owned by the Government with the remaining shares held by the employees' share option trust. The ESB is a vertically integrated utility and includes a number of divisions which are ring-fenced and operate independently in the electricity market. The ESB group employs approximately 8,500 people. It is the leading Irish company in the energy utility sector. I welcome these progressive facts about the ESB. It is a significant resource employing 8,500 people.

The ESB power generation operates 19 major power stations, covering hydro-electric generation and stations powered by coal, oil, gas and peat. A subsidiary company, Hibernian Wind Power, owns and operates wind farms. I wish to put on the record my concern about some of the operations of Hibernian Wind Power which have caused serious damage to the environment, especially in parts of Galway and other parts of the country. We must wake up to the reality that any involvement in these projects must be properly researched and examined. The geology of an area must be studied in a professional manner. That is my one major criticism regarding these issues. We cannot have landslides destroying little villages, towns and communities.

The ESB is a major supplier of power to domestic and business customers. The Commission for Energy Regulation, CER, oversees charges made by the public electricity supplier to customers. ESB Networks is the owner of the high voltage transmission system and the owner and operator of the medium and lower voltage distribution system. It provides services to all 1.7 million electricity customers and all generators and suppliers of electricity in the Twenty-six Counties.

With the opening to competition of the electricity market, it is essential that ESB Networks, which will remain a monopoly business in the new market, provides service on a transparent and equal basis to all electricity customers, irrespective of which electricity supplier they use. This requirement is clearly set out in the legislation establishing new electricity market structures and is incorporated into the licence issued to the ESB by the Commission for Energy Regulation.

It is important in the context of a debate on the ESB and power to put on record our opposition to nuclear power and any attempt by energy companies to introduce nuclear power to this country. When such attempts were made in the past, the people reacted positively by rejecting nuclear power.

As regards market opening, 56% of the electricity market had been opened to competition by February 2004 and the market will be fully open to competition in 2005. The ESB has facilitated this process. It is important to recognise, for example, that the company has made virtual independent power available at discount prices to the independent supply sector.

Ireland has one of the fastest growing electricity markets in the developed world. Record growth of more than 40% was recorded in the past ten years. This is far ahead of growth in the rest of Europe and a massive vote of confidence in the staff of the ESB. It shows the company's great potential for development and wealth creation. It is up to us to ensure we listen to the message of the recent elections and distribute wealth fairly.

The sheer number of staff in the ESB — 8,000 — indicates the potential for development. We have come a long way in creating Ireland's premier electricity utility. I state this confidently but with positive criticism. History shows that in the 19th century, the electrical revolution sweeping the rest of the developed world seemed set to bypass Ireland. Only a few selected locations had this incredible new power source on tap. Thanks to the determination of a handful of far-sighted people, however, electricity was soon to take its first steps towards becoming the indispensable power source it has proved to be.

The pioneers of electricity supply in Ireland are remembered in a stone which commemorates the building of a power station at the Pigeon House for the Dublin Corporation electricity department in 1903. The original building, modernised and re-equipped, still stands. It is a very small but historical part of the electricity generation and supply system of the Electricity Supply Board.

As long ago as 1915, a civil engineer, Theodore Stevens, investigated the possibility of generating electricity from the River Shannon on behalf of the Irish hydro-electric syndicate. This project, like an earlier one in 1901, was not developed and, in 1918, our water powered resources were discussed again without action being taken.

When the State was founded in 1922, it was clear that to progress industrially, it would have to develop and use its natural resources. An Irish engineer, Dr. Thomas A. McLoughlin, submitted proposals for damming the River Shannon and building an electric power station at Ardnacrusha, a few miles from Limerick, which would bring power to cities and towns. The concept was bold and radical and his initiative was rewarded when a German engineering company was authorised by the Government to prepare a detailed scheme to be submitted to a group of international experts. With minor modifications, the Shannon scheme was approved in a report published in the spring of 1925. This is the history and background of the ESB, one of which we should all be proud.

As regards the potential for the ESB in an all-Ireland market, it is essential that we tap further into the new economic situation, especially since the beginning of the peace process. There is significant potential to develop and expand the ESB. Radical and new policies show vision for the future.

To those who constantly attack the State sector and State companies, the ESB is an example of a profitable, vibrant company which pays decent salaries to its employees. We have a group of people who, backed by sponsors, want to take such companies apart to meet their greedy needs. Organisations such as the ESB must be nurtured, defended and protected. I also accept that they must modernise in a positive manner.

I have addressed the issues of efficiency, modernisation and nuclear power. I want to hammer home that nuclear power is not welcome. There are radical, more creative ways to generate energy and provide services.

I welcome the opportunity to put my views on record. As a backbench Independent Deputy, I celebrate the election of two new Independent MEPs, Kathy Sinnott and Deputy Marian Harkin, whom I congratulate. The election of two Independent MEPs and approximately 90 Independent councillors has not received sufficient coverage. Those elected have been emerging in all communities and councils and have now emerged on the European stage. It is important that the views of Independent Deputies are reflected and I am delighted to express my views on energy in this debate. I wish the ESB well and support the Bill.

Mr. Durkan

I compliment the ESB on its work since it was founded three quarters of a century ago. It has met challenges as they arose and done tremendous work to provide electricity. While electricity was expensive at times, it is reasonably competitive at present.

It is no harm to ponder the Ardnacrusha scheme for a moment. At the time, it was deemed to be a white elephant, isolated and surrounded by rabbits. Like Shannon Airport, it would be regarded as a monument to something of a negative nature.

The ESB has stood the test of time as a State and semi-State body, providing an essential service at a competitive price for industry. Deputies on the right and left have a tendency to come down on one side or the other as regards State and semi-State bodies. The former take the approach that the only way forward is privatisation, while the latter regard nationalisation as the only way forward. We should have a mix of both approaches. There is no reason they cannot co-exist for the benefit of the country, the economy and the industries in question.

As we all know, competition is the lifeblood of trade. Sectors with effective competition, whether public or private, are inevitably competitive. They give out competitive vibes and go about their business in a competitive manner. When one looks back, one finds that the transport sector was difficult to deregulate. While some aspects of that deregulation process may not have been helpful, services are now available in areas in which it was previously impossible to get transport.

I agree with much of what has been said about the success to date of the ESB and its concept. The future holds new challenges in that we have a bigger market with deregulation likely throughout Europe. Deregulation may become part and parcel of our economic thinking. Ironically, regulation of the ESB tends to encourage prices upwards, which is most unusual. While I am aware of the reason this is done, it should also be recognised that those in the business of providing alternative energy must bear in mind the need to keep their costs down so that they can compete with the ESB. I have serious doubts about the theory that is becoming dominant whereby to attract more competitors into the market, the cost of electricity to both industrial and domestic consumers should be increased. This concept could become part and parcel of future thinking on energy provision. It is not good and it will not work. It could have the opposite effect in a few years, as it may not be as competitive and sharp edged as it would be if the regulator insisted prices were kept down rather than being allowed to creep upwards.

I appreciate a semi-State body such as the ESB must have adequate resources to finance future projects at home and abroad. It has been innovative at finding ways and means to do so. The schemes referred to by the Minister have been before us for appraisal. Two elements of electricity supply are important. Prices must be kept down in so far as is possible because electricity is a basic energy source required by both industry and domestic consumers. If one lost sight of that, one would lose sight of the market to which the product is supplied. The knock-on effect of increased electricity prices would be colossal and stretches beyond electricity generation. Electricity is a basic ingredient for industry and, if it is competitively priced, industry has an advantage, but if it is not, industry is placed at a disadvantage. That can have further knock-on effects, which would not benefit industry, the competitiveness of the economy and the long-term prospects for the provision of such energy.

Wind energy is referred to regularly as an alternative energy source. While I agree with the concept, I am a little uneasy about it. The masts are not environmentally friendly in terms of their impact on the horizon. I am reminded of Don Quixote, the poor unfortunate guy who got entangled in windmills. There are many around nowadays who are like Don Quixote. I wonder if Cervantes had anticipated the effect of giant windmills on parts of the west, whether he might have elaborated more on them.

We all recognise alternative energy sources must be found and must be as environmentally friendly as possible. Wind energy is more expensive to produce but it is more environmentally friendly, excepting the visual impact of wind farms. I would not like a scenario where every hilltop would be festooned with masts revolving frantically, given the amount of wind and hot air generated in the State. The first wind generating masts were built in Idaho and there was a difficulty with the amount of wind available there. I assure the Minister of State there would be no such difficulty in Ireland. If wind was not readily available, it would be produced locally. We recognise and support the need for alternative energy sources but there is not much sense in adopting them if they result in increased costs to industry which may be prohibitive in terms of competitiveness. The regulator has dual problems but he should bear competition in mind.

I refer to wave energy, to which we can look forward. We have been told for the past ten years that the technology has not been sufficiently advanced to even consider its introduction. It has not advanced because alternative energy sources are available and there is no great urgency to proceed with wave energy production. When progress is made on wave energy, it will be much more accessible, efficient and effective than a number of alternative energy sources under consideration. Wave energy will prove to be more acceptable because of its visual impact on the landscape and it is likely to provide continuous power at a lower cost than had been anticipated because it will be based on the principle underpinning hydroelectric schemes, which have stood the test of time. Such energy would ensure electricity costs are kept in check so that industry can prevail.

The Minister referred to various alternative energy sources, including gas, which is important. The effectiveness of converting from one energy to another is determined by the efficiency of the conversion, whether it is from coal, gas, wind, wave or oil to electricity. Each much be examined in turn to assess the best way to make the conversion because, originally, gas conversion was not great in terms of efficiency but that has improved.

The legislation is a requirement. The ESB, of its own volition, must look to the future differently from the way it did in the past. New competition rules and deregulation have changed the landscape of energy provision and the ESB must examine how it can compete with its rivals. There should be less emphasis on ensuring its competitors are attracted into the workplace through increased electricity prices because of the serious detrimental knock-on effect that could have on industry.

We have experienced a few energy crises in recent years. There were nationwide blackouts on a number of occasions and, in my innocence, I used to table parliamentary questions only to be informed it was no longer a matter for the Minister. However, everything is a matter for the Minister because he or she is responsible for the ESB and he or she must answer to the House in this regard. While the Minister must answer to the House, there is an increased shyness among some Ministers, although not the Minister of State who is present. Some of his colleagues are remarkably shy when it comes to asking simple questions about State and semi-State bodies for which they have responsibility. When power cuts take place intermittently, there is a need for action and the Minister should be prepared to answer to the House at all times because such cuts have widespread consequences. Knowing what has happened in parts of the UK and US, these events happen overnight at peak power times and it is not just a small area concerned which is affected. Often vast areas are affected with negative consequences for industrial and domestic consumers.

I recognise the need for increased borrowing requirements. That must be dealt with on an ongoing basis and I hope the legislation will not encourage increases in electricity prices. Many consumers have recently received peculiar bills because of someone's failure to read the meters or for some other reason. I dealt recently with the case of an unfortunate person who received a bill for €400 when the bill is normally approximately €60 per month. That is due to a cost-saving exercise of one kind or another, although those exercises should not be necessary in the ESB at present given its solvency.

Mr. Ring

I am glad to address this proposal to allow the ESB to borrow more money. It is no wonder that organisation needs to borrow money because it is probably the most inefficient outfit we have ever seen, and I will give some examples of that. The Minister will let the ESB borrow money but when it is in difficulty, it contacts the regulator. The regulator and the ESB should both be sacked because he has let the company get away with murder. On three occasions last year he allowed ESB charges to be increased but, as Deputy Durkan said, when one asks the Minister a question in the Dáil, he says he has no power in this area because the regulator has the power. The regulator was appointed to regulate, but if his only job is to allow increases in the ESB's prices, then that is a problem for me, consumers and business. People complain about ESB charges. If that organisation borrows money and gets into more difficulties, that will come back to consumers and taxpayers, with the regulator bailing it out later.

I have some harsh things to say about the closure of Bellacorick power station but I will first inform the House why the ESB is inefficient, and the Minister of State should respond to this. It has been brought to my attention that the ESB bought a generator to use in Ireland and which it had in storage in Holland. It cost millions of euro but, once bought, the company found it did not suit the purpose for which it had been bought. Storage costs had to be paid for years and then the generator was sold at a loss to South Africa. An Irish person wanted to buy the generator to try to re-open Bellacorick. The minute the ESB heard that person was interested in Ireland, the generator was advertised for sale in European and world magazines and was sold, even though it had been in cold storage for two years, costing the taxpayers a fortune. The Minister of State should respond to that and if he wants more details, I will have them for him tomorrow.

The Acting Chairman, Deputy Cowley, is a constituency colleague of mine. Many people working in Bellacorick will lose their jobs in the next year or so, but there was no need to close that power station. It could have been modernised and if the Minister had had the will and the commitment to the west, that would have happened. The ESB gave information to Bord na Móna about the amount of peat in the area which could have lasted another 20 to 40 years. The minute the ESB found out someone was interested in trying to set up a power station in the area, it sent its staff to destroy the bogs so nobody else could do anything with them.

It is amazing that when there was talk of closing Rhode, Shannonbridge, Lanesboro, Cahirciveen and Bellacorick, the two power stations to be modernised were in Lanesboro and Shannonbridge. Shannonbridge is in the constituency of the Tánaiste of Fianna Fáil, the Minister for Foreign Affairs, Deputy Cowen. Why could not one of those stations have been opened and one station left open in the west? We have the peat, the people and the need for power, yet it did not happen. Were those political decisions?

People refer to subsidies for the west but the Minister of State should address the massive subsidies for the power stations in Lanesboro and Shannonbridge. The EU and the Irish taxpayer are subsidising those but what was wrong with subsidising and modernising Bellacorick? We could have kept jobs in a disadvantaged area which had peat and which needs power. What was wrong with keeping that station open? The political will to do so did not exist.

The taxpayers bailed out the ESB, just as they bailed out Telecom Éireann in the past. However, the latest from the ESB is that it will cost €10,000 to €15,000 to move one of its poles. It is time the Minister and his Department spelled out some home truths to the ESB. The taxpayers kept that company alive and bailed it out when it was losing millions of euro. Let us not crucify the man building a house in rural Ireland by charging him €12,000 to connect to the ESB. There is no competition in this market. That person cannot price someone else to connect to their power.

It is time the ESB was told to be realistic. It is the company's job to supply power to people in their homes. It is not the job of the people to pay for poles to connect rural houses to the electricity supply. Something must be done because people are getting angry. There are ESB and telecom poles in all corners of the country and someone will be killed by one. However, it will take a court case before the Department, the ESB and Eircom act. At the end of the day, the ESB is controlled by the taxpayer and the Minister of the day. It should not charge people the kind of money it does to remove these poles.

The Acting Chairman will support me when I say that there is no need to close Bellacorick power station and that it should be modernised instead. There is no doubt that the staff are there and we need the power. We are told by every report that the west needs power, and we were warned last year that the increasing number of businesses and people means there will not be enough power. It is important in terms of jobs, power and to ensure those in the west have the same advantages as everyone else that Bellacorick power station is up and running.

I want a guarantee from the Minister and the Department that if we allow the ESB to increase its borrowings to up to €650 million for network and infrastructure, it will not come back to the Minister or the taxpayer if it runs its business badly and finds itself in difficulty again. The ESB has run its business badly in the past, especially when one sees what happened with the generator to which I referred.

Debate adjourned.