The purposes of this Bill are to provide statutory authority for the payment of £10 million Government subsidy to the Electricity Supply Board in respect of a programme of expenditure of £18 million on rural electrification during the four years ending 31st March, 1975, and to increase the limit of authorised capital expenditure by the board for all purposes, including rural electrification, from the existing combined limit of £340 million to a new figure of £450 million.
As Senators are aware rural electrification has been in progress now since 1946, a period of 25 years, and the time has come for an all out effort to complete the programme. A brief review of the situation is, therefore, not out of place.
The original programme for rural electrification was on the assumption that, given a subsidy of 50 per cent of the capital cost, supply could be offered at standard rates to about 86 per cent of rural homes and that about 70 per cent of the total rural households would accept supply on these terms. Among the 14 per cent to whom standard rates could not be quoted, because of the high cost of connection, there were many who wished to have supply and the ESB programme provided for connections to them if the persons concerned were prepared to pay an extra charge, over and above the standard charge, sufficient to bring the return up to the minimum acceptable as sufficient at the time after taking account of subsidy. This was, in fact, the origin of the special service charges. The distribution networks for the scheme were designed with a view to connecting the maximum possible number of consumers with the money available and expenditure on distribution capacity unlikely to be used for many years ahead was avoided.
By the time the original rural electrification scheme was nearing completion in 1962 about 75 per cent of total rural households had already been connected compared with the original target of about 70 per cent. The Government at that time decided that a second comprehensive scheme, known as the post-development programme, should be carried out to give a further opportunity to obtain supply to all those houses which, for one reason or another, were still without electricity. Since most of the households qualifying for standard charges had by then been connected, the post-development programme required relatively greater capital expenditure to connect houses to the system. Consequently, under the Electricity Supply Amendment Act, 1962, the rate of subsidy was increased from 50 per cent to 75 per cent with a limit of £75 per house for domestic connections. This financial limitation had the effect of increasing substantially the level of special service charges for the very high cost connections while qualifying a greater number for standard charges. To cater for such households, a scheme for the payment of grants of up to £10 for the installation of bottled gas as a more economical alternative source of power for lighting, cooking and heating was introduced.
The rural electrification programme was reviewed prior to the introduction of the Electricity Supply Amendment Act, 1968. This Act extended the limit of capital expenditure on rural electrification to £50 million which then was considered sufficient to complete the post-development scheme by 31st March, 1973. At the same time as the Act was enacted, arrangements were made to effect substantial reductions in the higher special service charges to be effective from 1st June, 1968, the cost being borne by the ESB. In addition, the maximum grant for bottle gas installations was increased from £10 to £35.
At the time of the commencement of the original rural electrification scheme in 1946, only about 14,000 rural households had electricity installed. At the 31st March, 1962, when the original rural electrification scheme was virtually completed, a total of almost 280,000 rural houses were connected to the supply. At the end of March, 1967, 325,000 houses had been connected and the estimate then made was that a further 26,000 connections only would be required to complete the scheme, bringing the total estimated number of rural connections to just over 350,000 houses. It was planned to achieve this total by March, 1973.
The 1967 forecast of 350,000 rural connections proved in practice to be an underestimate. The substantial reduction in special service charges in 1968 made electricity supply a much more attractive proposition for many households and this added up to a considerable increase in demand for connections. Increasing prosperity and a growing demand for television reception increased the numbers seeking supply. As a consequence, progress on the completion of the programme in the different areas fell well behind schedule and the backlog was increased by new houses constructed in the meantime and seeking connection. The position was aggravated by the need to allocate an ever-growing proportion of the capital provided for rural electrification to system improvement, that is to strengthening the distribution network in order to improve the standard of supply sufficiently to keep up with increased demand.
The rate of growth in consumption of electricity in rural areas is now about 13 per cent as compared with an increase rate of about 9 per cent in urban areas. This growth in demand which is continuing at a high rate has necessitated considerable investment in strengthening the distribution system to maintain adequate supply. The development of rural industries and the growth in rural areas of new hotels, registered guesthouses and new homes built by existing consumers as well as new installations for the mechanisation of farms have all added to the problem of completing the scheme of rural electrification within the programme planned from 1968.
The 1967 estimate of the number of further rural connections required to complete the scheme was 26,000. In fact, in the period from April, 1967 to March, 1971, about 34,000 connections had been made under the scheme and, as Senators are very well aware, the rural electrification programme is still far from complete in many areas.
I, therefore, requested the ESB to carry out a further detailed study of the position, district by district, throughout the country so as to be able to forecast as accurately as possible not alone existing requirements for electricity connections, but to take into account also new house building programmes and developments likely to require priority connections for new rural industries, guesthouses, etc., as well as farming developments. The ESB have recently completed this review and they have proposed a four-year programme designed to achieve by 31st March, 1975, connection of all outstanding connections at the present time, estimated at 14,000 together with other demands for new connections, estimated to amount to a further 14,000, likely to arise in the four-year period. The cost of these 28,000 new connections is estimated at £7 million. At the same time, the ESB realise the necessity to improve substantially the whole rural electrification network and they will need to spend £11 million on system improvements in this four-year period. The total cost of this programme is, therefore, £18 million from 1st April, 1971, which will bring total expenditure by the board on rural electrification to £67 million.
The Government have accepted this programme and the provisions in the Bill are designed as, what I might term, a crash programme to enable rural electrification to be completed within the next four years. The capital provisions for expenditure by the ESB on rural electrification in each of these four years have already been determined and notified to the board so that there should be no obstacle to the ESB achieving success in completing this scheme as planned. The board are already planning on this basis and I earnestly hope that all parts of the plan can be achieved according to schedule. This should eliminate entirely the unfortunate situation we have had for some years past where the commencement of work in particular areas has had to be deferred time and again because of the heavy work programmes developing in areas getting prior attention.
For comparison purposes I might mention that the total expenditure on rural electrification in the 25 years of its operation up to 31st March last was about £49 million, including Government subsidy of £17 million. We are now proposing expenditure in the next four years totalling £18 million, including subsidy of £10 million. In the past four years' annual capital expenditure on rural electrification has ranged from about £2 million in 1968 to £3.1 million in 1970-71. The new programme envisages expenditure of £3.7 million this year, £4.1 million next year, £4.7 million in 1973-74 and no less than £5.5 million in the fourth and final year of the programme.
Our existing level of rural connections to the electricity supply system is very high by international standards, more particularly when account is taken of the very many scattered households in rural Ireland—a position that does not obtain in most other countries where rural households are concentrated in small villages or townships. By the time the new programme is completed, we expect to have total rural connections of about 386,000 houses or something approaching 98 per cent of total rural households. Such an achievement is something that I think we can be proud of.
In the new programme of bringing supply to those households not yet connected it is not intended to make any change in the existing reduced rates of special service charges which will continue to be calculated on the same basis as has obtained since the Government arranged for a reduction in these charges in mid-1968. This reduction was designed to reduce particularly the highest special service charges and electricity is now available to rural dwellers at very reasonable terms. While special service charges are necessary in some form or another in every electricity distribution tariff I can assure the House that those who are asked to pay these special charges are, in fact, paying very much less than the cost of the service they are getting. The availability of grants of up to £35 for the installation of bottle gas equipment for lighting, cooking and heating is an alternative available to those liable to very high special service charges. I might mention that in the past three years, that is, since the new rate of subsidy was introduced, over 1,600 bottled gas grants have been given, so far, at a total cost of about £46,000.
I should make it clear that the new programme of rural electrification which we are introducing is not a mere continuation of the scheme which has been proceeding on an area by area basis for some years past. This is a scheme to complete the original programme once and for all by provision of the increased finances which I have mentioned. Under the existing planned post-development scheme, something like 520 areas have been completed out of a total of 792 rural areas. It is planned not alone to re-canvass and re-develop the remaining 272 areas, but also to offer electricity again at subsidised rates to all un-supplied households in the 520 or so areas where the post-development scheme has been completed. There will not be an individual canvass in these 520 areas. Supply will be offered by way of local advertisement and it will be a matter for householders in the areas concerned to apply immediately for connection.
As I have said already, the four-year plan which this Bill is intended to finance is aimed at completing the massive task of rural electrification on which we embarked in 1946. It is aimed at bringing electricity to all rural homes which it is possible to connect at any kind of reasonable cost. To keep down costs the ESB propose, as I have explained, to tackle the job area by area. After each area is completed the connection of rural homes for electricity in such area will have to be made on an economic basis without the benefit of subsidy. Rural dwellers, concerned to ensure that they are connected for electricity, should apply immediately for connection whenever the ESB announce the provision of supply in each of the 520 areas in which the rural electrification planned post-development scheme has already been completed.
It is not possible to deal with non-domestic connections such as industrial consumers, registered hotels and guesthouses and farming activities requiring supply on commercial or industrial tariffs on the basis of completing the programme in each separate area. Subsidy will be available therefore in respect of such connections up to the end of the four-year programme. After the end of the programme we will have achieved one of the highest levels of rural electrification to be found anywhere, and it should then be possible to provide and extend the supply of electricity on the same self-supporting basis as in urban areas and, indeed, the growth of the economy throughout the country which has itself been fostered by the spread of electricity supply should help to put rural electricity supply on a sound financial basis.
Completion of the proposed programme will require an additional £18 million over and above the £49 million expended by 31st March, 1971. This means a total provision of £67 million as compared with the existing statutory limit on capital expenditure by the ESB on rural electrification of £50 million. It is necessary, therefore, to increase the limit of expenditure by £17 million to £67 million. Because of the acceleration of the programme and the very considerably increased expenditure on system improvements now being provided, a new approach is being made to the amount of subsidy to be made available. Instead of the old arrangement of 75 per cent with a maximum of £75 per house the Government have agreed to make a global £10 million available as subsidy in respect of this programme and the ESB will complete the programme with this amount of subsidy but will maintain the 1968 terms to householders for new connections. Total subsidy payments up to 31st March, 1971, amounted to £17 million so that the total Government provision by way of subsidy towards the cost of the £67 million programme will amount to £27 million in all.
I wish to make one more comment before I leave rural electrification. The ESB now have firm plans to offer electricity in all rural areas over the next four years. It is essential that they plan their programme on an orderly basis in order to keep costs at the lowest level possible as well as achieving the maximum progress on the scheme. Any departure from the planned scheme can only increase costs and delay progress. It is clearly impossible to connect at once all who are seeking supply. Some areas must be at the end of the board's plan. I would ask Senators, therefore, not to be impatient if areas in which they are interested are not high up in the board's timetable. The longest any householder should have to wait will be the 31st March, 1975, but the great majority of rural households will have connection long before that date.
I now turn to the provision of capital for general purposes for the ESB. Under existing legislation, the ESB are entitled to incur capital expenditure for all purposes other than the electrification of rural areas up to a limit of £290 million as fixed by the Electricity Supply Amendment Act, 1970. At present, the board have approved expenditure under this head amounting to £240 million and the balance remaining would be sufficient to cover general expenditure likely to arise for approval up to about March, 1973. In order to avoid coming back to the Oireachtas again within such a short time, it is now proposed to extend the statutory limit to cover expenditure likely to arise for approval in the period to 31st March, 1975, that is for the period covered by the programme for completion of rural electrification now proposed.
During the next four years, the ESB expect to approve of expenditure for purposes other than rural electrification amounting to about £140 million. Of this total about £85 million will be required for additional generating plant. The plant already programmed for commissioning in the next four years will comprise two 120 megawatt plants at Pigeon House B, another 120 megawatt plant at Great Island, the pumped storage plants totalling 280 megawatts at Turlough Hill and the 40 megawatt extension to Shannon-bridge milled peat plant. It will also be necessary to proceed with the erection of the first 250 megawatt units to be installed in our system. Two of these will be at Tarbert and the third at Pigeon House B. A small 25 megawatt extension to the Erne Station is also planned. This plant programme will be necessary to meet increased demand for electricity which has been growing for some years past at between 10 per cent and 11 per cent.
Senators will note that no provision is made in this programme for the construction of a nuclear generating station. As I have already stated elsewhere no final decision has yet been taken to build a nuclear station. The ESB have for some time past been training engineers in nuclear work and have got together a special project team to examine in detail all the technical, economic, social and financial problems connected with the installation and operation of a nuclear station. The board will need to consider all aspects of the project before coming to a decision to recommend such an installation to the Government. The advice of the new Nuclear Energy Board will be required by the Government before any decision is taken on this project. If a decision is taken to proceed with the commissioning of such a station which, as I have already indicated elsewhere, could cost up to £70 million at current cost levels then additional capital will need to be provided for the ESB but, of course, such expenditure would not arise for some years to come.
In addition to expenditure on generating plant, a sum of about £55 million is estimated to be required for other essential items, mainly transmission and distribution networks. The total required for approval by 31st March, 1975, will, therefore, amount to about £380 million.
Increasing the limit on ESB capital expenditure will not involve demands on the Central Fund. Since 1955, the board have raised their own capital without recourse to the Exchequer, except, of course, for the State contribution to the capital cost of rural electrification. The board's programme for capital expenditure within the statutory limit is required to be submitted in detail for my approval from time to time.
At present, the ESB maintain separate rural and non-rural accounts and separate provision has been made by statute from time to time for the capital necessary for rural electrification and for other purposes. Now that well over 90 per cent of potential rural customers have already connected to the electricity supply and that we are making provision for accelerated connection of the remaining rural households, I consider that the time has come to integrate the two separate accounts and to make one general provision for total capital expenditure. Integration of the accounts and of the statutory provisions will not affect rural subsidy arrangements, but it should help to simplify ESB account procedures and thus to some extent at least reduce costs. As I have already stated, expenditure on rural electrification by the ESB is expected to reach £67 million by 31st March, 1975, while expenditure required for general purposes by the same date is expected to be £380 million. The combined total of requirements is, therefore, £447 million and the Bill proposes to fix the limit of £450 million.
One of the main difficulties of any electricity supply authority is the variable rate of demand for current arising during any 24-hour period. In Ireland, so far, due to the absence of any substantial three-shift industrial base, the daily load curve has had a high peak and low valley. The erection of pumped storage plants of the type being commissioned at Turlough Hill will enable cheap electrical current from the valley period to be used to pump water to the upper reservoir which will then be available to generate current during the high cost peak demand periods. This operation is, therefore, obviously designed to flatten the demand curve to some extent. An electricity authority have to have available sufficient plant to meet peak demand together with sufficient reserves to cope with plant outages. This means at any one time an electricity authority must have far more plant capacity than is necessary to meet average demand.
I might illustrate the point by stating that in the year ended 31st March, 1970, the ESB had total plant capacity of 1,410 megawatts to meet a peak demand of 1,128 megawatts, while the average demand during that year was just under the equivalent of 600 megawatts. It is essential, therefore, that the ESB should do all in their power to increase valley hour usage while reducing peak hour usage. In recent years, there is definite evidence of progress in this regard by the board. In the year ended March, 1967, for example, peak usage was 5.21 times valley usage. This figure was reduced progressively each year in the next four years so that the peak in the year to March, 1971 was reduced to 3.78 times valley usage.
It is because of the need not alone to meet peak demand, but to have a reserve or security margin in addition and because it is not practicable to store electricity in large quantity that such very large capital investment is necessary in an electricity system. Ireland is not unique in having peaks and valleys in the daily demand curves for electricity and indeed neither are we unique in having to invest an ever growing proportion of our national resources in electricity generation. Electricity has, of course, become the most acceptable of all types of energy and the ever-growing demand for it is evidence of increased national prosperity and an index of our continuing industrial and commercial growth.
I think the capital expenditure figure I have given should bring home to Senators the extent of the growth of this our largest industrial unit and the extent to which this industry has grown and requires to grow in order to supply power to our growing industrial, agricultural, commercial and domestic needs. The necessity to approve of expenditure as high as £157 million by one semi-State body in the short period of four years poses very considerable problems for the Government and for the board. The sums of money now involved are such as to require the ESB to have recourse to foreign borrowing to an increasing extent. Common prudence apart, resort to borrowing from financial institutions abroad requires that the affairs of the ESB be managed as efficiently and as economically as possible. It is essential that the board be enabled to balance their accounts taking one year with another as any action to unduly depress prices or force the board into a position where they are not able to recover their costs could be disastrous not alone for the ESB themselves, but for the success of any development programme we may wish to undertake in coming years.
I am, of course, very concerned that the ESB continue to supply electricity at the cheapest possible cost and in the most efficient manner possible. I have already indicated that I am personally quite satisfied that the ESB are in the forefront of electricity authorities throughout the world in supplying cheap electricity, but to ensure that the affairs of the ESB continue to be conducted efficiently, I am as already announced arranging to have a special investigation made into the efficiency of the board's operations.
I commend the Bill to the Seanad.
