This wide-ranging Bill will bring about a number of fairly major changes to the operations of the ESB. The main effect will be to statutorily empower the ESB to promote, form, take part in, or acquire companies, to engage in coal trading from Moneypoint and to regularise matters in relation to rates.
Arising mainly from the ESB's experience in the areas of their consultancy and fisheries activities the proposal that they be allowed to set up subsidiary companies was put forward by the ESB themselves a few years ago. ESB consultancy activities have proven to be quite successful since they were first started in 1979. This has been aided by the high level of self-sufficiency that the board have developed over the past 60 years and their continuing investment and training of young qualified and enthusiastic personnel. Most recent published results show a turnover on the board's consultancy activities for the nine months ending 31 December 1986 of £7.5 million. This resulted in a slightly better than breakeven outcome for the period. Some 200 ESB staff are currently involved in consultancy activities.
The board's success in the area of foreign consultancy in recent years is clearly evident from the number and the diversity of the countries in which contracts have been secured. However, with the fall in oil prices and the completion of major developments, such activities are currently undergoing a shift in emphasis away from the declining markets of the Middle East such as Egypt, Saudi Arabia and Bahrain towards new markets such as Africa and the Far East. I know also that the ESB are attempting to expand upon their services in Europe and the United States. Indeed, the potential for operations in the United States is enormous and I am very pleased to see increased emphasis being laid by the ESB on this particular market with the opening up of an office there to promote their consultancy and management training work.
At home, ESB consultancy operations are also very active. This has mainly been brought about by the experience gained by ESB management of the Moneypoint project which has left the ESB in the happy position of being ideally suited for the management of other projects in Ireland. The board have also amassed considerable expertise in the management of their own treasury function and debt portfolio. To avail of these strong skills which have been developed, the ESB are planning to set up a financial services subsidiary which will try to get work in treasury management and merchant banking, initially from home-based businesses, but also from foreign utilities and Governments. This company will be located in Dublin's new Financial Services Centre. Also, ESB staff are now actively involved in the project management of the construction of the centre itself.
Over the years of their involvement in consultancy activities the ESB have found themselves on more than one occasion to be constrained by the lack of a provision in the Electricity (Supply) Acts allowing them to set up and participate in subsidiary companies. This has happened because many of the countries in which ESB consultancy operations are active require the link between the foreign contractor or consultant and local interests to be in the form of a company with a specified share of local participation. In such a situation the ESB are forced to negotiate a complex consortium agreement with other parties concerning their respective rights, duties, obligations and methods. What this Bill proposes is to loosen this burdening constraint on the ESB by allowing them to participate directly in limited companies. Complex consortium agreements will be replaced by far simpler arrangements which should, as a consequence, significantly improve the ESB's prospects of securing assignments in certain foreign countries, or of following up and participating in appropriate projects or developments at home.
This Bill will not only create greater flexibility for the ESB in their operations, but very important, it will also protect and limit the liability of electricity customers. This will be achieved by ensuring that all subsidiary companies will be set up under the Companies Act with limited liability. Fisheries is one external activity in which the ESB have a long tradition of both creative and successful involvement. The ESB, through their operation of hydro-electric schemes, have maintained a long association with fisheries on rivers. However, a more recent interest in the field of aquaculture has helped the ESB even further to develop their high level of expertise in these areas. From time to time the ESB have been requested to take equity participation in companies arising particularly from their fisheries activities.
This Bill, through allowing such participation, will extend the contribution which the ESB can make to the small fish operator by enabling them to provide both financial and technical investment. Once again it must be ensured that electricity consumers do not have to carry any of the losses which might be incurred through ESB participation with other parties in fisheries ventures. For this reason it would be best to permit the ESB to take equity in a limited company established solely for the purpose of the project.
Remaining with ESB external activities but turning more specifically to the matter of theProgramme for National Recovery, I would like to emphasise the considerable contribution the ESB will be making to this through diversification and development of their economic employment-creating activities. The sale of coal from Moneypoint has been identified as a way of contributing to the programme. I will have more to say about that later. The ESB also plan to set up a subsidiary company in the foreign consultancy and associated services areas with targets to provide employment for about 500 people and a turnover of £50 million by 1992. In the field of commercial fisheries another subsidiary company is planned. Particular interest is being shown by ESB in sea-farming of salmon, where it is aimed to reach production of 2,000 tonnes a year employing 100 people with an annual turnover of £8 million.
As part of the EC funded Valoren programme ten small-scale hydro-electric facilities in Counties Kerry, Cork, Leitrim and Donegal will be developed by the ESB over the next five years. Employment potential from this £7 million scheme will be as high as 20 people per site during the construction stage. The ESB continue to lay emphasis on supporting other Irish manufacturing firms through purchase of Irish goods and materials. In this respect a development research unit has been set up by the ESB, the first aim of which is to identify areas from which new electrical products and services might emerge for exploitation by Irish industries.
The few examples I have just given of the ESB's response to theProgramme for National Recovery are clearly consistent with and dependent upon the provisions in this Bill. The removal of all of the obstacles which may have up to now stood in the way of further development of the board's ancillary activities is vital if the ESB are to achieve effectively the targets which they have set themselves.
Enabling ESB participation in limited companies will, I believe, prove to be a beneficial move not only in terms of the ESB's performance but also to the economy as a whole. However, in order that the ESB are not given a free rein to involve themselves in any and every company in which they have an interest, I am proposing a number of controls to ensure that a constant check is kept on such participation. ESB participation shall at all times be subject to my approval and that of the Minister for Finance, given after consultation with any other Minister with responsibility in the areas concerned, for example, the Minister for the Marine in relation to fisheries projects. Any such approval will further be subject to any conditions which I may determine to be warranted or desirable.
The ESB along with the country's other major utilities were identified in theProgramme for National Recovery, as one of the areas which could make a significant contribution towards alleviating the high costs of services in the Irish economy. As such, the lowering of electricity prices is clearly a major factor for improving the competitiveness of Irish industry.
When the report of the inquiry into electricity prices was published in 1984, it fully justified the level of public complaint about the high cost of electricity which had helped bring about the inquiry. It found that, while domestic electricity prices in Ireland were close to the average in Europe, those for industry were 20 per cent to 30 per cent above the average, with heavy consumers faced with an even more severe differential. However, since the report's publication and in accordance with its recommendations, there have been a number of quite significant price reductions to each of the sectors. Over the past three years industrial prices have fallen by almost 19 per cent, commercial prices by 15 per cent and domestic prices by 12 per cent.
Latest material on electricity prices published by the International Union of Producers and Distributors of Electrical Energy reveals that on average, Irish prices compare quite favourably with those in other EC countries. The most recent 5 per cent cut in prices has been made possible because of favourable exchange rate movements which have a significant effect on ESB fuel costs, falling oil prices, lower interest rates and also as a result of internal savings. It is my intention to continue monitoring ESB costs and any further opportunities that may arise for a price reduction will be availed of.
The area of electricity in Ireland has been one of great change and numerous developments since the ESB were first set up 60 years ago. Over the past 25 years alone the ESB have seen their customer numbers double and their unit sales increase by seven fold. This high level of growth means that the ESB must ensure that careful planning for future demand is maintained at all times. The ESB have now reached a very important phase in their development with the completion of the 900 megawatt generating station at Moneypoint. This has made a huge contribution towards reducing Ireland's oil dependency and consequently improving the security of the nation's electricity supply.
The contribution of oil to electricity generation has fallen from a high of 73 per cent in 1978-79 to approximately 22 per cent in 1987. Coal, on the other hand, contributed 38 per cent of all fuels used in 1987 and almost a quarter of the ESB's generating capacity is now coal based. While the ESB's achievement in fuel diversification has been considerable, I know that they will continue at all times to ensure that they are as well prepared as possible to deal with future developments in this area in terms of both fuel prices and their availability.
The commissioning of Moneypoint has put the ESB in the position of being the largest single coal importer in the country. The jetty and harbour facilities at Moneypoint are excellent and capable of handling ships of up to 150,000 tonnes weight. This means that coal can be imported from anywhere in the world and already the ESB have bought supplies from Colombia, the United States and Australia. The opportunities for use of the Moneypoint facility are enormous and it would be a great loss if the potential of the site was let go to waste. In order to prevent this I have included a provision in this Bill which will allow the ESB to engage in the coal trading business.
I would like to emphasise that the ESB will only act as suppliers of domestic coal to wholesalers and merchants and as retailers of industrial coal. Ultimately the consumer will benefit from the availability of cheaper coal. Studies which I have had carried out into the benefits accruing from the ESB's involvement in coal distribution have identified potential, in the long term, for a cost reduction to the consumer of up to 20 per cent.
I am well aware of the widespread disquiet that has been expressed about the ESB's involvement in coal trading and the adverse effect it might have on other Irish ports. To allay the fears and concerns which have been expressed, I have included in the Bill a provision to prohibit the distribution of coal by rail or road from Moneypoint. The ESB will only be permitted to distribute coal from Moneypoint by sea. This will lead to an increase in traffic in other Irish ports and a consequent increase in jobs.
I am confident that Moneypoint can play a major role in the development of the potential of the Shannon estuary and its marine related activities. The main jetty at Moneypoint is the second deepest in Europe and of similar size to those at Le Havre and Amsterdam. In order to exploit fully the potential of the Moneypoint facility, I have included a provision in the Bill which will allow the ESB to tranship other products and substances, apart from coal, from Moneypoint.
A provision has also been included in the Bill to allow the ESB to sell any byproduct produced in the generation of electricity. The Moneypoint generating station produces approximately 200,000 tonnes of fly ash each year. This substance has been identified as having potential for use in cement manufacture.
The ESB have on a number of occasions disputed the amount of the sums levied on them in lieu of rates and they have claimed that the levies were not in accordance with section 7 of the 1982 Act. At a meeting with the board last year, I gave an assurance that if it was found that the interpretation of section 7 needed to be supported by some "removal of doubts" clause, I would seek its early enactment. Clarification in respect of future and past payments is incorporated in this Bill in sections 9 and 10.
The ESB are exempted from rates on the bulk of their property. The recently enacted Valuation Act, 1988, provides for a global valuation of utilities like the ESB. When ESB property has been valued in accordance with the provisions of that Act, the rates exemption on ESB property will be abolished. When rates are payable on property which was previously exempted, the levy will no longer apply. I have included the necessary enabling provisions in this Bill.
This Bill provides for some other amendments to the ESB Acts, namely, the amendment of section 2 (6) of the Electricity (Supply) Act, 1927, which provides that the position of chairman of the board of the ESB shall be a full time post. The proposal here is to allow for this post to be either a full time or part time one at the discretion of the Government. In relation to other semi-State bodies the terms and conditions of appointment are at the discretion of the Government or the Minister when appointment is made, thus allowing for the appointment of a part time or a full time chairman.
Another amendment to the ESB Acts relates to the power of the Minister for Finance to guarantee certain borrowings by the ESB. While in practice, the guarantee of the Minister for Finance covers the payment of promissory notes made by the board and bills of exchange drawn or accepted by the board, these particular transactions are not, I am advised, legally comprehended by the term "borrowing". The purpose of the amendment is to statutorily provide for their inclusion under the guarantee of the Minister for Finance.
Finally, another amendment dealt with in this Bill is of a minor technical nature, the purpose of which is to clarify the wording of section 3 (b) of the Electricity (Supply) (Amendment) Act, 1982. I commend the Bill to the House.