Dáil Éireann díospóireacht -
Tuesday, 1 Jun 1982

Vol. 335 No. 3

Private Members' Business. - Electricity Charges: Motion.

Mr. E. Collins

I move:

That the fuel variation levy in electricity accounts be discontinued in view of (1) the glut in oil supplies and the consequent lowering of heavy fuel oil prices, and (2) the adequate supply of natural gas to the Electricity Supply Board.

The price of electricity in Ireland has been described as being among the world's highest. Indeed, in a report in The Irish Times of 20 June 1981 it was said that an American consultant had found that Ireland's electricity was the third most expensive amongst a range of countries surpassed only by Britain and Belgium. That does and has posed serious problems for domestic, commercial and, perhaps most of all, industrial consumers.

In the past two years or so our electricity costs have been subjected to serious criticism by industrialists and the public in general. It is a fact also that the hydrocarbon tax in force adds to the cost of each unit of electricity — I understand, approximately 4 per cent. The rise in the price of electricity over the past two years have been very substantial. I understand that the price increases allowed in 1980 were of the order of 40 per cent, some 20.5 per cent in February and 19.5 per cent in September of that year. In the year 1981 an increase of 25 per cent was granted, coming into effect in September of that year and affecting the August/September accounting period. The 1981 price increase was sanctioned by the last Government of which I was Minister of State at the Department of Industry and Energy. The rise sanctioned on that occasion had to be of that proportion because the Fianna Fáil Administration, from February 1981 to the time of the election, had refused to allow the Electricity Supply Board any price increase. The then Minister, Deputy Colley, communicated with the board saying that there would be a Government subsidy to defray the loss of revenue. It is clearly understood that the board of the ESB did not want subsidisation but rather to be financially sound without recourse to State subvention. It is interesting to note that part of that 25 per cent increase — I think approximately 8 per cent thereof — was earmarked simply to recoup to the board approximately £30 million lost during the period February to end September that year. Indeed, that 8 per cent was to obtain for a period of a year only, to be withdrawn thereafter.

We are due for a reduction in the cost of electricity. In that context I was surprised to read recently — I think in the Sunday Press of 23 May 1982 — that the ESB had applied to the National Prices Commission for a rise of approximately 6½ per cent in the basic price of electricity. At the time of sanctioning the 25 per cent increase my stern warning to the ESB was that there should be no further price increase for a period of one year. I take it that the present Minister will take cognisance of that fact. It was a stern warning to the board that I did not expect any further price increase for a period of one year. Allied to that one must understand that Members on this side of the House would expect that that 8 per cent — sanctioned as a temporary price increase — be used to reduce the price of electricity to consumers. I must put that fact on the record. I am sure the Minister is aware of it but I would hope that he would insist that a reduction of 8 per cent be effected and indeed that the price of electricity be seen to decrease rather than increase. Electricity sales are directed more or less in the proportions of 50 per cent to domestic, 25 per cent to industrial and the remaining 25 per cent to commercial consumers. Therefore, while the bulk goes to domestic consumers, any adverse change in the price of electricity is damaging right across the board.

The amount of dependence on oil is interesting and has been decreasing substantially. Last year the board used approximately 54 per cent oil in the generation of electricity as opposed to other sources of primary energy. It is intended that that percentage should fall to approximately 40 per cent by the end of the eighties. Of course that policy is in line with the EEC one of diversification away from dependence on oil, which is to be welcomed. The fact now is that the price of oil has been reducing substantially over the past few months, a reduction which came about quite suddenly. Here I should like to quote some statistics I received from PIW of 12 April 1982 from a table entitled "The Ups and Downs of OPEC Prices, 1960 to 1982". I am taking the spot price for Mid-East light crude — 34 dollars — as being indicative of the type of oil used by the Electricity Supply Board. The average price per barrel of that crude in 1981 turned around at 34,1725 dollars. In January of 1982 the price was 34 dollars per barrel, in February it had dropped to 30.40 dollars per barrel and, by March, had dipped again to 28.20 dollars per barrel, constituting a substantial fall in the price of crude oil. Based primarily on that fact I feel that by now electricity consumers should be benefiting from the collapse in oil prices.

I readily admit that the board are taking a quantity of heavy fuel oil from the Irish National Petroleum Corporation, but I do not think the volume of that offtake will seriously affect the price of oil at this point in time. I feel we should now be benefiting from the collapse in the price of oil. It is evident that the price of oil from the North Sea has fallen and this should aid the oil supply position as far as the ESB are concerned.

I am surprised to see in the monthly report of the National Prices Commission, No. 113 of January 1982, in paragraph (5) that in their projections for 1982-83 they state the board are anticipating an increase in their total fuel cost bill. In the case of fuel oil they state that the board have forecast an average price for 1982-83 slightly above the average 1981-82 price. I take it that when the fuel variation charge is reviewed this month by the National Prices Commission cognisance will be taken by the commission of the substantial fall in oil prices since the beginning of this year and since the publication of the January 1982 report.

The other prong of the motion refers to the availability of gas. I am aware that at the moment the gas supply to the ESB is at the Cork Plant at Aghada. It is interesting to note in the appendix relating to the particulars and performance of generating plants of the Electricity Supply Board's Fifty-Fourth Annual Report for year ending 31 March 1982, that the fuel cost per unit for electricity sent out from Aghada was 1.452p per unit and that the works cost per unit sent out was 1.689p per unit. This was a very cheap source of electricity. During my period in office the ESB were allowed a larger off-take to help them to be competitive. In comparison, in Great Island, County Wexford, we find that the fuel cost per unit sent out was 2.710p per unit and the works cost per unit was 3.165p per unit, which is substantially in excess of the gas-fired stations.

I am seriously worried about the Ringsend generating station where the fuel cost per unit sent out was 3.630p and the works cost per unit was 5.912p. That is an oil-fired station and in the context of the cost of generating electricity an explanation is owed to the House for that cost per unit at Ringsend, which seems to be very high.

When we take account of the fact that there has been a solid reduction from 34p to 28p in spot prices and the fact that the ESB have a greater offtake agreement for natural gas from Bord Gáis Eireann, those lower prices for the cost of generating electricity and the cost of electricity generated from oil should be publicly manifested in the price of electricity to the consumer.

I am pleased to note that the ESB are currently converting the Poolbeg Station at a cost of £3 million to take natural gas when it comes on-stream at the end of this year. I see that as a priority. I am pleased to note, as reported in The Irish Times of 19 January, 1982, that Professor Dillon, speaking to the Rotary Club in Dublin, predicted that next year natural gas will replace imported oil in supplying the major portion of the ESB's total fuel requirements for electricity generation. While I accept it is in the future it must be a source of confidence that the benefits of natural gas will become apparent in the very near future.

I also note from an Irish Times report of 13 May 1982 that Mr. Seán Tinney, the director of advance projects at the ESB, said that the board were only too conscious of the level of price increases in electricity. He said that the board realised that industry needed to be assured not only about supplies but also about price stability. He said that the whole of the ESB is at present focused on a corporate priority to achieve far more price stability in the eighties than was possible in the past decade. He said that the target is to achieve an annual price inflation considerably lower than the national level as measured by the consumer price index. It seems that we are going into a period of price stability. It is essential for Irish industry and agriculture as well as for domestic consumers that the price of electricity should be more competitive than it is at the moment and that maximum advantage is taken of the lowering of oil prices and the availability of natural gas.

With regard to the price of natural gas, I fully appreciate that a pricing policy should be set down. I am not sure if it has been finalised in the Department. I realise that natural gas cannot be given away, that a pricing policy must be one that is to the best benefit of the people. It is within the power of the Minister and the Government to control the price of natural gas and to ensure that its price to the ESB is such that it will remain cheaper in the energy sense than the cost of higher energy sources such as oil and perhaps such as coal.

I am comforted in this matter by the fact that reserves at Kinsale are higher than what were forecast originally. Proven reserves began at one trillion cubic feet and the figure was later upgraded to 1.35 trillion. That is encouraging. When I was Minister of State I directed that a further examination be made of the reserves and I am optimistic that on foot of those tests the reserves at Kinsale will prove to be higher than the present estimate. Though I may be somewhat on the optimistic side, I am hoping that the consultants' report will show that the reserves are nearer to the two trillion cubic feet figure. When we discussed this matter here last week the Minister told us that the question of the reserves must be treated as confidential. I cannot see any validity for that argument. These reserves of gas are the property of the people and if they turn out to be higher than previously estimated surely we should be pleased to give the public that information.

Now that a deal has been finalised regarding the supply of natural gas to Northern Ireland it is important that the reserves be stated. The implication of supplying gas to the North is interesting. We are talking about a finite reserve. I am aware of the intended off-take to the various sectors of the community and I appreciate fully that in the case of a finite reserve a choice must be made as between users. Therefore, it is important to find out exactly what the reserves are. It is only by having that information that we can finally establish a policy of off-take and of prices.

Regarding the ESB situation, I am pleased that the board's generating capacity will be based on natural gas as the primary source of supply. I understand that about 55 per cent of the board's generating capacity will be by way of natural gas. When we consider the availability of this resource it is important to ensure that ultimately the consumer will be the one to benefit from the availability of the gas and that its price is not kept artificially high. A balance must be struck and it must be struck in favour of the consumer, the consumer being the Irish nation. To date, though, there has not been evidence of price benefit to the consumer. I do not know whether this is because the amount of natural gas available is not of sufficient significance to justify a reduction in electricity costs; but it is clear from the annual report of the ESB that the availability of the gas is having an impact and that impact, allied to the impact which has resulted from the lowering of crude oil prices, is seen in pricing policy.

I should like to refer briefly also to the structure of the fuel variation charge. This charge was introduced in January 1974, was discontinued in July 1978 but reintroduced in January 1980. The current domestic rate for electricity is 4.36p per unit and the fuel variation charge is 2.017p per unit. In other words, the fuel variation charge represents 46.26 per cent of domestic electricity costs. I do not think it was ever envisaged that this charge should be at such a level vis-á-vis the fixed charge. As I understand it, the fuel variation charge was introduced in order to allow some flexibility to the ESB whereby they could vary the charge without having recourse to the NPC on every occasion on which the price of oil changed. In the history of this charge it has never before been at such a high level. There is no justification for this situation. We should have a pricing policy for electricity whereby the price increase would be on an annual review basis. The fuel variation charge should be used only as a mechanism in times of rapid changes in the price of oil.

Therefore, if we view the likely trend in oil prices, it is important that we do not over use the fuel variation charge. In this context I would refer to the likely situation in the future in respect of oil prices. In an article in The Financial Times of 26 March, the chief economist of the International Energy Agency is quoted as forecasting that there will be a continuous decline in the real price of crude oil in the next three years. That analysis is interesting. The economies of western Europe seem to be in a stagnant mood with a growth rate this year of about ½ per cent. If we consider this trend in oil prices continuing to fall or even of stabilising, we cannot find any justification for the continuation of the fuel variation charge. That is why I say that this charge should be dropped now. We are not in a situation in which the price of oil is changing rapidly or in which the board must increase prices immediately so as to avoid the loss of huge amounts of revenue.

There is little justification, based on the forecasts of the price of oil, for continuing the fuel variation charge. The Minister may say that we should keep it on for a while longer, but I do not think there is any justification for retaining it. We are entering a period of price stability for electricity. That stability is soundly based on the fall in the price of oil, the availability of natural gas, and the fact that there does not appear to be any surge in the economies of Europe or the US now or in the immediate future. In making that statement I am relying on the opinions of experts.

I should now like to deal with the workings of the board. The ESB are responsible for supplying power to our homes, our factories and farms. Earlier this year a comprehensive agreement was reached between management and employees. It was a fairly expensive agreement and one hopes that as a result of it we will not have any further lapses in the supply of electricity to the nation. For the staff the agreement was financially attractive, but I must question the need for it. While the electricity generating industry is important — it is a monopoly and has a vital role to play in keeping our economy going — I doubt if employees in any semi-State body, no matter how delicate an area they serve in, should be treated any better than those in any other area. For instance, the Garda and the Army have an income level that is not excessive, but the staff of the ESB got a special comprehensive agreement about which I had reservations when it happened. It had been concluded when I came to office. The man sweeping the street is doing just as essential a service as the man who turns the switch in a generating station. I can see now why there cannot be any grounds for industrial disputes within the ESB. They have a comprehensive agreement and their incomes are generous compared to other workers. It would be a sad day for the State, and for the ESB, if we were to have a spate of industrial disputes such as occurred in the past.

The board have a responsibility to be efficient and that is important in a period when electricity usage has fallen — it fell, according to the annual report for 1981-82, by about 8 per cent and the board envisages a further reduction in consumption this year. I am aware that the board have major capital commitments such as the Moneypoint and Poolbeg projects and the new crow-coal station in County Leitrim. But the board have a responsibility at a time when electricity consumption is stabilising or, as in this instance, is falling, to ensure that they are not overmanned. While I understand that the lead time into any major capital programme is flexible, the board must ensure that responsible decisions are taken about further capital expenditure. Obviously, they cannot be caught. If there is an upsurge in the economy it is important to have the necessary reserves, but when we have natural gas that can be done by switching in and out from that source.

The board have a responsibility to ensure that their workers are carrying out their tasks efficiently and that the price of electricity is at its most competitive level as a source of energy.

In July 1978 the fuel variation charge was dropped and the time has come to do away with that charge again. It is far too high in proportion to the total cost of electricity. The price of oil has fallen sufficiently to make an impact on the cost of generating electricity and the increased availability of natural gas should combine to ensure that a price reduction can be made. Allied to that is the fact that in the 25 per cent increase granted in July last year was a figure of approximately 8 per cent which was given for one year only. That was designed to help the ESB recoup revenue losses incurred from February to September 1981. That should be withdrawn before the next billing period, August to September. That would mean a reduction of approximately 8 per cent in the cost of electricity. I am perturbed that the board have applied for a further price increase. I do not think they can justify it and I have outlined the reasons why. There is no reason why there should not be a reduction in the cost of electricity and now is the time to remove the fuel variation charge.

Minister for Industry and Energy (Mr. Reynolds)

I should like to clear up a few points in case there is any confusion before I go on to deal in detail with the subject raised in the motion, something which concerns us all. I can understand Deputy Collins' approach to this subject. Understandably, he made a few nice arguments which he hoped would hold water. I should like to deal with his reference to the 25 per cent increase granted last year. The Deputy said it was a condition of the granting of the increase to the ESB that there would not be any further increase for 12 months. The Deputy has nodded, so I take it I have interpreted him correctly. To put the record straight, if that was the case I am surprised that the Government did not make it a condition of granting the 25 per cent increase, which they did not do.

Secondly the question of subsidies was raised. This is a new phenomenon to some extent. When Fianna Fáil were in Government I was a member of the Cabinet and I remember that we said at that time that because of the movement in oil prices and the trends that were apparently there at the start of the year we were prepared to wait until the end of the year to see if oil prices had stabilised, look at the situation with the ESB and come to grips with it. Our views on the matter were borne out very shortly afterwards when the ESB returned a profit of up to £6 million. If the Government intended to make this the excuse for saying that the ESB should not have a price increase, this is the first anyone has heard of it except Deputy Collins. The record shows that there is no decision whatever conditional that the ESB would not be applying for any price increase within the 12 months.

Deputy Collins quoted spot prices on the market which we know are volatile. The whole oil market is volatile to some extent, but Deputy Collins quotes spot prices and spot prices only. The ESB buy heavy fuel oil at spot-related prices, but Deputy Collins, making the argument correctly from his side of the House, would say that he did not take into consideration the currency fluctuations. Bearing in mind that the price we pay for oil is in dollars and taking the currency fluctuation into consideration, then you see the real position and the fluctuation that he talks about is much less than he tries to make out.

I have no difficulty whatsoever in accepting the principle of the motion which reflects my own thinking and foreshadows the outcome of measures which I have already initiated. Within weeks of assuming my responsibilities as Minister for Industry and Energy I made it one of my priorities to look at the usefulness or otherwise of the surcharge to see whether it might be timely to remove it from the ESB accounts. Among the factors which have prompted me to look at it has been the fact that in recent times the market for fuel oil has tended to stabilise. In addition the ESB have for some years embarked on a policy of diversification of sources for the generation of electricity. I heard other comparisons made here in relation to the unit cost, taking various stations. I am sure that the House would like to be fully aware that gas used by the ESB was used in Cork only and when you talk about drawing a unit price from various other stations you have to do it accurately and professionally and not take a figure out of the air and make it a common price. Deputy Collins knows quite well that electricity generated from gas is reflected even at this time in 1p cheaper per unit than would be the case if gas was not used — I did not hear him make that point either — therefore, the fuel variation surcharge which has been in existence for over ten years by now was a vital mechanism when increases in the price of fuels were sharp and frequent, particularly with heavy fuel oil which at that time was the main fuel used by the ESB in the generation of electricity. This had very serious financial implications for the ESB. The surcharge, therefore, was a necessary mechanism to enable the board to recover the cost as quickly as possible.

At present heavy fuel oil accounts for about 40 per cent of the electricity generated by the board. As recently as 1978 fuel oil accounted for two-thirds of electricity generated. The reduction came about through a policy decision by both the Government and the ESB to diversify away from fuel oil and towards increased uses of indigenous resources. Obviously peat and hydro have played an important part in this, but the most significant contribution has come from the use of natural gas which now represents over one-third of electricity generated. In this situation, with the lessening of the ESB's reliance on heavy fuel, a reliance which will continue to decrease probably to less than 30 per cent by the end of the decade, clearly it is opportune to consider the removal of the fuel variation mechanism. I have had very many consultations with the ESB on this subject and I hope to be in a position to make a formal announcement on the matter within the next day or two.

A further significant development is in the board's annual price contract review. In recent years the price increases which have been implemented have been very high, for instance 25 per cent last year and similar figures in the previous years. One of my major policy objectives is to see that any necessary increases in ESB charges will be kept to single percentage figures. From my consultations with the board and senior executives of the ESB I am pleased to say that I have their full support in this approach. Therefore, while I cannot say too much at this stage, I am confident that the figure which will emerge from this year's contract review will be far more modest than anything we have experienced in recent years. I am equally confident that this single figure achievement will be repeated in future years. This will bring the benefit to the industrial consumer and the consumer in general of stability in electricity prices together with any absorption of the FVC into basic tariffs. This will mean that consumers will have to contend with only a single price adjustment a year and that adjustment in single percentage figures. I see the Deputy nodding his approval. It is the right road to go. He knows it, I know it and the House knows it and I am sure he must be asking himself why he did not do something about it.

The difficulties in industry in general arising from the high cost of electricity are of primary concern to me. I have received numerous representations from individual firms and organisations on the matter. This is one of the topics that I have been discussing with the ESB in the consultations I have already mentioned. I am anxious that some relief would be given to industry, at least in so far as the electricity surcharge is concerned, and the ESB are carrying out a review on this and will be reporting back to me in the very near future.

This motion also refers to a glut in oil supplies and a consequent lowering of heavy fuel oil prices. Recent references to falling oil prices concerned principally crude oil and some of the more expensive oil products. In particular the references have been to the dollar price of these fuels. Of course the ESB are faced with paying for their fuel oil in IR£ and must, therefore, take account of exchange rate movements. When these are taken into account a different picture emerges. The price of the residual fuel oil in IR£ has remained almost constant since the end of 1980. Clearly it is not realistic to expect any reduction in electricity prices from this source. Indeed, there are indications that with the easing of the world recession oil demands may begin to pick up again over the next year with a corresponding hardening in oil prices. I have heard references to reductions in oil prices and I am sure that the Deputy and the House have been aware only in the last day or so of an announcement from the British National Oil Corporation of an increase of $2.5 a barrel. A close watch on the spot market over the last while reveals that it also has tended to harden. When we look at the picture let us look at every side of it realistically and then come out with a decision that is right.

In recent years there has been a marked swing towards state to state oil deals. This is reflected in the purchasing pattern of world oil production. In 1978 the major oil companies accounted for some 60 per cent of total oil purchases. In 1980 this figure had dropped to 49 per cent. Simultaneously direct Government purchases rose from approximately 15 per cent in 1978 to 25 per cent in 1980. Purchases by the smaller oil companies and spot market deals make up the balance.

It was in recognition of this increasing trend on the part of oil-producing states to deal directly with oil-consuming countries having their own national oil companies that the Irish National Petroleum Corporation were established in July 1979 pursuant to Government decision. The INPC have contributed to Ireland's security of supplies by entering into supply contracts for crude oil. In October 1979 a contract was signed with the Iraq National Oil Corporation for the supply of 500,000 tonnes of crude oil in the year commencing March 1980. However, the instability of the world oil supply situation soon manifested itself and the outbreak of hostilities between Iran and Iraq resulted in supplies from Iraq being subject to force majeure. At present the INPC have one supply contract with the Saudi Arabian State Oil Company which was entered into in April 1980 and which provides for a crude oil supply equivalent to 500,000 tonnes per annum. This contract ran until December 1980 but incorporated a roll-over provision. The INPC are currently exploring the possibility of acquiring additional sources of crude oil supply to enhance further our security of supply and to provide the crude oil necessary for operation of the Whitegate oil refinery which the Government recently purchased and which the INPC as State agents will operate.

The Whitegate oil refinery, in State ownership, will when operational in July-August of this year represent a very important element in our efforts to reduce our country's vulnerability to oil supply disruptions and to the economic and social effects of such disruptions. With Whitegate in operation the INPC will supply some 35 per cent of our total national oil requirements. I need not overstate the significance of such a development. With the enhancement and development of the INPC's role and stature in the Irish oil market, it is my intention to bring before the Oireachtas at the earliest opportunity the legislation necessary to put the INPC on a statutory footing and to assign to them the powers, responsibility and capital structures necessary to carry out their work.

The motion also includes reference to natural gas. The ESB have played an important part in the development of the Kinsale gas field. They were one of the few organisations which could take gas in sufficient quantities at the outset to make early development of this field possible. The benefits of allocation of natural gas to the ESB are obvious. It provided revenue to Bord Gáis Éireann of about £45 million in 1981 and an expected £70 million in 1982, according to ESB estimates. Savings in fuel costs to the ESB have been about £45 million in 1981 and are expected to be about £55 million in 1982. The overall effect is that ESB prices to the consumer are currently about 10 per cent lower than they would otherwise be. Deputy Collins referred to the revaluation of the gas field which last year showed that the reserves stood at 1.35 trillion cubic feet and that they were 35 per cent higher than previously estimated. Studies have shown that it is now economically viable to embark on a policy of development of the total national gas grid to exploit the premium market in high density population areas. This will give the consumer the benefit of direct use of gas at keen prices. It will maximise revenue to Bord Gáis Éireann from sales of gas and will also maximise savings on imports as natural gas will ultimately replace significant imports of fuel oil.

Deputy Collins also referred to the revaluation of the reserves at Kinsale which is at present taking place. While I would like to think that his optimism in this would be justified, nevertheless I feel I must sound some note of warning that the information available to me from the preliminary work does not point in that direction. However, we will wait for the final valuation.

Already agreement has been reached to sell gas to the Dublin Gas Company and also to the North of Ireland. The House will be aware that last Friday at a meeting in Stormont Castle between Mr. Adam Butler and myself we reached agreement on all the headings concerned in this very complicated gas supply contract for the North of Ireland. While Deputy Collins has expressed some reservations about the quantities of gas which may be sold to the North of Ireland, I am quite satisfied that the present reserves off Kinsale Head give no major cause of concern in this area. In total the 20-year contract would represent something in the region of 12 per cent of the known reserves. This will also give us access to the development of premium markets on which we are embarked. Development of the premium market in other areas of the country such as Limerick and Waterford is under consideration but it will take some time to develop such markets to their full potential. During this intervening period surplus gas supplies from the contracted amount available from the Kinsale field will be allocated for electricity generation and heavy industrial use where an economic price can be paid. This will maximise the economic and financial return from investments in gas pipelines. Thus gas will be available to the ESB for some years ahead in quantities sufficient to have a significant beneficial effect on savings to the ESB and on electricity prices to the consumer. The coming on stream in 1986 of coal-fired electricity generating plant should produce a continued stabilising effect on electricity prices.

I am pleased to say that the Cork-Dublin gas pipeline project is well under way and work is expected to be completed by December. Construction of the pipeline from the Dublin city gate into Dublin Gas and the ESB is expected to commence later this month and to be completed by next December also. Consumers in Dublin can expect to be using Irish natural gas from the end of January next and they will have the opportunity of benefiting from the very considerable savings I announced within the past few weeks.

Many of the arguments pursued are understandable coming from Opposition benches. This is an area about which we are all concerned. The fuel variation charge has been a bone of contention for many years and I have no difficulty in accepting the principle of the motion because it is in line not only with my thinking but with the thinking of the Government. I have already said that I will be making a formal announcement about the situation within the next two weeks. The matter becomes very complicated when one pulls out figures and looks at indexes and at questions of how various prices should be fixed. It is also difficult to forecast the volatility of the oil market. Nevertheless, I have made it abundantly clear that on taking office my first objective was to come to grips with this problem and I did that. A considerable amount of work has been done and it is now coming to fruition. The right decision will be made at the end of the day.

I do not want to get into an argument here in relation to the various statistics that have been produced but from the information I have and the index I have seen in relation to spot oil prices as converted into punts it is obvious that the huge fluctuations referred to have not occurred. I am not producing that as an argument but merely wish to correct the record.

When people make comparisons regarding gas produced by the ESB from heavy fuel oil, they must remember it is only used in Cork at the moment. I am sure the Deputy opposite is aware that there is inefficiency and the Government are anxious to ensure that there is an improvement in efficiency where the ESB are using natural gas. There is a severe limitation in the present situation in that the gas can be used only in the Cork area. The sooner we get the pipeline to bring the gas here the better. Plans are on target and Cork is going ahead at the rate of approximately one mile per day. The quicker we can deliver the gas to the Dublin area the quicker we will get more efficiency in the system. This will be of benefit to the consumers.

People talk about fluctuations in price but it is well to remember what fluctuations have occurred and what fluctuations have not occurred in the price of heavy fuel oil. I do not want to bore the House by reading out the statistics for each quarter. There is stability in the price of heavy fuel oil but the same cannot be said in respect of gas. My officials put in considerable work on studying the prices of gas and petrol when I took over as Minister for Energy. The House will recall that when taxation increases were imposed in the budget they were neutralised by a reduction in petrol prices. When Whitegate oil refinery closed last summer everyone realised a premium had to be paid on fuel prices in that refinery. In fact, that was the situation from the begining when the refinery came into operation in 1959. It was reasonable to expect a reduction in oil prices after the closure of Whitegate but we did not see any such reduction.

When Whitegate comes on-stream towards the end of July or the beginning of August it will be well to remember that a premium will have to be paid for security of supply. If I want to take out a security on my own life I must pay an insurance premium. If we want to secure in the national interest oil supplies at a rate of 35 per cent of our national requirements, it is reasonable to expect that a premium will have to be paid there. When Whitegate was established the premium was one penny in the old currency. If someone would like to do a sum on what that money meant in those days and bring it forward in today's money terms I am sure Deputies would appreciate it. The INPC will run the State-owned oil refinery at Whitegate. They will be able to go to the market and purchase the proper mix of crude oil. They will not be restricted as they were in the past, depending too largely on one supplier from one source. They will be able to become a State oil trading company and get the benefit of any deals while, at the same time, ensuring security of supply.

Deputy Collins spoke about disputes that may arise in the ESB and the comprehensive agreement that was reached. This agreement is to be welcomed. I hope we will not see any going back to the days when we had so many interruptions of supply which undermined the confidence of investors and made them less competitive. I hope the comprehensive agreement that has been reached will ensure that we do not return to that kind of situation.

Deputy Collins made an interesting comment but one I did not understand in relation to the fuel variation charge. He said that the bulk of the price increase should be made on the basis of an annual review, that it should not be referred to the NPC but should operate independently. That may not be what he meant and perhaps I misunderstood him. The fuel variation charge is operated by the NPC and if it is to be altered it must be done by them. I did not quite grasp the point the Deputy was making.

I do not think we differ fundamentally on the policy or the thinking behind the motion. I have indicated I have no difficulty in accepting a motion that falls in line with my thinking since I became Minister and which foreshadows what I intend to do. We are all agreed on what should be done. I have given a clear outline of my approach since I took up office. I have stated my objectives and how I hope to achieve them. The matter of the fuel variation charge has been a major bone of contention in my mind as it has been in the minds of many Deputies. I know all Deputies will welcome action to resolve the situation. I have outlined clearly my position and that of the Government.

Mr. Taylor

From the Minister's statement that he accepts the purport of the motion I am not quite sure if he is going to discontinue the imposition of the fuel variation charge. If that is what he is saying, it is to be welcomed. However, from one's knowledge of promises from that side of the House I think we had better wait and see what will be the exact nature of the announcement. We must also see whether what has been given with one hand will be taken away by the other hand, perhaps behind the back.

The Minister indicated he did not want to get involved in an argument about statistics and I agree with him in that respect. But what we have to look at is the reality of the fuel variation charge and the effect it has had over the years on ordinary working people, particularly people on the low end of the incomes scale. It is no exaggeration to say that its effect has been little short of traumatic. It has made the ESB bill an item of terror. There are many families who, when they see that ESB bill dropped through their letterbox, are put in real fear as to what the outcome will be; and the outcome is that their supply of electricity is cut off. That is the reality. There are many estates I know of where ESB inspectors and operatives came in without warning and, on a large scale, cut off perhaps 50 or 70 houses in one day without warning, and in many of these cases the amount of the bill owed was relatively low. One can imagine the degree of misery that would be caused by the cut-off of electricity in a house with children. One has to see this in the context of the ESB, in the early years, adopting an aggressive sales campaign, advertising and pressing for the sale of their wares and their product, so much so that many builders built houses taking up their proposals and their offers and providing all electric houses, houses with electricity as their only means of cooking and heating, so that people were locked into the monopoly situation of the use of that commodity. They then had to face the horror of the fuel variation charge and the increases that took place in that generally over the years. Over the past seven years the increase in the fuel variation charge has amounted to upwards of 600 per cent.

I have to make some adverse comment generally on the lack of sympathy that is all too often evident on the part of ESB officials in dealing with many of their subscribers, particularly those who find themselves cut off from supplies and thereby deprived of heating and cooking facilities, often in the middle of winter. Many of the officials insisted on obtaining payment in full of all outstanding arrears on accounts and all too often they would refuse to enter into a reasonable arrangement to reconnect and allow the subscribers to pay off an outstanding bill. I do not think that that was a universal situation. It depended very largely on the particular public relations officers, and this would vary from area to area. Some certainly were more sympathetic than others. With this monopoly situation, where the ESB are the only supplier of electricity in the State, there is clearly a great need for sympathy and understanding on the part of the ESB officials in these situations, particularly in dealing with low income families, in being prepared to enter into an arrangement with the subscribers for the reconnection of electricity. It is an undeniable fact that as the years have progressed during the last decade the cost of the ESB bill in the average worker's household has absorbed an ever-increasing percentage of the wage coming into that house. This has caused immense hardship particularly in the case of people on long-term social welfare and people on low incomes especially where there are children in the house.

There seems to be some concept running through this country in the matter of the supply of essential services that these services must break even, that there must be no loss situation. One finds this area of thought not only in the field of electricity supplies but in the field of transport and in various other fields of that nature. These are areas where social necessity requires that these items be provided to members of the public as a social service and that a subsidy from State funds generally would be appropriate, if not across the board then certainly in cases where the financial need of the family involved so warrants. So far as electricity is concerned attention should be given to extending free electricity or subsidised electricity to people who are on long-term social welfare benefits, to the long-term unemployed, to people on low incomes and to people with large families.

The Minister touched on the relevance of the cost of electricity for industry. This is a very important issue, but it has been insufficiently analysed. It is a fact that the use of electricity is an essential factor in manufacturing industry. It is a key factor in the costs of manufacturing industry. It is also a fact that the cost of electricity here is, if not the highest, certainly among the highest in Europe. That fact alone places an intolerable burden on Irish industry and has contributed to the difficulties and collapse of very many of our industries. That is a tragic situation that we need not have.

The Minister referred to the cost of oil and said one of the factors that affects the cost of oil in the ESB has been the decline in value of Irish currency. That is quite right. As the Minister points out, when the Irish currency depreciates, that alone increases the cost of oil to us, because oil is priced in dollars. So, the Irish currency goes down and, as a result, oil costs go up. The next stage in the chain is that the ESB charges go up. ESB charges to the factories, big and small, make the marginal industries that bit less viable, that bit less competitive. As a result of that many of them go to the wall. A key example of that was the Clondalkin Paper Mills, a subject to which I trust in these closing days of the Minister's deadline he is applying himself very carefully, because tomorrow week is the deadline for the resuscitation of the Clondalkin Paper Mills. In that industry it was pointed out how vital a factor the cost of energy was. Therefore, as a result of the ESB charges going up, many of these marginal industries go to the wall, causing redundancies, increasing the already unacceptably high level of unemployment, placing an additional burden on the State in the provision of redundancy payments and social welfare payments. What is the result of all those factors — increased unemployment and a drop in the national product of the State, a further drop in Irish currency, thereby completing the vicious circle and triggering off the whole procedure once again leading to increases in the cost of oil and so on.

Why can we not get away from this concept that a service industry like the ESB must break even? In my view, it would make sound economic sense if the cost of electricity to industry was subsidised and reduced. There is an apparent loss and an apparent cost there, but it is only apparent, because in the long run that will be recouped and brought back fourfold and fivefold. It will make viable industries that would otherwise close down, it will preserve and maintain employment that would otherwise be lost, it will save enormous revenues to the State in social welfare and redundancy payments and in many cases it will mean goods produced in the industries which closed down will have to be imported — witness the paper industry, and there are many others. Industries are closing down week in and week out. When one adds up all these savings they will more than offset the initial apparent cost incurred in subsidising electricity charges for industries.

As far as industry is concerned, we should take a small risk — and I would regard it as a very small risk. Let us take a radical step for once. It is not that this is not done elsewhere. Electricity charges are subsidised for certain industries in industrialised European nations. They recognise the importance of the cost of a key vital factor in the production of industrial goods. Electricity charges are subsidised for specified weak industries in Germany, Norway and many other European countries. Why do we not do that when it has everything to recommend it? These industrialised European countries know the merit of that course of action.

So far as domestic use of electricity is concerned, the Minister said the increases during the current year would be down to single figures. I am afraid that will come as no consolation to the very many people who are unable to meet their existing electricity charges, who are terrified at the advent of the electricity bill. What they require is not an increase in single figures, but a reduction in the cost of electricity, a very basic and essential commodity of the family today which is as necessary as food, transport and so on. To plunge families, particularly with young children, into darkness and coldness is wrong. In my constituency it is standard practice for the ESB to cut off electricity supply because of the financial inability of people to meet the electricity charges. That is an intolerable situation. It should not be accepted and I urge the Minister to ensure that what he indicated in his speech will be translated into reality, that it will be within the financial means of people to meet these electricity charges and that no person should be cut off from electricity supplies because of being unable to meet the electricity bills.

Mr. Kitt

I welcome the Minister's announcement this evening that he will discontinue the fuel variation levy. Deputy Mervyn Taylor said he would welcome it when it was announced, but the Minister said very clearly here tonight that it will be officially announced within the next few weeks. As the Minister said when giving a history of our oil situation and the recent oil crises, we welcome the situation where our dependence on oil is diminishing because for the last few years we have been developing our natural resources — hydro, peat and natural gas.

The 25 per cent increase inflicted on us last July hit all sectors of society, consumers, industry and the farming community particularly. Dairy farmers found their electricity bills very severe. When the levy disappears it will help agriculture as well as industry and the consumer. I was glad to hear that increases in the coming year would be in single figures. People who were not in a position to pay were very frightened when they got their electricity bills; in many cases they got letters saying their electricity supply would be cut off. This is causing great concern.

Our dependence on oil has been reduced from 40 per cent to 28 per cent. This move has been welcomed by all. In my constituency we have an amount of bog which has kept us poor for many years, but one of the most heartening signs we have seen is milled peat being processed and shipped to places like Shannonbridge. Last week the Minister said he was giving the go-ahead to a briquette factory in the Ballyforan area. That type of development has ensured that we will not be as dependent on oil as a source of energy as we were heretofore. I am glad that type of development is going on and that Bord na Móna are acquiring more bog in that area. The bogland which has made us poor will certainly now make us rich in energy, as well as providing the jobs so needed in a rural area such as Ballyforan.

An Leas-Cheann Comhairle

I must interrupt Deputy Kitt, as it is now 8.30 p.m.

Debate adjourned.