Waterford Gas Order—Motion of Approval (Resumed).

The Gas regulation Act, 1920, enables the Minister for Industry and Commerce to extend the powers of statutory gas undertakings by a Special Order, which, before it is made must be laid in draft before both Houses of the Oireachtas. The Oireachtas may, by Resolution, approve the draft Order in the form submitted or may approve it with modifications or additions. Under the Gas Regulation (Special Orders) Rules, 1940, a gas undertaking desiring to obtain fresh powers is required to give public notice of its intention to apply for the making of the Order. If there are any objections to the making of the Order the Minister may direct the holding of an inquiry, in the light of which he may modify, or refuse to make, the draft Order.

The City of Waterford Gas Company have applied to the Minister for a Special Order altering certain provisions of the City of Waterford Gas Acts and Orders, 1858 to 1949.

The following are the principal objects of the proposed Special Order:—

(i) To increase the authorised capital of the company from £80,400 to £250,000. The additional capital of £169,600, which may be raised by way of Ordinary stock or Preference stock, is required for the renewal and extension of the company's plant, the extension of supply mains to new housing areas in Waterford and the repayment of a bank overdraft.

(ii) To increase the borrowing powers of the company to an amount not exceeding the aggregate amount of the paid-up capital of the company. The additional borrowing powers may be exercised by the issue of debentures or debenture stock. A development programme commensurate with such a considerable increase in its borrowing powers is not immediately contemplated by the company. They wish, however, to obviate the necessity for seeking increased borrowing powers from time to time and are bringing these powers into line with common commercial practice by relating the permitted borrowing to the amount of paid-up share capital of the concern.

(iii) To increase from £3,000 to £12,500 the maximum amount which can be set aside out of the net profits of the company in any year towards a redemption fund, to be applied in redeeming any loans, mortgages or debentures raised by the company.

(iv) To authorise the continuing directors to act notwithstanding any vacancy in their number, provided that, if the number of directors holding office is less than three, they shall not act except for the purpose of filling a vacancy. The City of Waterford Gas Act, 1858, fixes the number of directors of the company at not less than three and not more than five.

(v) To authorise the company to capitalise undistributed profits, by making an issue of ordinary stock to be distributed by way of bonus to the holders of the consolidated stock of the company.

In accordance with the statutory requirements, notice of their intention to apply for the Order was given by the City of Waterford Gas Company. Notice was given (a) by publication in Iris Oifigiúil and in a local paper and (b) by sending copies to Waterford Corporation, Waterford County Council, the E.S.B., and certain Government Departments. No objection to the making of the Order has been received.

The draft Order is in a form acceptable to the City of Waterford Gas Company, and I now move that the House formally gives its approval to it by passing the resolution.

I am grateful to the Parliamentary Secretary for this explanation which answers some of the questions I had in mind and which arose from my reading of this Order. I notice that the Parliamentary Secretary said at the beginning that it was a draft Order which we have the right to alter, if we see fit. The section of the 1920 Act under which the Minister is making this Order states:—

"Before any special Order under this Act is made, it shall be laid in draft before both Houses of Parliament, and such Order shall not be made unless both Houses, by resolution, approve the draft, either without modification or addition or with modifications or additions to which both Houses agree."

I think the Parliamentary Secretary has made it clear that it is within our competence to modify this draft Order, or to add to it. I notice, as the Parliamentary Secretary said, on page 3, that there is a decision to limit the dividend rate—I am referring now to Section 5 sub-section (1)—to 7 per cent. That seems to me to be too high. I am in favour of the principle of limiting the dividend for such a public utility as this, but I would contend that 5 per cent. is quite sufficient in a public utility concern of this kind.

It would not be in order for me to argue here that this kind of service should be in municipal hands, but I think I can contend that a 5 per cent. dividend maximum is quite sufficient, from a public utility, where the price of the commodity, gas in this case, is very closely related to the public welfare. It is a fact that in Dublin at one time there was an agreed sliding scale, and a practice—which I am afraid no longer operates—whereby, if the company wished to increase the dividend above a certain amount, they had to decrease the price of gas per therm by, I think, one-fifth of a penny for every ? per cent. increase in dividend. I think that is a good principle, if we say to a gas company: "You want to increase your dividend and we should like to see that linked with a reduction in the price." That gives them an incentive to reduce the price. That is quite an agreed principle in relation to gas price regulation, and if it is found possible by the gas company to reduce the price then I think the public will readily agree to the raising of the dividend rate. The rate of dividend being paid in Dublin now is something like 7 per cent. with the price somewhere less than 2/- a therm. I think it is 1/10½ a therm. The maximum dividend allowed in Cork, I think, is 8 per cent. which I would feel is high, although I think the dividend they pay in practice is 7 per cent.

Has the Senator noticed the price of the Dublin shares on the market?

I should be happy to receive information from Senator Hayes on that.

It is very important.

You are looking for money, not handing out dividends.

I am prepared to grant that the price of the shares, if they drop very considerably, might make it a service to the shareholders, if the municipal authority said: "You have carried this heavy burden too long, and we will relieve you of it from now on." I would suggest then that the dividend which is proposed in this draft Order is too high. We have been told by the Parliamentary Secretary that the reason for the issue of the new stock is the proposed extension of the company's service to new housing estates and possibly for increased industrial use, and "to pay off the bank overdraft." The total sum involved, the total stock, if we adopt this Order is going to be £250,000. In other words there is a very considerable increase of new stock amounting to £169,000.

I should like to ask the Parliamentary Secretary if he could give us some indication—I think the suggestion is that the company is not in too good a state at present—as to what way the net profit has been over the last few years, just to let us see whether there has been an increase, or a decrease and whether the company is really in a bad way or not.

I notice that it is implicit in this sub-section that I have just quoted, that the rate of dividend declared must not exceed 7 per cent. I think it is a good thing that the rate of profit in such a concern should be controlled, but I also notice that on the page 6 of this draft Order there is a method of distributing more profit by a concealed means. The dividend is "controlled", but in Section 15 the company "may in general meeting from time to time by resolution capitalise the undistributed profits of the company by making an issue of ordinary stock to be distributed by way of bonus to the holders...." That is a way, in Section 15, of getting around what has been carefully "precluded" in the earlier sections. You say: "You must not give a bigger dividend than 7 per cent.," so they pile up some "undistributed profits", and then the company can distribute those profits, not as a dividend, because that would be against the terms of the Order, but as a "bonus" to the holders of stock, by "capitalising the undistributed profits"!

My contention is that such reserves of "undistributed profits" would be a sign that the price of gas has been too high because if after the payment of the maximum dividend of 7 per cent. the company has been piling up reserves of undistributed profits you are indicating that the company has been running in such a way as to pile up profits at the expense of the consumers. They have been charging too much. I would be all in favour of the distribution of these undistributed profits, in the form of bonuses by price reduction, to the people whose money went to make those undistributed profits, that is to say, the gas consumers. That is why I should like to see the variation of the dividends rate up and down linked with the price of gas, so that we shall not be able by a devious route to get around what is apparently a dividend level control, but through which a coach and four can be driven at "a general meeting of the company from time to time" under Section 15.

It was contended at an inquiry into a similar situation in Dublin in June, 1955, that to make a dividend maximum of 7½ per cent. for the Dublin Gas Company would cause "hardship" to the shareholders. I am afraid I do not share that view. We hear a lot of talk about austerity. We must "tighten our belts" and we must "save money". We must "be content with less" than may be needed by us to meet the rising cost of living, and so on. If all that is sincere, I should like to feel that it applies equally to shareholders, equally to those who are seeking their profits from invested money and I feel that any indignation at such a suggestion on my part—that dividend rates be controlled—is out of place in the conditions in Ireland to-day.

I should like to ask two questions in relation, first of all, to page 2. I notice that Section 3 says:—

"The several words and expressions to which meanings are assigned by the Acts wholly or partially incorporated... have the same respective meanings, unless there be something in the subject or context repugnant to such construction."

That seems to me to say precisely nothing. These words shall have the same meaning as they used to have before, unless they have a different meaning! I should like to hear an example, making it clear what is meant. If we are to pass the Order in this form, we ought to be told something more about what we are passing. The "meaning of the words" is to be the same as it always was, except that occasionally it may be different! I am prepared to admit that there may be some simple explanation for that, but in such a case it ought to be given to us.

I personally should like to propose changes in this Order. I should like to propose modifications, but I am in your hands, Sir, as to the form in which I can make such proposals. The two proposals I have specially in mind are the proposal that 7 per cent is too high and that it should be 5 per cent. I should like to propose also that the dividend rate be linked, by means of a sliding scale, to the price of gas. Where the dividend goes up, the price of gas must come down. I should like also to propose a third modification, the elimination of this clause 15, which allows "undistributed profits" to accumulate and then to be distributed in the form of what are really concealed dividends, namely, bonuses to shareholders.

I presume the Senator is aware that the only course open to him is to move to annul an Order.

On a point of order. I understood both from Section 10 of the Gas Regulation Act, 1920, and from the opening words of the Parliamentary Secretary, that we have the right either to modify it or to add to it. Section 10 provides:

"...such Order shall not be made unless both Houses, by resolution, approve the draft, either without modification or addition or with modifications or additions to which both Houses agree..."

I would respectfully submit that we have, therefore, the right to "modify". It is implied right at the head of this Order under which the Minister exercises the power conferred on him by Section 10 of the Gas Regulation Act, 1920. I would suggest we have the power to modify or to add to the draft.

I would like to propose that the House adopts this motion. I do not intend to follow Dr. Sheehy Skeffington over all the paths through which he took us just now. I know Senator Sheehy Skeffington is a very idealistic person and we all give him full marks for his beliefs. However, every suggestion he made in connection with this motion was both unpractical and unrealistic.

The whole point is that this is a company looking for money, for people's savings. There is only one way in which you can get people to invest their savings, that is, by giving them a reasonable reward for the money they invest and the moneys they have saved. It is quite unrealistic to talk about getting money at 5 per cent. in the present state of affairs. I believe that 7 per cent. is the very least that could be offered in present day circumstances in an undertaking which has a high element of risk. We all know that the gilt-edge securities at the moment are offering far more than 5 per cent, and, as well as that, people having invested their money even in gilt-edge securities find that, after a short time their capital has very heavily depreciated. Therefore, how much more risk does one undertake in putting one's savings into a purely commercial undertaking?

There is only one way the money could be got under the terms which Senator Sheehy Skeffington proposes and that is by force, but in a free, private enterprise economy, or a fairly free economy such as we have here at present, the terms proposed in this Order are reasonable and they have taken due cognisance of the consumer. In fact, the consumer will get nothing from an organisation, unless it is run on sound financial and business lines. The first thing that would happen if Senator Sheehy Skeffington's proposal were accepted would be that no money at all would be got put and the company would not be able to expand or carry on its business. Therefore, I support this motion and I would like the House to support it also and to reject the proposal of Senator Sheehy Skeffington.

Will the Parliamentary Secretary, when he is replying, give us some idea as to how much of the new stock is actually required for the redemption of overdraft?

To answer Senator ffrench O'Carroll, I do not know the amount which is required for repayment of the present overdraft by the company. The company has expanded its business considerably, and I suppose it has raised an overdraft to cover that expansion in recent years, and it requires this new capital to continue the expansion and to pay off the bank overdraft which has financed that expansion to the present time.

Senator Sheehy Skeffington made a point about limiting the rate of dividend to 5 per cent. The present shares of the Waterford Gas Company have a limit of 7 per cent. and I do not think you could bring down the new stock to a lesser rate than is given at present.

The Alliance and Dublin Gas Company pay a 7 per cent. dividend and still their shares at the present time in the Dublin Stock Exchange stand somewhere about 15/- per £1 share. I feel that in those circumstances it will be very hard for the Waterford Gas Company to raise money on the open market at the ordinary rate. They will not have a very easy job doing it.

Senator Sheehy Skeffington commented on the wording of Article 3. The wording referred to has been approved by the Parliamentary draftsman. It is in the form which appears frequently in Orders of that sort. It is intended to have the same meaning as in gas legislation generally, unless it is intended that it have some other meaning than in the context.

There was a question raised about item 15, that the company could capitalise undistributed profits. This company is subject to profit control and its accounts are examined in the Control of Profits Section of the Department of Industry and Commerce and I can guarantee to the Seanad that they will not be allowed to build up reserves of that kind, to capitalise them afterwards.

I am not quite clear why Section 15 is deemed necessary if, as the Parliamentary Secretary now assures us, they will not be allowed to build up undistributed profits.

For the present time and for some years to come there will not be such profits, but times may change in years to come and that provision is made there in case there should be undistributed profits at some future date.

Could the Minister give us the present price of gas per therm in Waterford?

I am afraid I have not got that now.

The Dublin dividend is linked with the relatively low price of gas, and I should not be surprised if the Waterford price were more. It was 6 per cent. in Dublin some time ago, but when they got the right to increase the dividend they brought down the price of gas slightly. I should like to propose three modifications of this Order. I should like to propose the deletion of Section 15——

An Leas-Chathaoirleach

The Senator will have to get the approval of the House to move these modifications. Notice should be given of any intention to amend the motion. The House may give that permission on short notice. It is a matter for the House.

In asking for that permission, I would remind the House that this Order was sent out to us only yesterday. It is only very recently in our hands.

I do not agree to anybody moving amendments to the motion at this stage.

On a point of order, Senator Hayes says he does not want anybody to propose amendments at this stage, but——

Not now, not at this stage.

But we have not had any other stage. The Parliamentary Secretary has made it clear that power is given to each House to modify this Order. It is only a draft Order. I would plead with the House to give me the right to propose these modifications, and I think it would be wrong to say that I should not be in order in doing so.

I would not agree with Senator Sheehy Skeffington's view of the various matters he mentioned, but I would strongly uphold his right to put down amendments. It is deplorable that we should not give Senators the right to propose an amendment. The Order came into our hands only yesterday and what notice a Senator could possibly give, I do not know. We had no explanation until we got it now from the Parliamentary Secretary and it seems it is only at that stage that the Senator could make up his mind as to whether he wanted to move an amendment or not. It is not right to say that we pass these Orders without making amendments or modifications. There is legislation providing for that and any Senator should get the opportunity of moving such amendments.

Could we not postpone this matter to the next sitting day and let us discuss it then?

I would accept that.

Debate adjourned.
The Seanad adjourned at 8.40 p.m.sine die.