The purpose of this Bill is two-fold—to give statutory authority to the ESB's existing consultancy and advisory services work; and to increase to £1,200 million the existing statutory limit of £700 million on total expenditure by the ESB for capital purposes. Senators will be aware that the primary function of the ESB under the Electricity Supply Acts is to ensure the adequate supply and distribution of electricity throughout the State. This is the reason for their existence and they have a standing remit from the Minister for Industry, Commerce and Energy and his predecessors to ensure that electricity is at no time in short supply. The board have a number of other functions which I need not detail but these are subsidiary to their main function.
Since their establishment over 50 years ago the ESB have themselves carried out all design work on planning of power stations and on transmission and distribution lines, in this manner gradually building-up a competent body of professional and technical staff covering a wide variety of specialised fields, including areas not directly related to the electricity supply industry, for example, fisheries. Though there have been periods when demand for electricity was stagnant, over the past 50 years or so as a whole there has been a steady growth in the demand for electricity which necessitated frequent additions to generating, transmission and distribution capacity. A brief comparison of the scale of operations in recent years with the scale in the early years is instructive.
In the year ended 31 March 1930 the ESB generated 60 million units of electricity, some 43 million of which were sold to less than 50,000 customers; total revenue was less than £500,000. In the year ended 31 March 1978 the corresponding figures were 8,800 million units generated of which 7,300 million were sold to nearly one million customers, total revenue being £210 million.
The recession in recent years resulted in a fall in demand for electricity with the result that provision of new generating capacity was put off as long as possible and proposals for further expansion were deferred. With the fall-off in electricity demand the board found themselves with surplus capacity among their highly-skilled professional and technical staff. At about that time Córas Tráchtála indicated that there were openings abroad for ESB expertise and, with the consent of the then Minister for Transport and Power, the board ventured into the overseas consultancy and advisory services work early in 1975. The primary purpose of this radical development was to utilise the surplus staff capacity then available in the board by taking up the slack and in this manner protect employment.
I am pleased to tell the House that the results of the board's overseas venture have been encouraging. In all, work has been undertaken for electricity utilities in fifteen countries, but the board's major effort has been concentrated in Bahrain and in Saudi Arabia. In Bahrain an average of up to 60 staff of all disciplines have been seconded to bring the managerial, financial and technical aspects of the Bahrain State Electricity Directorate up to international standard.
A recent report by an independent Swedish consultant recommended that the ESB be retained until an adequate standard is reached in Bahrain. I feel that this reflects creditably on the board. In Saudi Arabia the board have been appointed consultants for the management of two regional electrification schemes including tender assessment, design approvals, supervision of construction, commissioning and overall financial management of the projects. There are several other areas where the board have succeeded in winning, on merit alone, useful contracts, but Senators will probably think it unnecessary for me to indicate them in detail. Let me say, however, that the ESB are alert all the time to the possibilities inherent in selling their expertise and specialised knowledge in those areas or countries where there is a demand for them.
A satisfactory feature of the board's overseas involvement has been its extension from ESB staff going abroad on assignments to foreign staff coming to Ireland for training. For example, about 90 engineers and technicians from Nigeria have already been trained in Ireland and are now back home successfully operating a new power station there; a further 29 Nigerians are in training at present and there are good prospects, I am told, of further substantial numbers of trainees being sent here.
A major Saudi Arabian training contract has been secured with 32 staff from that country attending an English language school in Dublin for six months before undergoing a 12 months training course in the ESB. These examples serve to illustrate the wide-ranging scope of the board's activities and the possibilities that have been opened-up since they embarked on their overseas venture.
In addition to overseas consultancy and advisory services work the ESB have also engaged to some extent in consultancy work at home, in areas where they have and are known to have special expertise not otherwise available within the country. Their services have been utilised by a number of public bodies or enterprises in this country, including the Dublin Port and Docks Board, Bord Gáis and AnCO. Whilst the ESB have been careful not to trespass on the field traditionally served by the consulting engineering profession in Ireland and have given assurances to this effect, I am particularly concerned that there should be no cause whatever for legitimate complaint by established consultants here about the nature and extent of the board's consultancy operations. I have therefore sought and obtained from the board a positive undertaking that they will not interfere with the activities of other Irish consultants who have the competence to carry out the relevant project work in Ireland.
I am confident that this undertaking will allay any fears that may have been entertained as to the nature of the board's activities in this field. In these circumstances I am disposed to agree that the ESB should be authorised to engage in consultancy work at home to an extent consistent with full compliance with their undertaking to me. It is my intention nonetheless to keep the board's activities as consultants under periodic review.
The Bill provides that expenditure on consultancy work shall not exceed revenue, and I have arranged that the ESB will prepare separate accounts for inclusion in their annual report to me which will show clearly all relevant financial aspects of their consultancy activities. In this regard I should like to mention that in the three years ending 31 March 1978 the excess of income over expenditure on consultancy work, after allowing for all salaries, expenses, promotional costs and overheads, was about £1 million. Apart from this favourable financial outturn, and the enhanced international status which we have acquired, it is worth noting that the ESB involvement in these large foreign assignments has drawn the attention of various public and private purchasing agencies to the possibilities of doing other kinds of business with Ireland, and as a result substantial exports of industrial goods have taken place to these areas.
The ESB have kept in close touch all along both with my Department and with the Department of Foreign Affairs as to their overseas activities. I will, however, be consulting with the Minister for Foreign Affairs in advance of any future commitments which the board may propose to enter into in connection with their overseas business. The Government regard this as a necessary step to ensure the closest possible cooperation and mutual understanding between the board and the Government Departments concerned.
The undertaking of consultancy work overseas does not appear to come within the ESB's statutory powers as laid down in the Electricity Supply Acts, and there may also be some doubt that such work at home is covered by existing legislation. The board have found the lack of clear statutory authority to be a disadvantage on several occasions when contracts were being negotiated. I am, therefore, promoting this legislation to eliminate any problems which the absence of statutory authority might create for the ESB in negotiating successfully for contracts or commissions.
I now come to the other purpose of this Bill, which is to provide for an increase in the limit of capital expenditure by the board from £700 million to £1,200 million. The existing statutory limit on capital expenditure by the ESB was fixed by the Electricity (Supply) Act, 1974 at £700 million. The total capital expenditure approved by the board to date has risen to a figure little short of £700 million. Whilst actual expenditure to date by the board only amounts to about £600 million or so, the standing practice is that proposals for capital expenditure are not approved by the board unless the total of the proposed expenditure, aggregated with previous expenditure and commitments to expenditure, is less than the statutory limit. As further commitments to substantial additional expenditure by the board will shortly arise it is necessary, therefore, to increase the statutory limit.
Senators will be aware that the electricity supply industry is largely capital-intensive and that the ensuring of an adequate supply of electricity in compliance with their remit necessitates heavy levels of capital expenditure by the board virtually every year. As the lead-times with capital investments in the electricity sector tend to be long the ESB must always look well ahead when formulating their capital programme. The board tell me that, during the year ended 31 March 1978, growth in electricity demand showed an 8.2 per cent increase over the previous year and the indications are that this level of growth is being maintained during the current year. The ESB viewpoint, with which I broadly agree, is that they must plan ahead for an average growth rate in electricity demand of 8.5 per cent per annum over the next decade, but with an inbuilt strategy of maximum flexibility to respond to fluctuations in growth above or below the 8.5 per cent level.
The existing generating capacity of the board's system is about 2,540 megawatts. The Poolbeg station extension which is expected to come into commission very shortly will add 270 MW to the system whilst a further 80 MW generating capacity will come available when the industrial dispute at Marina has concluded. The new station at Aghada, which is expected to come on-stream sometime in 1980, and the extensions to the Shannonbridge and Lanesborough stations expected to be completed about 1983-84, will between them add another 350 MW to the system. This makes for a total capacity of 3,240 MW. The cost of all new generating capacity, either already provided or in course of provision, is within the existing £700 million capital expenditure limit.
To meet the projected growth requirements over the next decade, the board expect that they will have to approve over the next two years or so of further capital expenditure totalling about £500 million on provision of new generating capacity, additional and ancillary transmission and distribution lines, new premises and other miscellaneous items. Actual expenditure of this magnitude will not, of course, arise in the next two years or so but will be spread over a number of years up to 1985 or thereabouts.
I am, therefore, providing in this Bill for an increase of £500 million in the existing statutory limit on capital expenditure by the ESB, bringing the total permitted capital outlay by the board to £1,200 million.
Before I elaborate on the purposes to which the proposed £500 million capital expenditure by the board will be put it might be useful if I reminded the House that essentially all that the ESB are proposing to do is to meet their expected consumer demand. Senators are, no doubt, aware that electricity cannot be stored and that, therefore, sufficient generating capacity must always be available to the ESB to enable them to meet demand as and when it arises, if shortages of electricity with all the inconveniences and hardship that such shortages would entail are not to arise. Last year the ESB consumed 2.23 MTOE—million tonnes of oil equivalent—some 67 per cent of which comprised imported oil. As of now the best available estimates suggest that the ESB will consume 5.5 MTOE by 1990. How best to meet this increased requirement is the problem.
For a number of years past the ESB, like most other electricity utilities, have largely relied on oil as their primary energy feedstock mainly because of its cheapness, ready availability and versatility. Oil, however, is no longer cheap and there is no guarantee as to its continued availability in the future. In an uncertain energy world it would be foolhardy to ignore these facts; it would also be foolish to forget that oil is a finite resource and that demand for it over the world as a whole is increasing. The inescapable conclusion is that we must lessen our existing near-75 per cent level of dependence on imported oil as much as we can. In our circumstances this can best be achieved by adopting the right policies in respect of the electricity generation programme. That is why I recently sanctioned the provision of a major coal-fired station and also why I will not permit the ESB to construct any more generating stations to be fuelled by imported oil.
Whilst I am hopeful that we can arrange in the not-too-distant future interconnection with the EEC electricity grid, with all the mutual advantages to member states to be derived therefrom, we must ensure at the same time that we have optimum diversification in our generating plant programme at home.
A large part of the £500 million proposed expenditure will be committed to the new coal-fired station which is expected to come on-stream about 1985, but there are other items and it might be helpful if I gave an approximate break-down of the total:
£ million |
|
New coal-fired station including provision for full site development works such as jetties, roadways and buildings as well as turbines, boilers and ancillary equipment for 2×300 MW units |
350 |
Distribution system arising out of the need to provide electricity supply to an additional 25-30,000 customers each year |
60 |
Transmission lines to provide improved supply to consumers, especially in outlying areas |
20 |
Premises such as new district and area offices, and related items |
20 |
Miscellaneous including provision for peak-load plant (small turbines) to meet sudden heavy demands for electricity |
50 |
500 |
This break-down is indicative only, and not definitive, but what I should like to make clear to Senators is that no provision is being made at this stage for capital expenditure on the ESB nuclear project. Though this project was approved in principle by the then Government almost exactly five years ago there is no question of it now being proceeded with until the Government have fully assessed all the energy options now open to us, and made up their minds as to the nature and extent of the generating capacity needed to meet our expected electricity needs in the coming decade and beyond. In this regard I have been impressed by the public reaction generally to, and understanding of, our major energy problems following the publication some months ago of the Energy-Ireland discussion document. As I have already indicated, any submissions by interested parties on this very important question will be fully considered by the Government.
As I have already indicated elsewhere I will be putting my proposals in the matter to the Government in the near future. If the Government should decide not to over-rule the existing decision of the last Government and that the ESB nuclear project should be processed further in accordance with the 1973 decision, a period of 18-24 months to permit of assembling of the ESB nuclear team, updating of plans and preparation of specifications, inviting tenders and so on will elapse from the date of the Government decision before there will be any question of acceptance of tenders and thus of an irrevocable commitment to the project arising. I wish to make it very clear that before this final commitment stage is reached it will be necessary to place before the Oireachtas proposals to increase the ESB capital expenditure limits to cover nuclear station costs. Senators are thus guaranteed an opportunity for full debate on this issue before there can be any commitment by the ESB to building a nuclear station.
I commend the Bill to the House.