Vol. 439 No. 1
4 Mr. Carey asked the Minister for Transport, Energy and Communications if he is considering an application from the ESB to increase electricity charges; when he will make a decision on this matter; and the policy framework in which this decision will be taken.
As I have stated previously in the House, the ESB has applied for an increase in electricity prices primarily to finance its proposed capital expenditure programme.
The Culliton and Moriarty reports and the recently published Programme for Competitiveness and Work all emphasise the necessity of minimising energy costs as a vital element in maintaining a competitive edge for Irish businesses. If our energy costs escalate, economic growth could be adversely affected. This is the policy framework within which the need for an electricity price increase is being assessed.
The Government has decided that the ESB's cost base and capital expenditure programme must be examined in detail before taking a decision on the price increase application. The review of the ESB will concentrate on how ESB costs compare with international best practice and will establish international benchmarks against which future ESB costs and performance can be monitored.
No decision will be taken about an electricity price increase until I am satisfied that all opportunities have been exhausted to maintain the existing price levels through greater efficiency.
The Minister indicated that there will be a further delay in arriving at a decision on the price increase sought by the ESB. Will he confirm that the ESB has sought a 5 per cent increase in charges up to 1997? This should have been taken into account in the calculations used by the Minister for Finance when he was negotiating the new agreement with the trade unions. Did the Minister take account of inputs to the consumer price index when the negotiations were taking place?
In April 1992 the ESB submitted a request for a price increase equal to inflation over a five year period. The main reason is to cover the cost of the proposed capital investment programme. This programme will depend on future directions for the electricity sector. No price increase has yet been approved and the matter is still under consideration. In the company's corporate plan, submitted in May 1993 the board of the ESB stated it wished to proceed with the price increase.
A number of issues is involved. There is a need to assess the very significant capital investment programme proposed by the board which is in the region of £1,300 million and will obviously have a major impact on future price levels. There is also the question of interest charges and the capital structure of the company with the cost that imposes. Fuel costs have been more to the ESB's advantage in recent times than heretofore. In terms of predicting the ESB's requirements there is a need to benchmark the company in terms of best international practice and to address precisely the needs of the company in terms of its capital investment programme. There is also the question of increasing plant availability, which would reduce the need for capital investment as soon as might otherwise be predicted. There are assumptions in all areas of the corporate plan which have to be addressed and monitored and then the Department will take decisions. I believe we should look at this in a co-operative way and come up with solutions so that a price mechanism that is acceptable to everybody can be arrived at.
Does the Minister not realise that his own or his Department's indecisiveness in assessing the ESB's request is harmful to consumers and to the employees of the ESB? He has to face up to the problem now. The ESB has lodged its corporate plan but no decision is forthcoming from the Minister who is using international market forces to arrive at a conclusion. Would he accept that this indecisiveness is harmful all round?
I have been accused of many things during the past 12 months but this is the first time I have been accused of being indecisive. As the Deputy is aware, a number of factors have to be taken into account by my Department in deciding whether a price increase is necessary and, if so, the level. A framework is being put in place to allow us reach conclusions in a co-operative manner. A cost study has been initiated to assess the company against international benchmarks. The intention, in keeping with its mission statement agreed with all the staff, is to have an excellent electricity company which can compare with any in the world. Before we reach any conclusion, to protect the consumer and ensure a price increase is warranted we will look at its capital investment programme to see if it can be made more efficient. It is prudent to do this. I am not being indecisive. We are putting a framework in place within which those decisions will be made and proceeding on that basis.
