I understand that having regard to the terms of the motion to be moved by Senator Sir John Keane, the Minister for Industry and Commerce does not propose to take part in the debate, but that after the motion is passed the Minister is prepared to give to the House the explanation called for.
Report and Accounts of the Electricity Supply Board. - Motion by Senator Sir John Keane.
Cathaoirleach
I beg to move my motion, which is in the following terms:—
"That, having regard to the report and accounts of the Electricity Supply Board for the year ended 31st March, 1930, which were laid on the Table of this House on the 9th December, 1931, the Seanad invites from the Minister for Industry and Commerce further information and explanation on the policy and prospects of national electrification."
When the various Electricity Supply Bills were passing through this House and it was proposed to remove parliamentary control in relation to this new national enterprise it was always said that there was machinery in the form of a motion of this kind whereby the matter could be raised on a suitable occasion. I suggest that the present is a suitable occasion to do so. It is true that this is the end of the Session, but it is only a short time since we received certain accounts, belated though they are. They are the accounts for the period up to the 31st March, 1930. They throw a certain light on the progress of this national electrification scheme. I claim the indulgence of the House in moving this motion, because I have always been, rightly or wrongly, a critic of this enterprise. I think there is no more annoying person in the world than the person who says "I told you so." I do not want to harp upon that, but I always pointed out the dangers of the State embarking on a large enterprise or business. It is very hard, even through the machinery of public utility, to get in the first place real essential business management, and in the second place to exclude the elements of politics—the feeling that the State is rich and vulnerable—being drawn into the enterprise and to divert the true business issues. I will not say anything further about that. I do think the House will agree with me that the country is not only interested and vitally interested, but at the present time is rather critical and uneasy.
In anything that I am going to say I want to put forward constructive suggestions. I feel myself that mistakes have been made. I even feel that a very dangerous line of policy has been embarked upon. I realise that applies to a great many things that have been done. But, while I say that, we have got to take the world as we find it, and we have got to square up to what is practicable and profitable at the present time. We cannot put the clock back, so that in the light we have got we have to review the whole matter as it is. I do not think the Minister was very fair to me when he said that I had revealed myself as a person who would rather have accounts of a bankrupt business than a successful business with no accounts. I do not realise having ever said that. I do not remember having even said anything to give him that impression. I did say that the accounts revealed the truth, and that in so far as the Minister was dealing with the accounts on that occasion he was not speaking the truth. I have never taken up such a ridiculous attitude in regard to any accounts. I do suggest that accounts are essential to good business management, and that, moreover, costings accounts are essential in any business where the management is going to exercise control. I am not going to take the House through the various items in the auditor's report. The House, I think, may take it from me that generally this report reveals a very unsatisfactory state of affairs. There have been shortages of stock. It has been impossible to trace stock. There have been documents mislaid and there are generally in the auditor's report a number of qualifications of which no business could possibly be proud, and of which any shareholder, I think, could rightly be very critical. There are two definite items in the accounts to which I would like to call the attention of the House. One is the item for creditors in the balance sheet. There is the item of £372,000 sundry creditors. I would like to know whether that includes any outstanding claim on the part of the original contractors. We have been led to believe that the contractors had made a very large claim against the Government and against the enterprise. We have not been given particulars as to the amount of that claim, or whether it has been just agreed to. I am rather doubtful whether this figure of £372,000 really does include that claim. I feel that it only refers to ordinary trade creditors as we understand that term. Then I should like, if possible, some assurance from the Minister that the capital account——
On a point of order. In view of the statement made by the Cathaoirleach I take it the House will have no objection to pass the motion, and thereby enable the Minister to make the statement he is willing to make. In view of that, would it not be better that specific questions to the Minister should be reserved until the Minister is here? Otherwise, the Minister will not have knowledge of the questions.
I think Senator Sir John Keane is fulfilling a very useful function in raising this question. He has devoted years to it and a considerable amount of his time. Whether he is right or not his views are very well worthy of attention.
I am not objecting at all to the Senator's statement.
Cathaoirleach
Senator Douglas's point of view has something to commend it. After the Minister has made a statement, if he remains in the House, then I suggest if certain questions are to be put to him they could be put and answered by him. Of course, it is to be understood that I am not binding the Minister to that point of view.
My object in referring to the matter was that unless the questions asked by Senator Sir John Keane are made in the presence of the Minister, thereby giving him an opportunity of replying, we will not get from the discussion the benefit that otherwise might be obtained.
Why does not the Minister come here?
Cathaoirleach
As I indicated earlier the Minister is prepared to come and make a statement if the motion is passed, but he does not desire to take part in the debate.
Unfortunately the Minister is not present, but in view of the great public interest that has been taken in this matter I can only discharge what I believe to be my duty in the matter. The Minister has his own views on what is right.
With regard to the capital account, I think we should have more details. Of course, I am not a technical accountant. I have tried to understand the explanation of the auditors as to how the capital account has been arrived at. It is very complicated and it is very important to make sure that the proper amount of capital has been brought in and that repayments, redemptions and all that are set out in accounts of this kind in considerable detail. The various enterprises taken over have all been set out in detail and these transactions are embodied in the accounts published.
On the general form of the account, I hope that the present account is not going to be static. I think that no system of accounting in the early years should be sterotyped. A business going on for half a century probably has not reached accounts as perfect as they could be. I hope as years go on the accounts will become elaborated and qualified by experience.
I should like also to draw attention to the very meagre statistics in these accounts. It has been brought home to me by technical people, more qualified to speak than myself, that there are large quantities of statistics rather analogous to these accounts in the "Electrical Times" which would be of extreme interest to the electrical profession. The only way they can ever get these is in the annual report of the Electricity Supply Board. Information in the present accounts may be sufficient for ordinary laymen, but technical people have a right to reasonable information in professional form.
Passing from the accounts, I come to certain general conclusions which I ask you to draw. One is the feeling of uneasiness about the management, reinforced by what I have already mentioned and also this question of increased charges.
Cathaoirleach
The question of increased charges is outside the scope of the motion.
I accept your ruling, sir, but my motion asks for an expression of the Minister's opinion on the national policy of electrification.
Cathaoirleach
"Having regard to the report and accounts of the Electricity Supply Board for the year ended the 31st March, 1930."
On a point of order——
Cathaoirleach
I have already ruled on one point of order.
I want to say this. From the beginning of the discussion on this electrification, the Minister gave us this assurance that on the presentation of the Annual Accounts the House would have an opportunity to discuss the policy and any question touching on the activity of the Board.
Cathaoirleach
As far as the Accounts here go.
That could not possibly be, because the Accounts inevitably are months later than the close of the financial year.
I accept your limitation. I think it is unfortunate on the general question that there is abroad in the country a feeling—I am afraid it is reinforced by the non-appearance of the Minister and the limitation of the debate——
Cathaoirleach
Senator, you spoke on the 14th May, 1930. You said "the Board must not be similar to the Post Office or other Government Department, on whose administration questions could be raised in the House from day to day. The Minister did suggest however in the early debates that it might be possible although he was not an enthusiast on the subject to have the reports debated once a year." That is the position, I take it.
Time after time in the Dáil the Minister explained that the policy could be discussed.
Cathaoirleach
This is the Seanad. We are dealing with what he said here.
Surely we are not going to be bound by one particular case, when on many other occasions he said the chance would arise to discuss the activities of the Board.
Cathaoirleach
We have been asked here, having regard to the report and Accounts of the Electricity Supply Board for the year ended 31st March, 1930, "to invite" certain things and we are limiting the discussion to these accounts.
I would draw your attention to the concluding words of the motion which have been ruled in order—"invite from the Minister for Industry and Commerce further information and explanation on the policy and prospects of national electrification." Surely it is within the basis of reason, if you are going to have that statement on the policy and future prospects, that the mover of the motion and those who speak on it should have the right to make some suggestions, and in making the suggestions to refer to some other Acts affecting the policy of the body or corporation under discussion. Otherwise this discussion becomes merely a case of asking the Minister "will you please make a statement." It means in effect that those who take part in the debate can themselves make no suggestion; they can merely ask the Minister for a statement. I think it reduces this altogether from the level of an ordinary parliamentary debate.
Cathaoirleach
I have made a ruling and the ruling cannot be debated.
I think it is very unfortunate.
I am only sorry for the effect that will be created outside by the general tendency of this debate. I will leave it at that. I am powerless in the matter. I was saying that there was a feeling of uneasiness about the matter of the management. I now come to the constitution of the board. I do not stand for any academic principle in the constitution of boards. I have seen all kinds of boards. I have seen business people controlling more or less technical activities like banks. I have seen technical people controlling enterprises like tobacco companies. I do feel about this board that there is an unfortunate tendency to tie it into the Civil Service.
Cathaoirleach
Senator, this is a statutory board. We cannot discuss a statutory board. If you wish to criticise the Minister for not properly constituting the board you may do it on this motion, but I rule you cannot discuss a statutory board.
On a point of submission, may I draw your attention to page 20 of the report in which the membership of the board is set out. Presumably the report is signed by the various members of the board. I suggest I am in order in discussing the general composition that those names represent.
Cathaoirleach
I do not think so, Senator. This is a statutory board. The Minister is the sole person responsible for that board. If you want to discuss a statutory board you may do so by a vote of censure on the Minister.
I am afraid this debate will fail through remoteness. I cannot discuss the board and I cannot discuss what is in the report.
Cathaoirleach
You can discuss every item in the accounts except the board.
Surely I can discuss the report?
Cathaoirleach
Certainly, you can discuss all the matters in this document.
I only wish to suggest in general terms that an enterprise of this kind wants to have called to its aid people of experience who would command high salaries such as many civil servants might be worth, but cannot be paid because you cannot discriminate between one grade and another. I feel that this enterprise calls for vast experience in its management. For that you have to pay. The present Board does not possess those brains.
I come to my final point and I hope to be very short. I ask the House to apply the business analogy to what is put before us. We in a sense represent shareholders in a very large business. If shareholders are met by a position in which they are uneasy and not by any means in despair—if they do not feel that things are going quite right what do they do? They have every right to ask for an independent opinion on the whole thing. I do not see what else we could reasonably expect. I do suggest that the Minister is not a fair judge in his own case. I yield to nobody in my admiration for the energy and the ability and the vision, I might say, which the Minister has thrown into this whole scheme, but naturally when your personal—I might say—prestige is rather involved you cannot give an unbiassed judgment on, say, anything of your own creation. For that reason, I feel that we should go right outside anybody and everybody who has had anything to do with it and call for an independent report from experts. I want to be clear what I mean, because I have heard it suggested in some quarters that a Parliamentary body should be set up. I do not think that would be at all suitable. If a Joint Committee were to do it we would have to learn the whole thing. We would be learning all the time and a lot of cumbersome procedure would have to be gone through. We would be dealing with experts and advocates and we would not really know how to decide between them. We want people who have spent their whole time on this business of electrical development. The ordinary consulting engineer is the person that we would deal with if we wanted to electrify a district or a country; we would ask him would he come and draw up a scheme, would he advise us on the best means of development, the form of distribution, and so on. Here a firm of contractors drew up a scheme and then called in experts of an academic character. I do not wish to say that they were not fully qualified, but they were, more or less, University people. They were not commercial engineers dealing with hydro-electrification. I should like to call in a firm and say: "Here is our problem. We really are uneasy, but we do not want to jump to conclusions. Here is the whole thing before you and you see what we have done. We want you to tell us what we should do. We want you to tell us whether you consider the thing is on the right lines, whether the management is right, whether our tariff policy is right, and to advise us on our interest charges." I think this is an entirely reasonable demand and I feel the Government should yield to it. As long as this thing is kept behind a screen there will be national clamour and it will be worse in the long run. If we could only have an independent report from people who have no axe to grind the country would be far happier. There is a sum of £10,000,000 involved in this. It is a very large sum for a small country. It is about half one year's revenue. I think it is only right that we should know where we stand. I do not see any other way of reassuring the people than by an independent inquiry by competent people.
I rise to second the motion. In doing so, I wish to lodge a very emphatic protest against the absence of the Minister from this debate this evening. I am compelled, by reason of what went on in the Dáil and his absence here, to ask what has he got to hide. I regard myself as a shareholder in this enterprise. If any director or manager of any concern in which I had a share acted as Mr. McGilligan is acting in this matter, I would take legal steps to have him removed if I could not get him removed by a vote of the shareholders. Senator Sir John Keane's motion is very simple. It merely refers to the report and statement of accounts and invites the Minister to come and give information.
Cathaoirleach
If the motion is passed.
That is not Senator Sir John Keane's motion, and it has not been ruled out of order.
Cathaoirleach
I beg your pardon. I think your view is correct.
Senator Sir John Keane's motion is in order, and the Minister for Industry and Commerce refuses to come here and perform the duties which the country pays him to do. I do not possess the technical knowledge necessary—very few persons in this House or in the Dáil with, perhaps, the exception of Senator Sir John Keane possess the necessary knowledge—to deal with this technical report and with the accounts. I am perfectly sure that what was largely responsible for the trouble, in the first instance, with regard to the accounts, was the fact that an ordinary accountant in a matter of this sort does not possess the technical knowledge which is necessary to enable him to frame a scheme of accounts suitable for such a project as this. I should like to ask the Minister, if he were here, if the late managing director had asked for an official possessed of sufficient technical knowledge to undertake this work of accountancy and if he were turned down by reason of the fact that such a man would cost more than they were prepared to expend. Of course, I am addressing an empty chair. I hope that this motion will be passed unanimously.
I should like to approach this matter without any heat. That is difficult in the circumstances and in view of the atmosphere which exists already in regard to the reception of this motion, the method of approach, and, if I might say so with all respect, A Chathaoirligh, because of the limitations placed on the debate in which we are taking part. It seems to me that if a report and statement of accounts are submitted to us here for any purpose at all it is so that intelligent people can make an analysis of the reports and accounts and put forward such suggestions, such remarks and such pointers to the Ministry or the Department or body involved as might, in the wisdom of the House, guide them as regards their future activities. I have considerable experience of handling the accounts of companies and business undertakings and I have yet to know for what purpose, other than guidance in the future, accounts are submitted and considered by directors, shareholders or others. I submit, with all respect to you, sir, that it is an unintelligible thing to ask people to discuss accounts with a view to setting down fixed, set questions which the Minister will deal with as he likes.
And if he likes.
I want to refer to some of the statements made by Senator Sir John Keane before I go into the question of the accounts. Senator Sir John Keane spoke of the dangers of the State embarking in business. That is a very commonplace method of attack upon all sorts of State social enterprise. I do not want to confuse the issue to-day by labouring that point but I would like Senator Sir John Keane and people who criticise State management and State control to look over the field of industrial enterprise, large-scale enterprise, and reflect upon what has happened during the last eighteen months or two years. We have had a business debacle unequalled in the history of commerce. We have had the Kylsants and the Hatrys dealt with and we have had some of the biggest companies in the world writing down their capital by millions. The reason I mention these things is that there is an idea that only by hard-boiled, shrewd business men can efficiency be attained in business. That myth has been successfully exploded in many cases. It is being exploded in other cases every day. Industry, just as much as State enterprise, has suffered in the general debacle.
Senator Sir John Keane referred to the uneasiness that existed with regard to the management of this undertaking and I think he was perfectly justified in doing so. There has been uneasiness about the management for a very considerable time. How could it be otherwise? In this House, we have asked questions and we have criticised the attitude of the Minister. In a very prolonged debate here last July, the Minister simply closed himself behind doors and said he knew nothing about the accounts, that he could not get them. It was pointed out to him that two of his representatives, out of three, were on the Board since April, 1930. Firstly, there was Mr. Leydon; then there was Mr. Fay and, thirdly, there is the present Chairman. In spite of that fact, that for nearly eighteen months of the period he or the Department of Finance was represented on the Board, the Minister stood behind closed doors and said "I know nothing; I cannot get information." We have got some information to-day.
The accounts are very difficult to analyse and very difficult to understand. We do not know what has happened between 1930 and 1931, but an analysis of the accounts has disclosed that up to 1930 there was no reason for the Minister to create the mental stampede he did create by giving the impression that the Shannon Scheme was, from a business point of view, a complete failure. Such was not the case. It appears to me, as I charged last July, that he was out to down one man and get him out of that Board even at the cost of the national credit. What do we find if we analyse the position in so far as a layman can analyse it? These accounts deal with the period from the 24/10/'29 to 21/3/'30. There is a chart showing the maximum daily load and the total daily output of Ardnacrusha station during that period. Anything like an average peak load, or half a peak load, was not reached until January 14, 1930, so that these accounts analyse down to a period of three months and carry, for the rest of the period, the necessary preliminary work, management and overheads and the spade work that was being done with a view to the Shannon Scheme being made a practical proposition throughout the country. On analysis, we will find that the position is not one that we need necessarily despair of. I am not condoning, nor would I ever condone, bad accountancy or bad management. But there is no reason, surely, to make a thing worse than it really is. I submit to the House that that is precisely the policy that has been pursued by the Minister.
In the Installation Account, page 66, Schedule 1, there was a gross profit of £9,254 and a net balance of £3,210. I do not know what the average profits are in the electrical installation trade but I submit that we have two points of view to keep in mind in dealing with that item—that this was part of the construction portion of the distributive system and that this was the medium of the sales force which was going to use the Shannon current and, with that development, lead to the greatest possible output. Schedule 2 deals with the Merchandise Trading Account and it shows a small margin of profit, after all wages, salaries, rent, rates, etc., have been provided for, of £453 19s. 5d. The gross profit in that department was £6,825, which is equal to 34 per cent. I submit that that is a reasonable trading profit, to say the least. During the summer of 1929, there was a supply given to a number of towns but, as I said, it was not until January 14 that the load at Ardnacrusha amounted to anything worth considering. The chart will bear that out. At that period, apparently, the load jumped from 5,000,000 units to 21,500,000 units. I do not know if I am reading this technical matter correctly but that is my interpretation of the chart. The proportion is 5 to 21½. That increase took place as from the beginning of October to the 14th January. So much for that.
Dealing with the accounts purely for the moment, we find in the balance sheet an item of £38,199 to reserves. I should like to know what these reserves are. When on that point, I should like to know if there is any account for the £156,000 that was specifically ear-marked for the period during which profits would not be earned. That item may be embodied in the accounts but I cannot find it. It does not appear as a specific item, so far as I can see. If we allow for the £38,199 to reserves, on the revenue account, as shown by the auditors, there is a deficit of £35,090 at the beginning of April, 1930. We do not know what has transpired between 1930 and 1931 but it hardly justifies the alarming atmosphere that was created when the Minister was introducing the accounts here. We cannot speak of 1930-31 until we know where we are but we know at least this—that before April 1, 1930, the Minister had got alarmed and that he had got persons on the Board either representing him or the Department of Finance. The auditor's report discloses a shortage in stores of £5,480. The amount of work done, as disclosed by the balance sheet, was £950,000. We have no separate analysis of that. We do not know how much of that was stores and how much time and expenses but, from what I hear from electrical experts, it is reasonable to suppose that from £200,000 to £300,000 worth of stores must have been involved. I submit that the alarming report we heard about the shortage of stores was grossly exaggerated, since we find now that the shortage amounted to £5,480. There may be other stores missing that are not disclosed, but I am going on the auditor's report. That is all they show as missing and I suggest that that was a small amount considering the quantity of stores handled. I wish all of us could get that small percentage of discrepancy in our own business.
There are other figures which I frankly cannot understand. They would require some explanation. According to the balance sheet, on the capital account the capital involved was £3,820,506. I am not clear as to how that figure is arrived at, though I have no doubt an explanation will be forthcoming. In a discussion on this matter in the Dáil on the 19th November, the Minister for Finance made a statement as to the amounts that had been credited to the Electricity Supply Board. These items, up to the date on which he was speaking, showed that the advances from the Central Fund to the Electricity Supply Board amounted to £2,764,385 18s. 8d. (Dáil Debates, Column 1755). It is not clear from the balance sheet how this capital was made up. I do not understand the statement of the Minister for Finance as to the issues from the Central Fund to the Electricity Supply Board. There is a discrepancy somewhere. It is probably a mere matter of book-keeping.
I should like the Seanad to reflect on some of the things done with regard to the organising of the work and the differences of view between those who believed in one line of policy and those who believed in another. It would seem that the Electricity Supply Board set out very definitely upon a policy of getting consumers. They deliberately went on this line of policy, to sell electric current, and I think they were perfectly justified. Assuming for the moment that they had an output at Ardnacrusha of 150,000,000 units, were they better to try to dispose of that 150,000,000 units and give a service to the country than sell 50,000,000 and charge three times the price for the 50,000,000? I have tried to make an analysis of the units output up to the date on which these accounts close.
I find that for that period there were 43,177,288 units sold. These figures are taken from the report, so I am speaking strictly within the report. The gross revenue to the Board arising out of the 43,177,228 units sold was £478,000 which, I take it, works out, in so far as I can figure it out, at 2.66 per unit. I understand that the consumption at the moment is running up to 150,000,000 units, and if we argue that the Electricity Supply Board is going to get sale for 150,000,000 units on the present sale basis the gross revenue would be £1,670,000. That, of course, is absurd because if they are going to get their surplus load disposed of they will have to make terms, and why not?
If we assume they can sell 100,000,000 units at the present rate the gross revenue from that would be £1,110,000. If the remaining 50,000,000 units were sold at ½d. a unit it would bring in £104,000. That would give a total sale price of £1,214,000. As I stated here in July, I believe the revenue could easily be brought to £1,250,000.
This was one of the main lines of policy upon which the board disagreed with their late managing director. It seems to me that the line of policy pursued by the late managing director was the sane one and the present line of policy is going to arrest consumption. If we assume that 100,000,000 units can be sold at this average price and the surplus of 50,000 units can be sold at ½d. a unit, can we find any justification in the world for increasing the price of electricity to the consumer? There is a very vital matter involved in this. There are dogmatic opinions being expressed on all sides and the whole fate of the Electricity Supply Board and the Shannon Scheme hangs in the balance. It is not a question for me or for this House. We should endeavour to get the best expert advice that we can procure.
Senator Sir John Keane stressed that point, but I would like to indicate the line of difference between his attitude and ours. When we appealed for a Parliamentary Committee to investigate the position we were not at that time considering accounts or efficiency; we were considering what was quite obvious, that there was one man making a charge and damning the career of another man and refusing to let that other man get a hearing. In other words, we wanted to try to find where the truth lay. I put down a motion to that effect but, like most of my motions, it was defeated. The House does not know the truth to-day and it is not going to know the truth so long as the Minister can help it. It remains for the House to say whether it is going to insist on getting the truth.
I submit that, whilst the reports and accounts may offer food for criticism, there is nothing in them, so far as I can see up to 1930, to cause all the alarm that the Minister deliberately created and that still exists. The next issue is, are prices going to be increased? If they are, then we can realise what is going to happen. Cobh has decided to use gas and lots of people will decide to use gas if electricity prices are increased. Even a State Department cannot afford to lose the goodwill of the community any more than any business concern. The Electricity Supply Board, entirely because of the Minister's attitude, has lost the goodwill of the people of the country.
I do not propose to defend any individual on the Board. I must say, however, that when all the charges were going about, charges that were concentrated on the managing director, irrespective of the fact that he was only one member of the Board and was the technical director too, we should not lose sight of the fact that, according to the reports during that period, the networks were in process of being erected, transformers to the number of 181 were erected and 30 more were in course of construction. It must be remembered also that during that period the consumers increased in number and the consumption of electric power increased by 51 per cent.
Therein lies the whole difference between the attitude of the late managing director and those who have succeeded him. My feeling is that he was right. If he could get the Shannon Scheme to distribute 200,000,000 units, it was certainly the right policy. If he had the opportunities during the off hours for disposing of the current that would otherwise be running waste, if he could cater for tramways consumption and so on, and if he could get ¼d. or ?d. a unit, he would definitely be making money for the Electricity Supply Board because otherwise the current would be running waste.
I have taken the trouble of looking up electricity reports and reading some of the various conventions of electrical associations and the considered opinions of electrical experts. It is evident from these that the money in electricity, particularly in State enterprises, does not lie in the production of electricity but in the distribution of it. It is just like every trade; it is the retailer who gets it and we, manufacturers, know that. It is not the manufacturer who gets the profit but rather the distributor. I hold that the late managing director, in his line of distribution, was absolutely justified and these figures here justify him. These accounts show quite clearly that one man was wretchedly treated. No allowance was made in regard to him. There was all sorts of vicious propaganda about discrepancies in stores, but all those allegations have been blown to the wind by the figures.
Similarly, his attitude in regard to inducing consumers to take electricity is perfectly justified by this report. In so far as these reports go and in so far as we have figures it is obvious that the late managing director was perfectly justified in his attitude and the Minister is condemned.
I think in this matter the Seanad is concerned only with the broad effects of the general policy of the Shannon Scheme. It only confuses the House and serves no particularly good purpose to go into details on any report or statement of accounts that may be submitted. I do not think one would be wise in taking sides in regard to internal disputes that may take place. To that extent, I deplore the statements made on political platforms throughout the country and which, no doubt, will be made in greater volume during the next few months. There will, I am sure, be many efforts to make the Shannon Scheme a political issue.
We all looked upon the scheme as a national asset, a national achievement, the greatest achievement of an historic decade. We looked forward to the scheme to supply electric energy for lighting and heating at cheap rates throughout the State. We looked to it to help to build up and to brighten the conditions of this country.
To the extent that the scheme fails to do that, it has failed in the ideals which I believe those who initiated it set out to achieve. I cannot conceive anybody with any imagination contending that this should be purely a huckstering business concern, just paying its way without any real regard for national development. If the scheme extended no further, but merely paid its way, charging the existing consumers what is necessary in order to pay interest charges and sinking fund, then I would contend that the scheme had lamentably failed. It would be little better than a small business concern run with State money.
The report discloses, unfortunately, a lamentable lack of accountancy as far as the business of the Board is concerned. That lack of accountancy was due, unfortunately, to a huckstering spirit amongst the members of the Board, or rather the majority of the Board. They refused to pay the salary necessary to get an accountant with electrical experience. They relied on people who were good as accountants but who had no experience of electrical accounts. There were only a half-dozen stores clerks available in Dublin who could identify the different electrical parts that were required.
Stores accountancy is a very important branch of business in any great manufacturing concern. There are at least 5,000 different electrical parts and stores clerks were brought in who did not know a door-knob from an insulator. That accounted for the fact that, instead of the clerks doing the accountancy, it was given out to the working electricians and they had to keep the records of the parts they used. That accounts for the fearful muddle that occurred as far as the accounts are concerned.
That is the type of economy which is so popular nowadays and which is particularly popular where the Department of Finance is concerned. The country is paying for it in the case of the Shannon Scheme and we must not complain. That, however, is only a detail. I agree that it is an important detail, but it certainly is only a temporary and a comparatively small consideration in so far as the actual amount of cash involved is concerned.
I am concerned with the future policy of the Board in regard to development. One would like to know from the Minister whether it is to be their policy to rest on their oars through sheer fright lest they may exceed the amount of money given them and lest they might not be able to meet the sinking fund and interest charges that they are expected to meet during the first few years. Is it the policy to make the existing consumers pay whatever charges are necessary to achieve these miserable ends? It is lamentable to find that while there were 600 working electricians engaged this time last year spreading the network, wiring houses and widening the whole field of consumption, to-day there are only 200 and the number is diminishing. In other words, development has slowed down to one-third of what it was a year ago and it threatens to slow down much further.
In regard to the financial aspect of the case, we observe that the revenue was £478,000 whilst the estimated revenue for the current year is £920,000 or over 9 per cent. of the total capital invested. That is not a sign of bankruptcy. As regards the actual machinery working, I understand that the whole scheme is only at its peak for about 200 hours in each year out of a total of over 8,000 hours. Except between the hours of 5 p.m. and 5.45 p.m. in the months of October to March there is never a peak load. From 12 o'clock on there is about a half load, and during the whole of the time from midnight to 6 a.m. there is no load at all. I understand there could be a peak load all day without any addition whatever to the running costs of the scheme.
Would it not be good policy to try to sell electricity for heating and cooking purposes at such a price as would enable a greater portion of the energy now running waste to be utilised during the day? Would it not be a better policy than to raise the costs in such a way as to make the use of electrical energy for heating and cooking an absolute impossibility? Is it not the ordinary experience of people that when the price of anything goes up, particularly in times of depression, the attitude of the consumer will be to pay only the same amount for a particular commodity as he previously paid; in other words, cut down his consumption, use less? Is that going to be the policy of those responsible for running this scheme?
This scheme raised hopes in the minds of millions of people at home and abroad. They looked upon it as the one great thing that had been accomplished in very difficult times. This scheme, together with the solution of the housing problem, seemed to many people, and certainly to me, to be the two great things that would tend to build up the nation in a way which would make us proud. If the policy now is simply to allow things to rest just as they are, to say that the scheme is a nice little paying proposition, that there are to be no more State commitments of any kind and that we must not bother about development, then I consider such a policy a very unwise one. Let it not be the policy that we have gone a certain distance, we have got tired of the business and now all we need to do is to make the scheme pay so far as it has gone.
I live within four miles of the centre of Dublin. I got electricity from a small concern which supplied 100 consumers before the Shannon Scheme was established and I paid 1/- a unit for it. When the Shannon electricity was generated I got the same amount of current at 7d. a unit. I am now paying 9¼d. a unit. That is not a revolution. I understand that people in the country districts who used about 150 units per annum paid 1/- a unit for it. Such a person, if his valuation is based on 2/- per week for the purposes of electrical consumption, is paying at the rate of 11¼d. a unit, in accordance with the increased rates that have come into operation. In other words, he is getting relief to the extent of ¾d. a unit. Surely, something more than that was expected of the scheme?
The accounts we are now dealing with bring the affairs of the Board only up to 31st March, 1930. We have been told on the most reliable authority, including the statement of the Minister, that the Board and the Minister do not know exactly how they stand so far as present-day affairs are concerned and they will not know until further reports from the auditors are made available. Is it not extraordinary in such circumstances that a very important step such as was taken recently should have been taken? Is not that extraordinary, in view of the state of uncertainly? Would it not have been the proper businesslike method to wait until the financial affairs of the Board were quite clear before they took the important step that has been mentioned? I appeal to the Minister to let us know if it is the policy of the Board to go ahead with as much development as possible, to try and spread the networks and widen the field of consumers. Is it the policy to sit tight now and charge the present consumers with the cost of the scheme instead of trying to increase the number of consumers, to sell a volume of electricity that will enable energy to be sold at a cheap rate and at the same time make the scheme pay its way? Personally, I feel that unless the development goes on, that the whole country is linked up, the scheme will have failed absolutely to achieve the purpose for which it was originally conceived.
I hope I will keep within the terms of this motion. I think it is quite possible to discuss fully this report and these accounts without going outside the terms of the motion. I must compliment Senator Sir John Keane on having drafted the motion so carefully and so well. I suggest everyone must deprecate using this great enterprise as a political cockpit. I would not like to have it used as a cockpit for personal disputes, whether these disputes are between Ministers and officials or persons of any other character. Neither do I look on the Shannon scheme as a great project in socialism. I look upon it as an attempt to develop one of our great national resources and would like to see it a success. Up to the present, there have been some considerable difficulties, some difficulties which were natural to the greatness of the undertaking itself and some which, I think, were due to measures wrongly taken and to advice which was not taken.
In the first page of the auditors' report, paragraph 2, Senators will see this remarkable statement: "the task involved was one of considerable magnitude because by reason of the looseness in the preparation of dockets and records, and a serious lack of co-ordination between departments, it was evident that complete and reliable figures would not emerge without extensive investigation and reconstruction." There are many pages in that report, but there is one line that attracts my attention and I have read it for you. It is "serious lack of co-ordination between departments." Now, I am told that in these great electrical undertakings the main thing is to have complete co-ordination between departments and complete co-operation. In going back on the literature of this project I find in the experts' report, which was available to the Minister, that the experts recommended that each director should have certain departments and certain duties assigned to him for which he should be specially responsible. What did that mean? That for this particular work and for these particular departments a director should be chosen who had special qualifications. It also meant that there would be complete co-ordination. There would be one man, I suppose, a specialist in accountancy, and another man a specialist in engineering. That was the recommendation of the experts who came over here to advise the Minister, and that is the advice that was not taken. Without being unduly critical it is that, I think, that is at the foundation of all the little difficulties we have had since, difficulties which I hope will pass away.
Paragraph 22 of the report refers to the bargain made in respect of the Cork and Cobh electricity undertaking owned by the Cork Electric Supply Company, Limited, operated by that company as the authorised undertakers for these areas. We have a full description of that transaction. The only thing we are not told is, what is the price. I think that the cost of that Cork undertaking ought to have been set out in this report. Again, in the case of the Dublin United Tramway Company it is stated in the report that agreements have been entered into for the supply of power to that company. We have details in every respect, except in regard to price. That is a matter that I for one as a ratepayer, representing now rural ratepayers—I am not an expert or a specialist or an advocate for any particular form of social enterprise—would like to have information on.
There is another little matter in which I and people like me have their curiosity aroused. I find this statement in the report: "The Board further continued the practice of supplying information regarding the progress of its work to the Press for whose co-operation it is indebted." That is another sentence that struck me in the eye. I looked through the accounts to see if I could find that little sentence reflected somewhere in them. I find in the accounts this remarkable figure: printing, stationery and advertising £18,231 5s. 6d. That is a pretty large sum for stationery and advertising in a business which made a gross profit of £9,000. However, I do not marry one fact to the other. I only mention both facts at the same time and let each Senator form his own conclusion. These are a few of the points that have occurred to me. There are, of course, other matters which have already been dealt with by Senator Sir John Keane and Senator Connolly. I do not propose to go over the same ground again, but I would like to emphasise one matter which has been referred to by Senator O'Farrell, and that is in regard to the future policy of the Board.
Cathaoirleach
I would ask the Senator not to pursue that. The Board is a statutory body, and the House can only deal with the accounts that have been furnished.
All that I will say is that I want further information in regard to the report. Having regard to what I have said here, I want further information on the policy and prospects of national electrification. I will ask only one question on that. First of all, I would like to express the hope that no energy that is generated at Ardnacrusha will be allowed to go waste. I want to ask the Minister whether it would be possible to make arrangements to secure that that shall be accomplished either by a variation in the prices or by such other means as the Minister and his expert advisers may think proper.
They would need to be very expert.
I do not wish to criticise public officials or people that are dealing with a new enterprise of this kind. I hope I have not been too critical. I do not wish to be critical. I wish that any comment I made should be regarded as helpful, because I think that is the proper spirit in which we ought to deal with an enterprise of this description. We ought not to make it a stick to beat any person, particularly officials and people who cannot answer for themselves. Speaking generally, I will go this far, that I think the Shannon electrification has been a success. It is a great enterprise, and I think it has been a success. I think that perhaps a tremendous number of blunders have been made here and there, but if these are debated they will probably be remedied. I apprehend that is the main reason which Senator Sir John Keane had in bringing forward this motion.
I want to explain to the Senator that my interjection was directed to the problem of utilising the whole of the energy generated. That has not been solved anywhere, and to express the hope that every unit of energy generated will be consumed is, I am afraid, beyond the reach of electrical engineers at this stage of development. I want to deal with some items in the report and with the terms of the motion. I want to draw special attention to the last line of the auditors' report, which states: a comprehensive report dated the 17th November, 1931, on the accounts and balance-sheet, has been submitted to the Board.
I think that before we can discuss this report and accounts satisfactorily we ought to have placed before us this comprehensive report dated 17th November, 1931. I find, for instance, in the Electricity Supply Act that it is incumbent on the Minister to lay before both Houses this report, including this comprehensive report. That is provided in Section 7, sub-section (2) of the Electricity Supply Act, 1927: "The accounts of the Board shall in each year be audited and be the subject of a report by duly qualified auditors." It is provided in sub-section (4) of the same section that "immediately after every audit under this section of the accounts of the Board, the Board shall send to the Minister a copy of the balance-sheet and profit and loss account as passed by the auditors, and a copy of the auditors' report."
Under Section 32 of the Act it is provided: "the Board shall in each year, at such date and in such form as the Minister may prescribe, make to the Minister a report of its proceedings under this Act during the preceding year," and later in the section: "the Minister shall lay as soon as may be before each House of the Oireachtas a copy of every report made to him by the Board under this section, together with a copy of the last capital account, revenue account, profit and loss account, and balance-sheet of the Board, and a copy of the auditors' report on such accounts and balance-sheet." These are to be laid before each House of the Oireachtas, but the comprehensive report dated 17th November, 1931, on the accounts and balance-sheet submitted to the Board by Kennedy, Crowley and Co., Auditors, has not yet been laid upon the Table of each House, so that in the absence of that comprehensive report it seems to me we are not able to discuss the present report with sufficient authority and knowledge. The report deals, as Senator Comyn has said, with two matters on which I would like to have more information, because it directly affects the scales and tariffs that are quoted in the report.
As Senator Comyn has reminded the House, paragraphs 22 and 23 of the report refer to the taking over of the electrical supply undertakings at Cork and Cobh and to the fact that certain arrangements were made with Messrs. Henry Ford & Son, Limited, regarding the taking of a supply of current from the Shannon scheme. Paragraph 27 of the report explains that a bulk supply was offered to the Dublin United Tramways Company and that certain expenditure was undertaken to enable that supply to be sold. Now I, too, think that we should have some information as to the price at which that power was sold, the period of the contract and whether the expected utilisation of the current has been fulfilled.
I am making this point about prices because the scales of charges in the various districts that are related in the appendices must have some relation to the price at which power was sold to these two institutions. I understand that at least the management board responsible for the production of this report decided that it was good policy to develop the consumption of current for heating and cooking purposes in private houses. They instituted, therefore, a scheme whose purpose was to encourage consumption in private houses of much larger quantities of current than would be consumed by mere lighting. Therefore, they adopted a price basis on valuation, plus a reduced unit charge for every unit consumed. I presume the intention of that was to develop the consumption of energy during the daily hours of generation of current. I take it that the same hours to a great degree were the hours at which both Messrs. Henry Ford of Cork and the Dublin United Tramways Company would be requiring current. I cannot see, from the information available, that it was good policy from the point of view of national electrification to take over the supply of these two institutions which were already being supplied by the existing undertakings. It seems to me that it would have been very much better policy, and would still be very much better policy, to develop the consumption of heating current by reducing the price to the household consumer instead of raising it, and by leaving Messrs. Henry Ford & Son and the Dublin United Tramways Company to go on as they were doing.
I want to keep within your ruling. Therefore, I am pointing out that the policy of this Board in taking over these two institutions and the supply of current to these two bodies, was unnecessary and unwise. They would have got the end they sought—an increase in the load—by lowering the charges for current to households and it would have been very bad policy at any time to increase the charge for household current. It would be very good policy to increase the load for household current by reducing the price of that current. If there had been a still further reduction of the price for heating and lighting we would have had a very great increase in the electrical habit and in the consumption of electricity for household purposes. Not having done that, I fear that the prospects are that there will be a falling off in the consumption of current for household purposes and a falling back upon gas. The Act under which this Board has been working requires that from a certain date, to be fixed by the Minister in conjunction with the Minister for Finance, a date not before the 1st January, 1933, there shall be payments made to the Exchequer in respect of amortisation. This Board has been working, and this report gives evidence of it, under the general scheme as provided in the Act and as outlined by the experts in their report. We learn that by the scheme of amortisation in forty years' time the Free State will own the plant in first-rate condition, free from debt.
The Minister has not stated yet, but I am sure it comes within the explanation and prospects that he will deal with, when he intends that the amortisation payments will begin. He will remember that there was a strong urge during the passage of the Bill in 1927 that the period from 1929 to 1932 was entirely too short to expect revenue and expenditure to balance and that a longer period should be provided. I think this report gives evidence of the necessity for extending that period, and for the Minister to use his option which is contained in the Act to make the date a considerably later one than the 1st January, 1933, because there seems to be no reason at all that the generation that will live after forty years have elapsed should have a complete electrical supply, entirely free from capital liabilities. If this generation is to contribute the greater part of the cost of electrification in the form of payment of interest on capital liabilities, I would like to know from the Minister if he can give us an indication of the intentions of the Board when they were making this scale of charges.
The old scale.
The scale in the report. We are precluded from dealing with the new scale. What entered into the mind of the Board when fixing this scale of charges? Had they in contemplation the possibility even of the accounts not being as satisfactory as they had hoped? Did they imagine, in fixing this scale of charges, that they could have developed a demand for current in households even without the assistance of the Dublin United Tramways and Messrs. Ford, or were the charges fixed after they had decided to supply the Dublin United Tramways and Messrs. Fords at the particular price because future policy regarding prices would necessarily be determined by the relation between the price of current for heating houses and the supply of current for tramways and works of the kind of Messrs. Fords?
As I have said at the beginning—I am not sure whether the Minister was present—I would like to know how soon we may expect to be laid on the Table, as required by the Act, the comprehensive report dated 17th November.
Cathaoirleach
It has been deposited in the Library.
It is in the Library for about a week or ten days.
This printed report and the other report?
This voluminous report referred to is in the Library.
I have not anything more that I can say but there are a few things that I would like to say.
I only wish to make one remark; perhaps it is a bit academic. Senator Connolly seeks to defend the system of nationalisation against private enterprise. Rightly, as a debating point, he refers to the unfortunate results of various commercial enterprises last year, to the very large losses of capital that have been experienced in the world depression. He rather suggests that private enterprise has defects. With that I agree, but there is this essential difference. In private enterprise the loss falls directly on individuals but in the case of nationalisation, where there is a loss, it hangs around your neck for ever in the form of a national debt, probably placed on the taxpayer. It can only be got rid of by repudiation which no country cares to incur. There is that essential difference between the misfortunes of private enterprises and national enterprises.
Motion put and declared carried.
In the first place, I would like again, as I have had to do on another occasion, to explain to this House that my absence earlier was not due to an intended discourtesy to the House. The reply to this motion, of necessity, involves a considerable amount of trouble in the preparation of such details as I thought I might be called upon to give. I was engaged with this proposition. Nevertheless I present myself to the House feeling myself unprepared to a certain extent, necessarily unprepared, because I simply have not some of the matter that I think the Seanad should have put before them. It is not even now in my hands. I am unprepared in another way because I have not had what I would count sufficient time in which to get in order such material as I have. The motion which has just been passed invites me to give "further information and explanation on the policy and prospects of national electrification." That is tacked on to "having regard to the report and accounts of the Electricity Supply Board for the year ended 31st March, 1930." There has been published this booklet containing the annual report and accounts of the Electricity Supply Board, presented to the House in pursuance of certain sections of the Electricity Supply Act. The auditors' report at the back of that booklet refers to "a comprehensive report, dated the 17th November, 1931." That report is at the moment in typescript form. Some thirty copies have been presented to the clerks of the two Houses and have been laid in the Library. It will arise for consideration afterwards whether members of the Oireachtas generally consider it is worth the expense of publishing and circulating this in printed form. It can be made public—indeed it has been made public through the fact that it has been put in the Library, but I can decide afterwards, on representations made to me, as to whether it is worth while to incur the expense required to print it.
I would like to call attention to certain items in these reports. The first thing to which I turn is the "Report on the Proceedings of the Electricity Supply Board for the year ended 31st March, 1930." This has been recently compiled and it is the Board's own comment on its work for that year. May I stress that it is its own comment on its work after the Board had taken heed, as no doubt they did, of the remarks passed in the debates of the early summer on their procedure during that year and other years? They say in the first paragraph, lettered (a):
"(a) The delay in the presentation of the present Report and Accounts is due solely to the confusion which existed in the records of the Board by the end of March, 1930. The whole recording machinery had by that time fallen into very considerable arrear, and this situation was aggravated by the circumstances that much of what had been done was imperfect and unreliable. When the full facts were placed before the Board it was agreed that the position could not be remedied except by securing the services temporarily of additional experienced staff, and the auditors to the Board were accordingly approached to ascertain if they could meet the Board's requirements in this matter. In compliance with the Board's request the auditors provided a large staff which has been continuously engaged on the work since July, 1930."
The Report continues:
"(b) The task involved was one of considerable magnitude because by reason of the looseness in the preparation of dockets and records, and a serious lack of co-ordination between departments, it was evident that complete and reliable figures would not emerge without extensive investigation and reconstruction. In some instances records have had to be overhauled, partly reconstructed and checked back to the very beginning of the Board's activities. In order to produce dependable figures at 31st March, 1930, large blocks of expenditure unclassified or in suspense at 31st March, 1929, had to be broken down and analysed. For the year ended 31st March, 1930, a period during which there was considerable capital outlay, it was necessary to deal with similar large blocks of unclassified expenditure. The analysis and allocation of this expenditure was rendered extremely difficult by reason of the manner in which issues of materials were recorded and described, and of carelessness in the handling of invoices which in many cases had been lost or mislaid. The system in operation in the stores department, which was intended to control a very substantial portion of the Board's expenditure, has broken down. The execution of the necessary work by the auditors' staff has involved the Board in an expenditure of £7,500, which appears in the Accounts, but the Board felt that there was no alternative to this course as it was essential that the confusion which existed should be removed and that accurate figures would be available for the future."
This is the Board's own statement of its position, and its comments on the machinery at its disposal for getting out its accounts during this year.
There is another paragraph which I will read later. It gives better hope for the future. But postponing that and even at the risk of being tiresome, I am going to read the auditors' report. It is found on page 73 of this document, and opens with the ordinary formula:—"We have prepared the foregoing accounts and certify they exhibit a true and correct view," etc. The report goes on:
"The classification of the Assets in in the Capital Account is in accordance with information received from the Board's officials.
We were unable to obtain verification of part of the Capital Expenditure on the Distribution System.
No provision has been made for depreciation except in so far as this may be regarded as having been provided for by the charges in respect of repayment of loans and loan-stocks of undertakings acquired.
We are not satisfied as to the accuracy of the amount included in respect of stocks on hand or in transit.
No provision has been made for bad or doubtful debts."
The auditors refer to certain contingent liabilities and, continuing, state:
"Owing to the condition of the books and records we are not satisfied (a) that all expenses chargeable to the Installations Trading Account and Merchandise Trading Account have been debited thereto; (b) as to what proportion of the amount charged to Merchandise Trading Account for salaries and wages should properly have been charged against electricity sales. For the same reason it was impossible for us to satisfy ourselves as to the extent to which the accuracy of the accounts is affected by the fact that materials, purchased for constructional and trading purposes, for maintenance work and for other activities of the Board, were not properly controlled."
Would the Minister read the two paragraphs he left out, because they seem to be the most important of all?
Certainly. "Contingent Liabilities existed at the date of the balance-sheet in respect of:
Claims not admitted arising out of the acquisition of local authority undertakings.
Unascertained Capital Commitments."
I was going to refer to them in another way. The comprehensive report to which reference has been made, goes in considerable detail into all these items, and winds up with what it calls "general remarks." Here the auditors state:
"Throughout the foregoing reports we have referred briefly under various headings to difficulties experienced in the course of our audit, due to the unsatisfactory condition of the books and records of the Board." I will leave out portion:
"The accuracy of the balance shown by those accounts, and of many items in the Capital Account and Balance Sheets depends on the effective control of stores material. This control, so far as it existed, was so incomplete and so unsatisfactory that only after great difficulty was it possible for us to prepare the figures now incorporated in the accounts."
I pass over one paragraph. It goes on:
"The records of the materials supplied by your stores for the purposes indicated above were defective. We succeeded in reconstructing them in such a way that they could be incorporated in the accounts, but the lapse of time, the absence of control, and in particular the following conditions made it impossible to verify them fully:—
(1) The dockets used for recording the issue of material were not controlled, that is there was no means of ascertaining that all dockets on which the movement of stocks was recorded were included in the records from which the accounts have been prepared. The significance of this may be appreciated when it is mentioned that from time to time during our audit bundles of dockets were discovered which had been mislaid and were omitted from the accountancy records."
I pass over another paragraph which is not material. It continues:—
(3) There are some issue dockets still under enquiry. These include dockets discovered after the accounts were drawn up, and others the examination of which was delayed by difficulties arising from the general condition of the stores organisation.
(4) The amount accounted for as representing the cost of material issued to network operators is a negligible fraction of what must have been issued to them. It does not account for the amount returned for sales made by these operators, the value of which has been included in miscellaneous revenue.
(5) The pricing of material issued, we were informed, was based on schedules of prices compiled mainly from suppliers' invoices. These schedules were in such a bad condition and were so incomplete that we were unable to verify the accuracy of the prices they contained.
(6) The treatment of goods received on sale or return affected the accuracy of both the Merchandise Trading Account and the closing stocks. Your records did not distinguish the dealings in these goods with the result that it was not possible to identify the recording of the whole of these transactions.
We were unable consequently to satisfy ourselves (a) that the amount included in the charge to the Merchandise Trading Account for goods sold out of sale or returned stock was correct or (b) that such goods as had not become the property of the Board were not included in the stocks.
A later remark is:
The absence of complete and correct stores invoice registers and goods inwards books made it necessary for us, in endeavouring to rectify the mistakes made in allocating the charges for goods purchased, to rely mainly on the opinions of the stores officials as to what materials were properly chargeable to the stores department.
Later, they say:
The accuracy of the amount representing the value of stocks is unreliable for other reasons also. The pricing of the stock lists and the calculation of prices was found during our examination to be so faulty that it was evident the work had been performed most carelessly. To some extent, the prices suffered because the articles listed were not properly described.
Again, they say:
An effort was made to control the movement of stores material and the stocks held in the central stores by the installation of an elaborate system of stock cards, but these records were not properly kept and the system broke down and it proved valueless for the purpose intended. The balances shown by the stock cards were not reconciled with the result of the stock-taking at the 31st March, 1930. The foregoing remarks will give some indication of our difficulty in preparing a stores account upon which any reliance could be placed, and of the many weaknesses entering into the account, which, in the circumstances, could not be entirely removed. These remarks make it obvious also that we cannot form any definite opinion as to what the actual result of the want of proper control in the stores organisation may have been.
The report concludes, and I desire to emphasise the conclusion:
We were able to satisfy ourselves that your authority had been formally given for a large proportion of the capital outlay. There was no system in operation by which the expenditure incurred could be readily identified with your authorisations, and for that reason our inquiries into this matter were somewhat restricted and, in addition, we were unable to ascertain the nature and extent of your capital commitments at the 31st March, 1930.
At a cost of £7,500, according to the Board's own report, outside staff, numbering as many at one time as twenty, were brought in to investigate, and yet, in the end, the auditors, writing on the 17th November, 1931, in relation to the accounts for the year ending 31st March, 1930, are driven to say: "We were unable to ascertain the nature and extent of your capital commitments at the 31st March, 1930." Senator Johnson asked me what were the conditions under which the old prices were made. Can anyone believe that the old prices could have had any relation to reality when it is realised that the old rates were made under those conditions?
I said I would read one further paragraph of the Board's report. I think it indicates the new situation as it is, in contrast with what I have described as, and what I am going to call, the old and bad situation:
The Board is glad to be in the position now to say that the whole ground up to 31st March, 1930, has been investigated and covered and no sums are being carried in suspense. Consequently, with the work for the elucidation of the situation at March, 1930, substantial progress has been made in bringing the records of the Board up to date and towards the compilation of the accounts for the year ended 31st March, 1931. To produce these accounts with the least possible delay the services of the auditors' staff are being retained for a further period. Circumstances now have also permitted the Board to make special arrangements having in view the early production by the Board's own staff of the accounts for the year ending on 31st March, 1932. The Board wishes to avail of this opportunity to express its appreciation of the competent and energetic assistance afforded by the auditors.
That brings hope. We have got away from the old, bad system. There has been a certain reconstruction carried out. That reorganisation, as I indicated in this House in earlier debates, has extended, to some extent, to the staff. I have confidence that, under the Board now appointed, the condition of affairs revealed by these accounts will not recur. The Board assure me that they have confidence that the reorganisation of the staff which has been or will be brought about will not permit a situation of that kind to arise again.
The policy and prospects of national electrification we must take as starting behind that point, that being one stage—what I call a bad stage—in the progress of the Shannon electrification scheme. I am afraid that I shall have to go into some details of a historical nature to get the new position clear. I shall, however, be going over ground which is familiar to most Senators and, therefore, I may be able to abbreviate my remarks. Senators will remember that the Shannon scheme, properly so called, was a scheme brought forward by the Siemens-Schuckert firm and advised upon by four experts of continental repute. The matter was first brought before this House and the Dáil by motion. Eventually, the Act of 1925 was introduced in order to give the Minister concerned power to develop the Shannon according to the modifications proposed in the experts' report on the partial development scheme, as originally submitted by the Siemens-Schuckert firm. That was a scheme estimated to cost £5,200,000; the estimated cost on the constructional side being £4,600,000, with £600,000 by way of provision for interest while the works were being built out and no revenue was being produced and also to cover later years—three years at most—when it was expected that the revenue which would be derived from sales would not equal the outgoings of the organisation. There were many variables in that old scheme which was first brought to the notice of the Oireachtas in 1924 and which received the consideration of the Oireachtas in the form of a Bill in 1925. There was the amount which the scheme might cost; there was the number of units to be sold and there was the price at which these units were to be sold. The cost was put down at £5,200,000. It was stated by the Siemens-Schuckert people, and confirmed afterwards by the experts, that if in 1932-3 the sale of 110,000,000 units could be secured at a variety of prices indicated by them, then the Shannon scheme, first system, would be paying its way and consumers in this country would be getting electricity, so far as bulk supply was concerned, at prices comparable with those of many continental cities and, in particular, Swiss and German cities. The £5,200,000 figure was, more or less, accurate. The experts advised on that. They stated that that figure had to be taken as subject to a fluctuation or allowance, up or down, of 10 per cent. on the costs of the civil constructional side. With the possibility of an increase of 10 per cent. on the civil engineering costs if a sale of 110,000,000 units could be secured in 1932-33 at named prices, then the scheme could be made pay its way. What did "pay its way" mean? It meant the amortisation of the capital over forty years, paying interest charges at 5½ per cent. while any portion of the loan was outstanding, setting aside for renewals and for depreciation sufficient to replace the entire plant in the same 40 year period, and allowing for general charges, maintenance and the ordinary type of day-to-day repair. That was the first Shannon scheme which was to cost £5,200,000, with a possible variation of ten per cent., increase or decrease, in the cost of the civil constructional works.
We passed the Act of 1925 and we proceeded with the work. It was indicated that the enactment of 1925—the conclusion of that part of the work— was not the last word in connection with the scheme. We got very nearly to the last word that had to be said on it in 1929, when a Bill was introduced increasing the sums of money placed at my disposal for the Shannon works. The increase was relatively small. From the amount stated in the 1929 Bill I am going to deduct the navigation money, which stands in a category apart. That omitted, the amount placed at my disposal was increased to £5,850,000. May I explain again what the real increase amounted to? While the 1925 Bill was going through the House many references were made to an "addendum." Modifications, it was explained, had been suggested by the experts and were being considered by Siemens-Schuckert. These modifications, it was stated, were likely to increase our costs. They did, in fact, put up the cost of the scheme by £100,000. In addition, I took into my capital account certain rentals to be paid for pole sites. I capitalised the amount that was to be paid annually for pole sites, and for that I required a second sum of £100,000. We have, therefore, for comparison the figure of £5,210,000 plus £200,000, i.e., £5,410,000 and the 1929 amount is £5,850,000. I pointed out then, and now repeat, that there was a real increase of £450,000 to be explained. I divided that sum into three parts. I said that the experts, when reporting on the scheme, had stated that they presumed—some such word was used by them—that administration costs would be borne by the State as a general charge and given as a sort of gift to the electrification scheme. These costs amounted to £150,000. I saw no reason for not charging them against the scheme, and accordingly we did debit them against the scheme. In the second place, we were making allowance for contingencies. The sum for that was £53,000. That left, as an increase in the contract itself, £247,000, of which a little more than half was to be set against the civil constructional works. Work which was originally estimated to cost £5,210,000, which figure was subsequently raised to £5,400,000, was carried out, so far as the contract was concerned, at an increase of about £247,000.
Is that the final figure? Will that pay for the whole of the original scheme?
That question I cannot answer yet. I said in 1929 that that was not the final word. I hope it is very near the final word. At any rate, to date you have the figure of £247,000 additional to the contract. When I was speaking in both Houses on the 1929 Bill I asked if I could be given an example of a work, estimated to cost as much as £5,000,000, carried through with so little addition to the original costs. I have since queried that point on many occasions, and I have not yet been able to find an example of a scheme of anything like the magnitude of the Shannon scheme being carried through with so little addition to the first costs.
The Minister has not shown that that figure is the final figure.
I do not pretend it is.
Therefore, you are not arguing on the facts.
I think the Minister should be permitted to make his very illuminating speech. Senators cannot follow the speech if the Minister is to be persistently interrupted.
Cathaoirleach
The Minister must be permitted to speak without interruption. Senator Sir John Keane can put any questions he thinks necessary to the Minister when he has concluded.
I think the point I made is germane to the statement of the Minister. I think the Minister will admit that.
The Senator should reserve his criticism until I come forward with a Bill for additional capital. The position at any rate is that the charges for current to be made by the Electricity Supply Board have to be founded upon what is before them as capital expenditure at any moment, with whatever extra amount is, in their view, likely in the future.
That is what I call the Shannon scheme proper—that £5,200,000 or £5,400,000, or £5,800,000 scheme. That is the Shannon scheme as it was popularly recognised. That is the Shannon scheme which, in this House, I was told, was likely to cost £10,000,000. I will wager anything in the way of reputation which I have that £10,000,000 will never be set down as the figure for that scheme—the scheme to produce 153,000,000 units, the scheme to sell 110,000,000 units bulk supply.
A big addition was made to this project in 1927. On that occasion we decided to establish the Electricity Supply Board. The Electricity Supply Board was in fact established later on. The members of the Board were seized of what had happened up to date, advised what the actual estimates put before us were, what increases we foresaw in those estimates at that particular time, and what we envisaged as likely in the immediate future, and before the task was through. They were established as an independent Board, but certain directions were given them with regard to their method of operation. I come once more to the clause I read so often in the earlier part of this year. In earlier clauses the Board had been given complete control of the Shannon plant. They were given power to take over any plants in existence belonging to any municipal body or belonging to any private company. Different methods of taking-over were arranged, and, with regard to undertakings in the hands of individuals, it was laid down that, unless by agreement, these undertakings could not be removed from them. The Board was then told generally to develop the use of electricity in this country. They were given a certain sum of money for their operations. They were told that that could be expended in particular ways. Finally, they had to assess charges to consumers, and they were given a direction with regard to their charges in Section 21 in these terms:—
All charges made by the Board on or before the appointed day for electricity (whether derived from the Shannon Works or otherwise) sold by it in bulk or direct to consumers and for goods sold or services rendered by it shall be fixed at such rates and on such scales as are in the opinion of the Board most conducive to the Board being from and after the said appointed day in a position to comply with the next following sub-section of this section.
The sub-section referred to is as follows, and it is the governing portion:—
All charges made by the Board after the appointed day for electricity (whether derived from the Shannon Works or otherwise) sold by it in bulk or direct to consumers and for goods sold and services rendered by it shall be fixed at such rates and on such scales that the revenue derived in any year by the Board from such sales and services, together with its revenue (if any) in such year from other sources, will be sufficient and only sufficient (as nearly as may be) to pay all salaries, working expenses, and other outgoings of the Board properly chargeable to income in that year (including the payments falling to be made in such year by the Board to the Minister for Finance in respect of interest and sinking fund payments on advances out of the Central Fund) and such sums as the Board may think proper to set aside in that year for reserve fund, extensions, renewals, depreciation, loans, and other like purposes.
I divide these items for clarity in this way: They were bound to make their charges so as to cover certain things, and they might make their charges so as to cover other things or so as to cover such proportion of those other things as they thought proper. They had to cover salaries, working expenses, and other outgoings of the Board properly chargeable to income in the particular year, including the payments falling to be made in that year by the Board to the Minister for Finance in respect of interest and sinking fund on advances out of the Central Fund. These they had to cover. In addition, but rather optional or at discretion, there was reference to "such sums as the Board may think proper to set aside in that year for reserve fund, extensions, renewals, depreciation, loans, and other like purposes." I have divided these charges purposely into what they must cover and what they might cover.
Before explaining my purpose in this, I would like to say here again, speaking of the independence of the Board, that when I was moving here to establish the Board I did indicate that the consideration for the great independence we were giving them was that we should have the fullest possible publicity regarding their affairs. We were to have published their accounts and several reports on those accounts, the auditors' comments on the accounts, and whatever further information the Minister might think fit to ask from them concerning their finances, and might think fit to have published. I assume, under this scheme of publicity, that if the Board did not set aside anything at all for reserve fund, extensions, renewals, depreciation, loans and other like purposes, the Oireachtas might have something to say to it, and would certainly have the right to pass comment upon the lack of provision. That was the scheme to which Section 21 must be related.
I think, therefore, that in all the circumstances the implication of that paragraph to any body of prudent men was that they should inquire as early as possible and make sure what interest rates were going to be charged and what payments by way of sinking fund they were going to be asked to make. These were surely the implications in the last part of the sub-section. When the Oireachtas, passing the Act, pointed to such things as reserve fund, extensions, renewals, depreciations, loans and other like purposes they must have meant it as an indication that some provision would be required from prudent men on those points. What steps would any prudent persons take to discharge the obligations of that paragraph? They would be, I imagine, first to inquire what was going to be put upon them for interest and sinking fund and, secondly, considering the section as a whole, to budget, in the proper sense of the word.
Can anybody believe from what I have read from the 1929-30 report that there was anything remotely approaching what could be described as the operation of budgeting done by these people? If there is any further comment required I can say that I have it from the members of the present Board that their own view is that nothing in the nature of budgeting was done, that there was no advertence to Section 21 when they struck their first charges, that they simply decided on charges more or less in vacuo. That section, whether it did or did not rule the Board in its first period, must rule it now. That is the section by which the Oireachtas gave them their orders. Definite orders are given, in the first part of the subsection, and an indication of the point of view of the Oireachtas emerges from the second part.
I have said that confessedly the Board did not advert to Section 21 when the first rates were made. I add now this further statement that such advertence was impossible as the Board never had before itself a picture of its own affairs until August and September of this year when, arising out of the debates here and out of certain contact I had with them, a report was prepared—an estimate of their position around the period 1933-34. That was put before the Board and considered by them over some months. It was modified by them in some detail and substantially adopted by them. From that I can give an indication of what the situation is likely to be after the Appointed Day. But before I give those figures there are a few points with which I would like to deal.
The whole trend of the 1927 Act was clearly to make the Board independent. But it also tended to put it, as far as it could be done, on a commercial footing. When we thought of making it independent, but also of requiring it to be governed and guided as a commercial undertaking would be, we felt they should co-operate under Section 21 so as to become not only independent but also a first-class commercial concern. Into such a context I wish to bring the question of sinking fund and interest charges. I have already stated publicly, in answer to a Parliamentary question, that we have not exactly determined either the rate of interest or the period over which capital must be amortised. We have given an indication and have made suggestions in that way. We could not determine exactly, as we did not know at the time whether the situation would allow of certain payment being made. But I am aware that there is considerable comment as to why a board of this type should be compelled to amortise its capital even over a very long period and pay interest charges on its loans. I think that very little argument is required on this. If it requires any, I give this in answer. The Government have to relate both the rate of interest to be charged to this Board and the period over which the money must be repaid to the rate of interest at which the Government itself can borrow and the period of years in which it must repay. Within the period so established there must be advertence paid to a second principle— that it is wrong to leave outstanding money spent on assets beyond the life time of those assets. If the Board were an independent company looking for a loan from the public it would certainly have to relate the amortisation period or rate of depreciation to the life of the assets they were going to acquire or create with the moneys they borrowed.
If we who finance the Board do not insist on getting from the Board a rate of interest equivalent to what we have to pay, and if we do not have it repaid in the period in which we must repay ourselves, then the taxpayer is going to be brought into the scheme. Up-to-date my first concern has been that the taxpayer is not to pay one shilling for this concern. His credit might be lent for a period, but he was to be reimbursed every penny he lent.
Approach this question from another quarter: This Board has not to pay dividends like an ordinary commercial undertaking. Instead of that it has to pay interest plus sinking fund. At the moment we take the rate of interest at about 5½ per cent., the sinking fund arrangement will bring that figure to 7.3 per cent. That after twenty years drops to about 6.4 per cent. An ordinary commercial undertaking of a good type will pay in dividends at least as much as 7 per cent., so it cannot be said that in imposing that obligation on the Board we are making any greater demand upon it than would be made on a good commercial undertaking. And it must be remembered that in addition to dividends most good commercial undertakings do depreciate their plant. Whether that should be done in its entirety here is a matter for consideration. It was proposed in the original scheme. The Siemens-Schuckert people projecting this scheme put it up in such a way that the bulk supply system would pay interest, and a sinking fund sufficient to amortise the capital in forty years, and they also proposed to depreciate the whole works at the end of forty years. Here is what the experts, reporting on the Siemens-Schuckert proposals, said:—
Full amortisation in forty years has been assumed. As the quotas for the sinking fund have been put high enough to permit a replacement by degrees of worn parts, this implies that the Free State would own the plant in first-rate condition, free from debt, after forty years.
First-rate condition?
Yes. The Siemens-Schuckert plan, as advised upon by the experts and as accepted by the Oireachtas, included interest payments, amortisation, and depreciation at such rates that the entire plant would be covered in the forty years' period. Whether that should be done here, or Whether it can be done, is another matter. But apart from what Siemens-Schuckert put up in regard to this scheme, the practice of municipally-owned electrical undertakings in England is that all this is done. Interest, amortisation and depreciation are all covered, and covering all three is not regarded as anything unusual. It is the common practice.
It might be regarded as a hardship.
It might by people who want benefit immediately. This, too, is the practice of State-owned concerns where I have been able to get track of them; it is the practice in the Ontario Electricity Scheme, which is the biggest one falling for consideration. And it seems to me, viewing the principles upon which good commercial firms operate, to be established as the proper procedure to be followed. We shall see later if it is now possible with this scheme.
When I speak on this point of amortisation charges and depreciation charges I expect to be met with the argument about putting too much on a scheme in its early years. I want that phrase, infant undertaking or early years, in connection with this undertaking related to facts. What are the facts? When we first proceeded with the scheme there was undoubtedly great clamour that we were looking to a development of electricity consumption which would have to raise the electricity sales from the point they were then at to just double that amount by 1932. In reply I often pointed out that if one took the automatic rate at which demand was increasing in the country year by year there was very little doubt, on the automatic increase only, that the doubling would have been achieved by the year 1932. In fact, the doubling has been achieved. This Board came into possession of a scheme which was estimated to sell current at a rate which was advantageous to good sales, and at such a rate it had to double consumption. But it had to double it in a country where the consumption per head of the population was so low that a big increase in consumption was to be looked to immediately, and it began its operations at a time when automatically the increase was such that the conclusion was easy that by 1932 the consumption required for the scheme would have been reached. In fact, that consumption has been reached. It has been reached by, for instance, the absorption of the Dublin electricity consumers—by counting them as the Board's consumers. No one can say that the Dublin electricity undertaking was in an infant stage, was in its early years. Can that be said either with regard to the Cork plant or the Limerick plant? If there is any plea to be made in regard to infant undertakings, it can be made only in relation to those areas where there was no electricity undertaking in existence when the Board took over. Even there the Board were able to offer prices which bore a favourable comparison to the general average of the old prices. That comparison was attractive, 3d. in contrast to 8d. in the olden times. Undoubtedly consumption was bound to be affected, and progress was bound to be very speedy, and in all the circumstances I do not think the phrase "early years" or "infant undertaking" can be used with any precision in regard to this scheme.
Recently, this summer, changes were effected in the Board. After that, and after study of a report which they had under consideration in August and September of this year, the new Board decided—on their own—on three pretty definite changes. They arrived at a decision on two points more or less immediately; they postponed a decision on the third point until they made investigations as to whether there were other methods of increasing revenue. When they came to the conclusion that there were no other methods they took the third decision—to increase the tariff rates. By comments made outside and in the Dáil I know that a suggestion has been put abroad that the Board came to this decision under dictation from me or under my influence. That is not so. I have the authority of the Board for saying it is not so.
The Board are entirely and solely responsible for what has happened in these three matters that I am going to talk of. As far as I was concerned I confined myself to pointing out to them their obligations under Section 21 of this Act and asking them what provisions they intended to make to meet these obligations.
May I here refer to the discussions of the early part of the summer merely to say that the suggestion has recently been made that one of the major matters of policy which led to certain resignations was this question of an increase in rates? That was not the case as far as I am concerned, and it was never revealed to me that on the question of rates the resignations took place. But I am little concerned with the reasons that prompted certain people to resign. I did, however, state clearly what prompted me to accept the resignations that were sent in. There were three reasons—I have referred to them already. They were— (1) an undertaking given to me had been broken; (2) a development necessitating further capital had been inaugurated without the Oireachtas having any chance to determine whether that development was good or bad or should be financed by them; (3) the whole system of accounting, and the whole finances of the Board were in such a hopeless state that those responsible for them certainly had to be replaced by others.
On the new policy I do not claim to know the Board's mind, but I understand the Board has developed its new line of policy with definite advertence to Section 21. In August or September of this year the Board, for the first time, got a good view of its situation, and proceeded then to relate its future proceedings to Section 21, the section which should have governed its proceedings from the start. I do not know why, in pursuance of this policy, the Board made a particular increase in rates instead of a different one. I do not know why they made certain discriminations as between certain types of consumers or between different towns. For that the Board took, as they must take and do admittedly take, full responsibility. I do know, however, what results from it all. From that report of August and September of this year the Board first got a view of itself and of its operations in and about the year 1933. I will take the years 1933-1934, because, in answer to a letter addressed to me, I replied to the Board that the Minister for Finance proposed to fix 1st April, 1933, as the Appointed Day, that 5½ per cent. was the interest rate to be charged, and he proposed to fix the following periods as the periods to set against various blocks of the Board's capital: That portion of the Board's capital which was engaged in the Shannon works had to be repaid over a period of forty years, that portion of this capital which was associated with the Board's own works had to be repaid in twenty years, and capital for everything else—interest and other matters —had to be repaid over the same period of twenty years. Those periods date from 1st April, 1933, and to that extent they depart from the principle I first spoke of. When I said a moment ago that forty years had been indicated by Siemens-Schuckert as the life of the plant in the original scheme, I do not mean that the period of forty years was precisely the period for each item. Forty years was the period which related to the whole plant, not to each precise item. We made the Board's payments start from 1933, though the life of the plant should begin at least four years earlier. On some sections its life runs even earlier than that, because some of the plant was built prior even to 1929. We are, therefore, spreading the period of repayment on a plant that is assumed to last forty years over forty-four years. Similarly with regard to the Board's own plant it is assumed it will have a life of twenty years, and the repayment period covers twenty-three years.
The Board in August and September of this year had produced to them trial accounts relating to its position in the year 1933-34. On those they faced annual deficits of about £50,000. The realisation of this drove them to certain decisions, enabling them to readjust their accounts.
I do not intend to go into details of the items of the new accounts at the moment. The general picture is, however, this: They believe that now they can get—they did not have this belief last September—in an ordinary year about £1,232,000 per annum as revenue. Against that they must set interest and sinking fund payments to the extent of £713,000. The division of that sum would be: £543,000 interest, and £170,000 sinking fund. Operation costs, fuel, oil, maintenance and repairs amount to about £150,000 a year, general charges and management to £184,000 a year, and the liabilities of the acquired undertakings to about £90,000 a year. These figures give a total of £1,137,000, as against an income of £1,232,000—a carry-over of £95,000.
Is that based on existing tariffs?
If the Senator will allow me I shall explain. In order to achieve this result the Board had first to decide three points of policy. The first concerned their expenditure. They recognised that their expenditure was too high, and they felt bound to make economies which, they believed, would amount to as much as £30,000 a year. The second point related to consumption. They decided slightly to divert their policy with regard to consumers, to direct their sales away from the less remunerative consumer more consistently than had been their practice up to date. They believe that, by adopting that method when increasing consumption, it will bring them in an additional £32,000 per annum. Finally, they increased their rates. They believe that the increases announced will bring in about £80,000 a year. But it must be stressed that before they took these three decisions the position revealed in their September deliberations was that their base year, 1933-34, instead of allowing a carry-over of about £95,000 a year, showed a deficit of £47,000—and that although not a penny piece was being set aside for reserve fund, extensions, depreciation, loans, or other purposes.
A serious situation, and one tending to complete disaster, was recognised by the Board when they realised that the original account would have shown a deficit of £47,000 in a year in which no allowance whatsoever was made for depreciation, and not a penny set aside for extensions or for any of the other purposes set out in Section 21 of the Act. To avert the disaster, they advanced step by step. By economies in expenditure they saved £30,000 a year. That reduced the prospective deficit to £17,000. By aiming to get in an additional £32,000, on the plan of adapting their methods to attract more remunerative consumers, they hoped to turn that deficit of £17,000 into a surplus of £15,000, and finally, by increasing the charges, they budgeted for a surplus of £95,000 in all. The new tariff rates, the savings of £30,000 if they are effected, and the increase of £32,000 by this new diversion of policy if it is successful, will give this £95,000 as the amount which they hope to carry over in any one year for reserves, extensions, renewals, depreciation, loans and other purposes. That is the position the Board will find itself in in 1933-4, but only if these three things work out according to their estimates.
Some of these items of the balance sheet may have to be queried further. It is quite clear that the first item of £713,000 on the expense side will not show any reduction. I have queried to myself, and I know the Board has queried, the items of £70,000 and £80,000 on operation costs, fuel, oil, maintenance and repairs, and the estimate of £184,000 for general charges and management. These are the lowest they can bring these items, even after effecting a saving of £30,000. The only item left is the £90,000 which has to be paid in liquidation of the undischarged liabilities of acquired undertakings. This amount will reduce year by year and will finally disappear, but what other charge will come in its place has yet to be determined. That sum of £90,000. I should explain, represents liabilities undischarged by the local undertakings that the Board has taken over, and it is to be presumed that generally these local undertakings borrowed for the purpose of providing themselves with certain electrical assets and proceeded to amortise their capital so sunk over periods which were somewhat strictly related to the life of these assets. One has to consider whether, when that sum of £90,000 disappears from the expenditure side, there will not also have disappeared certain assets which the Board took over into its possession from the local authorities, and whether, consequently, for the replacement of these assets they may not be forced to incur fresh capital expenditure with the inevitable consequence of additional sinking fund and interest charges.
I am told that a certain amount of that £90,000 can be set aside as not recurring. That item of £90,000 will decrease year by year until finally, and I think quite soon—I should say within a decade—it disappears. It will not thereafter appear as a full £90,000 item, but as something less, how much less I do not know. But whatever it is less than the £90,000 then, by that amount, it can be added to the £95,000 that the new revised accounts show as a carry-forward to reserve.
Whether this £95,000 accumulating to reserve is sufficient cannot yet be decided. It is a goodish sum, but if the original Siemens-Schuckert plan with regard to full depreciation on the Shannon Works was to be carried out, and if the Siemens-Schuckert scale of depreciation related to the Board assets was applied to the Board's works, depreciation would have amounted in any one year to £200,000. If, therefore, the Board do succeed in getting £95,000 from year to year and carry it forward they are fulfilling about 50 per cent. of their obligations in this regard, meeting about 50 per cent. of the depreciation charges that the original scheme provided. It may be that even that is an extravagant amount, but for the moment I think that the Board is to be commended for recognising the gravity of the situation presented to them in August or September of this year, and for deciding to increase the rate to a point which would bring them in about £80,000 and so enable them to carry forward something to meet their obligations under Section 21.
I said at the beginning that I was not prepared to speak in a decisive way on this because there is still an amount of detail to be got out. But inasmuch as certain details have been got out to that extent we are much better off in relation to the E.S.B. than we ever were in the history of that Board. We have got the picture that I have given, for what it is worth. There are some things in it that may be variable. It may be said, for instance, that the estimates may go wrong. That is always so with estimates, but when I used the phrase previously that their best estimate of revenue was one of £1,132,000, I do not mean "best" in the sense of meaning "most optimistic" but rather as "most accurately envisaged." I do not believe that that estimate has been drawn up in any over-optimistic vein. I do not think it is deliberately conservative. It does not err as far as it goes on either side, but it is as good a picture as circumstances allow the Board to get at the moment.
Could the Minister give this year's estimate?
I cannot, not just now, as I have taken another year. It is only after the appointed day when sinking fund payments have commenced, that you can get a true picture of what the Board will have to meet. If from the earlier years we got a nest-egg from surpluses arising out of this year, so much the better, and if there is a deficit then that is something additional that will have to be met later on. The only policy about the intermediate years is to secure that there will be investigation and supervision by the Board, so that if there is going to be a deficiency in the early years it will be kept as low as possible. The point on which people want to be reassured is the main years, after the sinking fund payments have begun to be met.
I do not know whether full depreciation was the proper thing to demand, but I do know that the first scheme allowed for full depreciation. On the original scheme of £5,800,000 if the 110,000,000 units were sold in bulk at the price of .9d., then the first Shannon scheme would be not merely paying its way as regards sinking fund, interest, full depreciation, renewals, maintenance and management expenses, but would be carrying forward something to the betterment of the second scheme—the distribution scheme. That, in fact, is the actual position this year. The price of.9 of a penny is, of course, somewhat of a hypothetical figure. As a bulk price it might be too high to attract purchasers. But that was the figure that we went on at the time. The first price was .84 of a penny, but that was raised to .9d. by reason of the additional costs indicated in 1929. At .9d. per unit over all the units generated in the partial development, I can say that all the costs of the first Shannon scheme are being met.
As regards the new prices with which consumers are faced there has been considerable agitation. I can understand well why there is annoyance over the increased prices. I believe it is due to the fact that people have not stopped to consider whether the new charge is fair or unfair, but simply found a grievance on the fact that a change in prices has been made. I believe that if the Electricity Supply Board had in its early years fixed the present prices instead of the old ones no one would then have objected. I believe that most of those who are complaining now do so simply because there has been a change. Some may have a more legitimate grievance, because in some not very numerous instances they can say that they were induced into a bigger use of electricity than otherwise would have been the case simply because they were offered what they thought to be very favourable terms. The complaint even of these people can, I think, be minimised by the fact that any one must have realised that the first rates could only have been experimental. Anybody who has read the auditors' reports must now know that the first rates were definitely experimental. And as to the new rates, it may save further agitation if I explain by comparison the result of their imposition. It is difficult to make a detailed comparison with towns where, prior to the Shannon, undertakings already existed, because only very few of the undertakings in those towns have been, when taken over by the Electricity Supply Board, in operation for a full year. For that reason no very extensive comparison can be made. If Senators wish to get a general view of the prices that were charged I would refer them to the report of the Board for the year 1928-29. In Appendix III. to that report they will get a list of all the towns then getting a supply of electricity from local undertakings, and the exact rates they were paying for electricity. A rapid glance through these rates, remembering that the towns' average price from the Shannon, even with the recent increases, does not exceed 4d. per unit, will show how provincial consumers have gained. The only other detailed and exact comparison I can make at the moment is to take the towns which for a full year have been worked by the E.S.B. In Bray at the moment the average price per unit for all purposes is about 4½d. It used to be 8d. for lighting, 8d. for heating and cooking, and 8d. even for power. In Clonmel the rate is now 3.29d. It used to be 1/- for lighting and 6d. for heating and cooking, and from 2d. to 4d. for power. In Dun Laoghaire at the moment they are getting electricity for all purposes at a decimal point over 3d. They used to pay 8d. there for lighting and 3d. for heating and cooking. In Enniscorthy, at the moment, they are getting it for 4d. The rates for lighting, for heating and cooking, and for power are 1/-, 4d., and 6d. respectively. In Thurles the price is nearly 4½d., while they used to pay 10d., 2d. and 3d. In Listowel the price is 2d., where it used to be 10d., 5d., and 5d. In Charleville the price is 2.7d. Formerly it was 10d., 4d. and 4d.
Is the Minister speaking of the average? Do these figures include the price to large consumers in bulk supply?
No. We have to take the average because the Board's price runs on a single meter system, and it is really a domestic convenience price. Where it is provided on light or heating it is impossible to determine. I think one may say that there are no power users to any great extent.
Do these figures include domestic charges?
These are domestic charges. In Portarlington the price is 3d. where it used to be 1s. 3d., 6d., and 6d. I now take Dublin, which, I think, is the best example. The price in Dublin before the municipal station was closed down was 2.7d. The rate at the moment is 2.3d. Dublin represents the area of the country in which electricity users got the best that any good concern could supply. Even in Dublin, and on the new rates, we can challenge comparison with the old charges that were made by the Dublin electricity undertaking. A very large number of items enter into that final calculation, and the comparison will have to be gone into in detail hereafter. For example, in Dublin there was a tremendous increase in the rating just before the Electricity Supply Board took over. But I take Dublin as the example by which the Shannon scheme charges will be most severely tested, and even there the comparison is favourable. In the case of Dublin the E.S.B. can supply at 2.3d. where current was supplied previously at 2.7d. That omits traction, and, I think, also cuts out street lighting; it certainly omits traction.
I take another comparison. There is a return published by the Electricity Commissioners in England of undertakings all over England, Scotland, and Wales. To get a comparison properly made, we may take the averages struck for different types of electrical use divided in this way:—Use of electricity for ordinary domestic lighting and heating; secondly, electricity for public lighting; thirdly, traction; and fourthly, for power. The average price in England for the year 1930-31 for domestic convenience, heating and lighting would be 2.86d.; public lighting 1.9d.; traction .81d.; and power .82d. The old rate here for domestic convenience was 2.73d., as opposed to the English price of 2.86d. The old price of 2.73d. here is now about 3d. Therefore, the comparison between our new prices and the English price would be 3d., as against 2.86d. in England. For street lighting and public lighting the English figure is 1.9d. The figure here is 1.60d. For traction purposes, the English figure is .81d., and the Irish figure 5d. For power, the English figure is .82d., and the Irish figure 1.5d.
Can the Minister say, for instance, what were the traction costs of the Dublin United Tramways Company before?
I will come to that later. The comparison I have made cannot properly be understood, or, I should say, it is hardly a proper comparison unless certain points are taken into consideration. The sale of current in England for domestic convenience is fifty times as large as it is here. Then, as far as England itself is concerned, they have cheap fuel at hand. There is also the point that they have large centres of population, so that you have more consumers per mile of distribution system there than you have here. Further, I think it would be very rare to find an English town with a population of 2,000 and under with any electricity supply. Our original scheme proposed to carry current to all towns and villages with a population of 500 and upwards, and certainly brings it to a big number of places under the 2,000 mark.
I take one return that will give a slightly more accurate comparison. I have got taken out at random prices in undertakings in a certain number of areas in England, with a population of 5,000 and under. There are a number of stations here, some twelve or fifteen. The average price per unit for all purposes, heating and power and everything else, is over 6d. The average price here is not more than 3d., and that on the new charges.
The Board will have to make up its mind hereafter as to whether or not they will keep at the present rates or return somewhat nearer to the old rates. It seems to me, while that specimen balance sheet for 1933-34 only shows a carry-over of about £95,000, the Board would be imprudent to go back to the old charges, particularly when the new charges can bear such a good comparison with both the pre-Shannon prices in this country and present prices in England. It may be argued, on the other hand, that the carry-over of £95,000 is not sufficient. If Senators read another pamphlet that has been issued by the Electricity Commissioners in relation to development in rural undertakings they will see it there asserted that the properly remunerative station ought to earn about 20 per cent. on its capital. That is in relation to a fuel station, and a difference must be made as between that and a hydro station. If one takes the figure of 20 per cent. as a proper figure to be earned by a fuel station, that 20 per cent. would be reduced by some two or three points to be properly applicable to a hydro station. There are two or three places with which we were able to get a hurried comparison. The hydro-electric of Ontario earns about 14 per cent. on its capital. On that revenue estimated here for 1933-4 the Electricity Supply Board would have earned about 12 per cent. on its capital, that is with the new charges working out as estimated. Two stations in Switzerland, the Berne Cantonal station and the North East Swiss station, earn about 16 per cent., and these are hydro stations.
On all these comparisons, the Board is certainly not aiming, as far as I can see, at too big a price per unit over all the units it sells. If the revenue it hopes for is secured it will bring in about 2d. per unit for all units sold and about 1.6d. per unit for all units generated. The question is whether in aiming at that point they are imposing too much of a burden on the electrical consumer or, not imposing enough, and so jeopardising the taxpayer. I have stated earlier that the first concern I had in this whole matter was that the taxpayer was not going to be called upon to pay a shilling towards the concern. That is the first concern we must have. After that the electricity consumer is our next concern. He must get electricity at the cheapest possible rate. But there must be a balance struck as between these two, as you must not cheapen the cost to the electricity consumer so as to bring into jeopardy the funds of the public. The Electricity Supply Board has, at any rate, got for the first time a view of its own situation and having surveyed that situation it decided on this increase entirely on its own responsibility. Why they discriminate as between areas, and why they raised the price to a certain point I do not know and I do not think it is my business to enquire into these matters. I alluded before to people who might with some justice complain about these increased charges. I think people hereafter would have more justice in their complaints if, after this investigation of the position the Board decided in August and September of this year that they would stick to the old prices. I think the consumers who would come on at this point would have good cause for complaint if hereafter the rates had to be raised. In the old situation the rates were clearly experimental, there was no advertence to the obligations imposed, no appreciation of the burdens the Board had to carry, but in the new circumstances if with a full appreciation of what they had to meet they enticed new consumers in at the old rates and later on raised the charges these new consumers would then have considerable grounds for complaint. So prudence and honest dealing both dictated that the Board should make these changes.
I must return to one point to which I alluded earlier. I make a sharp distinction between the Shannon scheme proper and the later addition to it. The Shannon scheme proper was a scheme which was estimated to cost £5,200,000. A month later if that scheme had been put through the Dáil the cost would have been £5,300,000 and if one had capitalised the rentals for pole sites it would have been £5,400,000. The addition which has been made in that scheme to date is £450,000. The Shannon scheme has not cost this country ten, twelve or fifteen million pounds as has been urged by orators through the country. The Shannon scheme has cost at the very most, neglecting the reasons for the increases, £5,800,000. The Electricity Supply Board were given two and a half million pounds for their purposes. This year I got an advance of an additional two million pounds. That two million pounds has not been expended. The expenditure of the Electricity Supply Board to date, including the undischarged liabilities of the municipal undertakings acquired by them, is about three and a half million pounds. You have, therefore, something under six million pounds for the "scheme", plus three and a half million pounds supply money, for the production, transmission, and sale of 110,000,000 units bulk supply, that is to say the number of units envisaged under the original Shannon scheme which looked only to the bulk supply. But that expenditure of nine and a half million pounds will, in fact, allow for the production and sale of more than that number of units. So that definitely that nine and a half or ten million pounds capital has to be related, not to the number of units looked to in the original Shannon scheme but to something more, and if the additional million I have in hands is expended it will only be expended when further additional units have to be generated and sold. There may, therefore, be later on a ten million pounds composite business. But the original Shannon scheme was not a ten million pounds business. It was less than six millions. The Electricity Supply Board addition to that is about three and a half million pounds. When the two sums are added together and capital charges, etc. are met the Electricity Supply Board, even on the increased charges, will give consumers electricity at such rates that I can definitely say that there is no area in this country which is not getting electricity cheaper than it did before the Shannon scheme came into operation and that statement is accurate even on the additional capital expenditure and with the increased rates. I say further, as I have already shown, that these charges that the Electricity Supply Board are making bear a very favourable comparison with comparable institutions in England.
One question was raised, I understand, in the debate as to the calling in of experts. If experts have ever to be called in I doubt if the time has yet come. I allude again to what I said about being unprepared in certain ways. I am unprepared to some extent because I did not know what line the debate was going to take here. I am also unprepared because there is certain information which the House should get some time, but which it cannot get now. Although in the summer I was inclined to agree that experts were required and should be called in, I begin to weaken in my attitude towards that. I do not know what the experts are wanted for. There are economic calculations to be made. If one wants a comparison with other countries that can be provided, and the country will then have to make up its mind whether in the future it is going to meet, in a full and proper way, the obligations which ordinary undertakings of this type shoulder. Experts might be required on technical points to say whether the power house is properly built, whether after some years' experience it can be said that the machinery is good and sufficient for all its purposes, whether the transmission system is properly planned. On that we have had expert advice. Not merely had we experts writing reports on the original scheme, but two of them have visited the country on several occasions since the scheme was planned and have from time to time reported upon how the scheme was proceeding on the technical side. In addition, one other expert, a Swiss, was brought in to report upon certain matters that were referred to him in particular. All the reports received have been favourable. I doubt very much if any further expert advice is required or that it would add anything to what we know already about the scheme. The thing that really, I suppose, dissatisfies and disquiets people is the increased charges and people want to find out whether certain sums ought to be put aside and how much, whether there might be some deduction from the original scheme with regard to full depreciation such as is actually now being forced upon us, or whether we might go back to the original rate of depreciation over a forty year period.
That, I think, is not a matter for experts, so called. It is a matter for the people of the country, speaking through their representatives in the Oireachtas, to say what they want done after seeing what are the difficulties and the dangers in the way. I do not think that either House can give a proper judgment on all this until a later stage when we have got the accounts for 1930-31 and the auditors' comments upon those accounts. I am informed that these accounts are in preparation, that the system now is much better than it was and that it is expected that those accounts will be audited and in our hands somewhere in February or March of next year. That being the situation, I suggest, in answer to the Senator's advice about calling in experts, that that matter should be postponed, if only for the three months, when it may again be raised. I have given as much information as I could get in the time at my disposal. I hope that I have given enough to prevent any further sabotage of the scheme and any further comments of a wild nature as to this scheme involving an expenditure of fifteen million pounds. There is no question of fifteen million pounds, fourteen million pounds or thirteen million pounds. The expenditure at the moment is something less than ten millions. Senator Sir John Keane has asked specially and has referred a couple of times to a certain other charge that may fall. That matter is peculiarly situated at the moment. I cannot speak with any precision upon it. All I can say is that I am not dissatisfied with what is likely to happen with regard to that. I have no great fears with regard to it. I would discuss that with more detail if it was not in the particular position in which it is. The Senator must wait for information on that point also for a few months.
I want to say, on behalf of the House, that I think we owe the Minister a very great debt of gratitude for his extraordinarily clear and lucid information. I know that these things are extremely technical and very difficult to follow. He has shown a command of figures and details which really I think is marvellous. There was a question that I wanted to put. It is stated on page 6 of the Report that no sums are being carried in suspense. That, I think, is an exceedingly important statement. I should be glad to know whether the Minister himself thinks that that is a desirable state of affairs, and that we need now have no fear that irregularities of the kind that occurred during previous years are likely to occur again.
I thank the Minister for his very complete and illuminating statement. With regard to the suggestion about an expert inquiry, I have only to say that you have got this very subtle and elusive thing called public opinion to deal with. Public opinion, I am sure, would be reassured if you were to have what I suggested, a really expert inquiry, because there is uneasiness. I believe it will be met in no other way.
I might say that I am disappointed that we cannot debate the Minister's statement. I think it is very disappointing and hardly fair to the House. I would ask the Minister one question. Can he give us the figures of the units of consumption at the moment or in the last month?
This year they will amount to something over 110,000,000.
Cathaoirleach
Of course when you have time to digest the statement of the Minister it will be possible to have a new motion, if you so desire. Then there will be plenty of time for speeches.
I will accept that suggestion.
Is the Minister now satisfied with the co-ordination of the various departments?
That is not my business, but I understand the Board are now satisfied with the co-ordination they have achieved, and that it will prevent any of this confusion occurring again.
Cathaoirleach
That concludes the business, and it will not be necessary, I think, for the Seanad to meet again until 20th January. I extend to all the members of the House the compliments of the season.
The House adjourned at 8 p.m. until Wednesday, 20th January, 1932, at 3 p.m.