Seanad Éireann díospóireacht -
Thursday, 18 Jul 1929

Vol. 12 No. 24

Public Business. - Electricity (Finance) Bill, 1929—Second Stage. (Certified by the Ceann Comhairle of the Dáil as a Money Bill)

Sir John Keane

There are one or two points in connection with this Bill on which I would like to have information. I should like the Minister, if he has the figures, to say how much of the estimated final sum of £5,800,000 would be interest and how much expenditure on works. I should like to know also whether the £156,000 which is going to be voted to the Electricity Supply Board will be all the moneys they will have available and be entitled to use for the payment of interest, apart from receipts from sales. Is it the position that they will not be allowed to use any of the capital sum of £2,500,000 previously voted for the purpose of paying interest? There is only £165,000 now being voted for that purpose. With regard to navigation, there are one or two matters with which I would like to deal. I think under Section 4 of this Bill the sum of £132,000 is excluded as a burden on electricity, and is going to be subsequently provided for by charges on navigation, or in some other way. I think the inference is that it is going to be met by navigation. I should like the Seanad to refresh its memory with regard to the charges in navigation. In a statement made by the Minister for Industry and Commerce in the year 1925, on a resolution practically sanctioning the preliminary stages in this scheme, the Minister indicated that if the people interested in navigation were prepared to use the old method, the existing canals, there would be no charge placed on them at all, that the lock that would be necessary to lift the boats out of the old canal to the higher level would be met by the electricity scheme. But if other methods of navigation were required, if they were to proceed up to the tail race to be lifted into the head race at Ardnacrusha, the cost of £75,000 would fall upon navigation. Reading the debate which took place on that occasion, I think it is clear that the navigation interests were to be allowed to say which they preferred —the old method or the new or present method. This is what was said (Official Report, 2nd April, 1925, col. 1763):—

"if the navigation company desire that new method of navigation, £75,000 would be an additional charge upon them. If they desire to proceed in the old way, then the power scheme will have to bear the charge for the new lock at a cost of £20,000, and navigation will be as before."

I should like the Minister to say if the parties interested in navigation were consulted, and whether they did elect for the present scheme, which it was estimated in 1925 was going to cost £75,000. There is a further matter. This £75,000, without any explanation in the Dáil—I hope the Minister will give an explanation now—is increased to £132,000. As far as I can judge from the scanty information at my disposal, there are no definite changes in the general character of the new scheme. It was always intended that the new scheme would involve lifting the boats from the tail race into the head works, and that is all that is being done now. Therefore, one would like to know how that sum has increased by 80 per cent. roughly, whereas generally the works have only increased roughly by ten per cent. I ask the House to accept the view that this heavy burden should not be placed on navigation.

Minister for Industry and Commerce (Mr. McGilligan)

Why assume that it is going to be on navigation?

Sir John Keane

I think the Minister has in effect said so.

Mr. McGilligan

No; I think not.

Sir John Keane

If the Minister will say it is not, well and good.

Mr. McGilligan

I have not said that either.

Sir John Keane

Assuming that it is to be placed on navigation, it is a very heavy burden. If it is not, the navigation interests will be quite satisfied.

Mr. Johnson

I was hoping the Minister would repeat for the benefit of the Seanad some of the statements that he made in the Dáil a few days ago. He made a very interesting and lucid statement full of information—rather too full for easy understanding of all its aspects, but nevertheless a very valuable statement of the position. He was astonished that his statement of the position showed so slight a departure from the estimates that were made when the scheme was originated. I am not going to dilate upon the extent of the increase, whether it is too great or too small, but I want to say that the figures he gave, no matter how closely they may be examined, are not sufficient to enable us to arrive at a true estimate as to whether the increase in the charge was excessive or not. We would require certain other information. For instance, the £5,210,000 which was originally voted was based upon the Experts' report, which itself allowed for a loss of interest, during the construction period and the period before the scheme became profitable, of fifteen per cent. I think we would require to know whether that fifteen per cent. has been over-estimated or under-estimated. Further, there is a figure that runs through the construction estimate of 8¼ per cent. for a possible increase in wages. Eight and a quarter per cent. was allowed on the total cost of £2,343,000 for a possible increase in wages. That £2,343,000 was a charge inclusive of the hire of machinery and everything connected with construction. If we assume for a moment that wages amounted to one-half of the total, that is a margin of sixteen and a half per cent. for a possible increase in wages. We would require to know whether or not that figure has been reached before we could decide whether or not the increase in the cost of the scheme has been within the ten per cent. that has been mentioned.

There is a further item which would require to be unveiled. On page 88 of the Experts' Report dealing with the electrical part, the Experts say:

The Experts consider the prices to be fair. The clauses concerning copper notation and wages will probably not have any appreciable effect upon the total cost of the mechanical and electrical parts. A further rise in the exchange value of the pound will cause a decrease of the cost.

That, I think, was dated in the latter part of 1924, and I think the stabilisation of the German mark did not take place until some months later than that. One would therefore require to know whether any allowance has been or ought to have been made in respect of the change in the exchange value of the £, so that the figures that are available are not yet sufficient to enable us to arrive at a fair computation as to whether the Experts' estimate has been exceeded by too much or whether it has been kept within reasonable limits.

There is another matter that I think ought to be discussed on this Bill—it is outside the mere technicalities of the scheme, but it touches upon State policy—and that is in regard to electrical development and the use that is to be made of the electrical power. The plan is, of course, to hand over the scheme to the Electricity Supply Board, and require of them that they should cover expenses, including interest on capital charges, but not make a profit. Obviously, the obligation upon the Board is to cover the expenditure. But there is involved in their policy the question as to how they are going to use that power; what will be the influences upon the general economic activities of the country; whether, for instance, they will tend towards encouraging power consumption for industry or for agriculture or for lighting mainly, and where will their bias lie. Who will have the influence upon the policy that they will carry through for the purpose of making the scheme pay?

I made a suggestion at the very inception of the discussion upon this Bill that it would be good policy for the country to throw capital charges upon the National Exchequer. I repeated that in another form on the 1925 Bill, urging that, at least for a period, much longer than the three or four years up to 1932 then suggested, privilege should be given, by way of low charges, to encourage consumption, and that for a much longer period there should be freedom to run the concern at a loss for the purpose of encouraging consumption. I want to go back to that proposition, and to urge upon the Minister that he should come to an arrangement with the Board, and, with the assistance of the Minister for Finance, embark upon a bold policy of power for production for nothing.

I think it would be a profitable business for the country. A quarter of a million or three hundred thousand pounds would be better spent by that method of encouraging industrial production than in any other way. The Minister for Finance told us a while ago, when dealing with the question of de-rating, that it was a proposition that this country would be bound to meet because of the developments in other countries, and I submit to him for consideration that by way of aiding industrial production, free electrical power would be probably the most advantageous method to the manufacturer, the most beneficial to the country and the least costly.

Cathaoirleach

I think that the Senator is really talking about electrical policy in general instead of this particular Bill. The Senator has already talked a good deal on that matter, and I ask him now not to be too long. This would be relevant to a Bill dealing with electricity, but not to this Bill.

Mr. Johnson

I am not going to continue very long, but I submit it is important when dealing with the charge that is to be laid upon the Electricity Board.

Cathaoirleach

It may be very important, but it is not relevant.

Mr. Johnson

I do not want to go into anything that is not relevant, but I submit, when either seeking to minimise the charge upon the Electricity Board or to increase it, as the case may be, it is really germane to discuss how they are going to utilise the powers and the money granted to them. I want to submit to the Minister for Industry and Commerce and the Minister for Finance that by the provision of free or almost free power to the electrical user for productive purposes existing industries would be encouraged and new industries would be attracted. The future of the country depends, I think it will be generally admitted, as much upon the possible development of industrial activities as upon anything. We heard a good deal of talk recently about a tariff on flour. I find from estimates given as to the amount of power used in the flour mills that free fuel would equal practically one shilling per sack of flour. Free fuel may be too much, because there is the cost of distribution to be taken into account, but a bulk supply of power for nothing would go very far to meet the legitimate demands of many industrial undertakings. Taking the reports of the industrial census, one finds that about five per cent. of the net output of productive industry equals the sum paid for fuel. I am not suggesting for a moment that the whole of that could be met by electricity, but I urge upon Ministers that they should conduct an inquiry into the possibility of industrial development by way of a very cheap supply of power for productive purposes. Taking a very rough estimate, based upon the only figures I have, it would seem to me, from the figures given by the Minister and allowing one penny per unit for bulk supply power for lighting and domestic purposes, that the cost to the community would not be more than about £300,000 even upon the figures for 1932 and leaving out of account subsequent developments. The prospect of very cheap power would enable Irish industrialists to meet the very cheap power of Norway, Canada and Switzerland and other places and would enable them to overcome the handicap which Irish manufacturers and industrialists are inevitably bound to encounter.

I think it will be realised that some of the new electro-chemical and metallurgical industries might possibly be attracted to this country if they were guaranteed a practically free bulk supply of power for these purposes. One way or another, I urge the Minister to consult with the Supply Board and endeavour to examine this proposition and take into sympathetic consideration how far it would be possible to use the finances of the electrical supply scheme, aided by the revenue, in such a way as to promote industrial activity for the benefit of the country.

Mr. McGilligan

I can only attempt to answer the questions put to me by Senator Sir John Keane at the moment in a rather rough and ready way, but in a way, I hope, that will be sufficient to satisfy the Senator. He asked for a division of the new sum of £5,835,000 as between the moneys actually to be spent on construction and the moneys to be used either for interest charges or to meet losses during the unremunerative years. I cannot divide that accurately at the moment, but I put this problem to him in return: The old sum of £5,200,000 was divided roughly into £4,600,000 to be spent on construction and £600,000 which was to meet the interest charges plus the loss of revenue during the unremunerative two or three years.

That division was founded upon the original Siemens-Schuckert project, which set aside a sum for construction and which calculated that 15 per cent. of that should be sufficient to meet interest charges during the period in which the losses would be incurred. There was a further division of that 15 per cent. into 12 per cent. for interest and 3 per cent. for the period during which the Shannon scheme would not be paying its way. If the Senator would take the new sum of £5,835,000 plus the sum of money handed over to the Electricity Supply Board under Section 2, that is £156,000, and make a similar division he will get the answer to his query. We estimate that £156,000 is 3 per cent. of the capital costs. We are handing that over to the Electricity Supply Board in order to meet the losses of the unremunerative years, as under this Bill the Department will have to meet all interest charges before anything is handed over to the Shannon Board. That is the nearest approach to a reply that I can give the Senator at the moment.

I would direct the attention of the Seanad to a promise of mine in the Dáil that, for further clarification of all Shannon accounts I would hereafter introduce a Token Vote, when we have the final cost of the whole scheme actually determined.

With regard to the £156,000, that sum is expressed under Section 2 of the Amending Bill to take the place of sub-section (2) of Section 12. Sub-section (2) of Section 12 did not provide an exact sum, but it gave a calculation as to a sum to be handed over to meet interest, and the arrears of interest. Then it went on to say in the third sub-section: "The total amount advanced for any purpose, other than to meet liabilities, shall be two and a half millions." Now instead of an indefinite amount of money in Section 2 we are putting in the definite amount of £156,000. It seems to me that the two and a-half million cannot be used for the purpose of meeting interest and arrears of interest, but the £156,000 can. That £156,000 was arrived at by taking 3 per cent. of what we estimated to be the capital cost, and that 3 per cent. will meet interest and other charges. With regard to navigation, I cannot go into the details of this matter or show how that sum is to be made up or is to be determined. Originally the navigation was estimated to cost £94,000. It was stated that £20,000 was to be the cost of putting a lock in the weir. The amount that could be borne by and be equitably put against the users of electricity for interfering with navigation was £20,000. That was the old sum, and that old sum of £20,000 is still here. The old figure of £5,210,000 did not include the £74,000. That £74,000 was left out of the calculation altogether. It was to be met somehow, but the "how" was not settled. We simply put in £152,000 in the same way, the figures having risen from £94,000 to £152,000.

Sir John Keane

The Minister said that £58,000 is chargeable against navigation.

Mr. McGilligan

Give me the reference.

Sir John Keane

It is on top of column 375, for the 4th July, 1929.

Mr. McGilligan

That was a slip, as will be seen from the context. I think if the Senator will read through the whole speech he will find that I mentioned that as far as the present proposals go we are not charging electricity consumers with the £132,000 but are not deciding who is positively to be charged. In the old scheme, we set out to charge £20,000 against the Shannon navigation. The only thing determined in this Bill is that this sum of £132,000 is not to be paid back as at present things go by consumers of electricity. The cost of navigation improvement is not to be charged against the electricity consumers, except the £20,000 previously provided.

How the £132,000 will be met will have to be decided when we see what are the moneys to be saved to navigation users by the elimination of the ten or twelve locks and by the saving in the cost of maintenance charges afterwards. In that way we will find out how the navigation users have benefited, by elimination of some of the present charges, and in addition there will be the speed improvement.

There were two expressions of opinion in the Dáil by members of the same Party as to how this cost should be borne. One was that it should be borne by the taxpayers, and another expression of opinion equally vehement was that this cost should not be borne by the taxpayers. The determination of that matter will have to wait. As to why the figure of £94,000 has gone up to £152,000, on that we will have to await the presentation of the final accounts. Until that time we must postpone final decision as to how it should be charged.

But I think it will be found hereafter that in one part of the canal the cost more or less went up in the proportion in which these navigation costs show an increase from £94,000 to £132,000. I think it will be found that the increase was due to the increase in the earth excavating and rock cutting costs. Again, I would emphasise that anything I have said on the navigation question is hedged round with reservations. But before this matter is settled we will have an opportunity of discussing the proposals in the Oireachtas. Settlement must be either by legislation or by Orders. I promise to give an opportunity for discussing it before the final determination is made.

Senator Johnson asked about points of detail. Again, I will answer in a rough and ready fashion, pointing out that another opportunity will be given hereafter for query and reply. As to the 10 per cent., whether that is an over or an under-estimate, if one reads the paragraph where the 10 per cent. occurs and applies it exactly as it was meant to be read I think it will be found that we are very definitely under the 10 per cent. With regard to the 8½ per cent. addition to meet a possible increase in wages, that was taken into consideration when we were fixing the unit price. I do not know if I can answer the Senator's question by saying that I have lost on wages, and lost rather badly.

Mr. Johnson

We can only understand these things when we have the contrast.

Mr. McGilligan

I agree. As regards the exchange value of the mark, that point arose when the contract was being made, and it can only be properly understood if and when the full circumstances of the contract are made clear. As to who will direct the policy of the Electricity Supply Board, I would like to follow up what Senator Johnson has said, although the Cathaoirleach may rule it out as somewhat irrelevant. Actually, the Electricity Supply Board is in control of all policy, but although we have relieved the Board of the type of inquisition involved in Parliamentary questions, we insist that they submit reports to the Oireachtas. These reports will give grounds for debate, and in these debates directions on policy may be revealed. Under present legislation these directions could not well be imposed on the Electricity Supply Board, but they could be put in such a way that the Board could not very well ignore them.

But without special directions the Board must proceed on the lines of an ordinary commercial concern. Their object is to make the scheme pay in the quickest possible time, and with that object they will have to look for consumers, and they will have to conduct affairs on a normal business course. It will be, of course, the duty of the Executive Council from time to time to direct the Electricity Supply Board if the occasion arises. If the Board does not follow the policy as outlined to them, then there might have to be a change in the legislation. The Senator went on to indicate that in his opinion there should be power granted free to industrial users. Of course, the Electricity Supply Board could not follow that line. To enable them to act in this way there would have to be a definite line of policy laid down by the Government, and I will say a little more about that later on. Senator Johnson previously did make the suggestion that capital charges should be thrown on national funds and, if necessary, the whole scheme should be run at a loss in order to encourage consumption. A suggestion of that sort must be considered in the light of the new facts. What are the new facts? The facts are that if there is anything ahead of us it is not a deficit in the Shannon revenues, but rather the opposite. Let us take the calculation that I gave to the Dáil regarding the automatic increase in the consumption of electricity year by year. Not merely have the prophecies of a few years been upheld, but it would seem that the most sanguine hopes then entertained will be improved upon. The Electricity Supply Board are in a position to know what the position is. They have been making arrangements for the supply of electricity, and they estimate that in 1932, instead of the 110 million units originally estimated as the demand on the scheme, the Shannon will have to deliver fully 144 million units. That will be the demand in 1932 without any activity on the part of the Board.

Matters of policy will have to be considered hereafter, but unless there is some big problem to be faced, such as would be involved by the encouragement of industries by supplying power free of charge, I would rather like to have the early years of the Shannon scheme unclouded. I would like to have it made a complete and entire success. I expect a great deal more from the Shannon scheme than merely the sale of so many million units at a certain price. The whole scheme is a big one. Young engineeers were put on the work, and have been opposed to foreign engineers of great experience. I would like to have the greatest revelation made as to how completely they have achieved what was put up to them as an almost insuperable task. I would like to have that revealed in such a way that there can be no mistake about it.

In contrasting the 144 million units estimated demand in 1932 with the 110 million units generally mentioned as Shannon output it must not be thought that we are going to be 34 million units short in our deliveries. The Shannon will have a greater delivery than 110 million units, but if it sells 110 million units at a certain price, then the scheme pays. Owing to there being a slight delay in completion, certain additions had to be made to the Dublin plant, and that means that the Dublin plant is a much more powerful stand-by than ever before. That shows that as distinct from the 110 million units which was prophesied to be the output of the scheme, there will be a bigger sale possible. The figure of 110 million units, if it is sold at a certain price, will leave the revenue equal to the expenditure.

There is some evidence of the scheme being a very big success at the moment. We are only now beginning to realise how conservative were the reports of the experts. Originally we based our calculations on a sale of 110 million units—we took that as a maximum. But other things must be taken into consideration—the rainfall over the whole catchment area and the flow out of the Shannon. Our 110 million units were calculated on statistics obtained in respect of the driest year in a period of forty years, and it was calculated that in a normal year there might be 20 million or 30 million units extra. When we come to the new development, the second stage, we will have the total output at a fraction of the original cost. It is calculated that if we sell 110 million units we will have £486,000 per annum in order to make ends meet. When we come to the further stage of development the revenue will be double, but the cost of production will be increased only by one-third. Every addition made to this scheme will mean the cheapening of the unit cost to everybody.

A further point was raised by Senator Johnson when he talked about throwing certain costs on the national funds. There is one very extraordinary point in the whole economics of the Shannon. The £486,000 per annum required in order to make the scheme pay includes two items, and many people think it wrong that both these items should be included in the annual bill. It includes payment for interest charges and also a sinking fund which will have repaid the entire sum of money in a period of 40 years, and will have paid interest on this money all the time.

In addition, every year there is set aside a sufficient sum for renewals and repairs to keep the plant in first class condition. So that as the scheme's finances are at present arranged we are not merely meeting interest and sinking fund charges, but we are setting aside a certain amount for renewals and repairs each year, so that at the end of forty years the users will have a completely new plant in first-class condition, renewed and repaired to the last point, and will have no interest or sinking fund charges to meet. Interest and sinking fund charges amount to 70 per cent. of the £468,000 that has to be met each year. It is questionable whether there should not be a better distribution of that, so that instead of throwing it over a period of forty years, the charges for interest and the renewals and repairs should be spaced over a longer period. It is difficult fully to justify in a scheme of this sort, that we should ask consumers for forty years to bear such charges, and that at the end of that time they will hand over to their successors a plant entirely free from interest and sinking fund charges, a first class plant brought up to the highest perfection. It is doubtful whether that should be carried out in its entirety, but I would rather go ahead with it as it is for the first few years. We have a scheme that is very much criticised. We are told that we will not get the consumption which we need to make the scheme a paying one. Some estimates put the cost of the scheme at ten, and even fifteen millions. We were told that the price of the unit will go up so enormously that electricity in this country could not compete with other agents.

I stressed a figure in the Dáil on the last day and I would stress it again here. The net result of the extra money I now require is best shown in the new figures that have to be substituted for the table on Page 103 of the Experts' Report. The Experts previously gave two ways in which interest and charges might be met. One of the ways was that they took the cost of the earthworks and power houses and said: "You will have so many units and it will cost so much to get it to this point." They made a calculation and said: "If you get to .41d. it will pay." They went further and said: "At the end of the 100 KV. system you pay your way when selling at .52d." They added that after reaching 35 KV. transformer stations the charge would increase to .74d. and at the 10 KV. transformer stations it would be .84d. As a result of the new money which we have had to spend certain additions must be made to each of these fractions of a penny. These charges are to be increased until the .42 becomes .5 and until the .84 becomes .9. That is the increase. That is one of the variables that is now, more or less, fixed. The estimate of 110 million units was in the region of prophecy. It was a prophecy which was based on calculation, and we say, looking back through the years, that our prophecy has been not merely fulfilled but that the consumption is likely to outrun what was estimated. The automatic increase, if it continues at its present rate, brings us in 1932 nearly up to the point of 110 million units. The Electricity Supply Board have gone further and said that in 1932 we shall have a demand for 144 million units. That being the situation—unless it is done in a careful, judicious way so that there will be no be-clouding of the estimate—I would rather have no spacing out of the period in which interest and expenditure on repairs will be met.

I would rather let the scheme operate as it is until 1932 and, when it is beyond doubt that it is paying and when the enterprise has been justified, we might make certain changes in the finance arrangements. I would not allow any pride with regard to the works to interfere with such a thing as Senator Johnson suggested if good reason be shown for it. If we are going to do anything of the kind we can always make our arrangements so that the final costs will always appear. I ask the Senator to consider his previous suggestion in the light of what I have said. We are going on the most conservative basis and we believe that we are going to get the consumption estimated. We have got one side of the account almost complete. We know where we are. The sale price of the unit is now .9d. in contrast to the .84d. previously estimated. It would be well for the Seanad to read again the report of the experts and to see the basis on which the whole scheme is founded. It may be the subject of debate afterwards whether the interest and sinking fund charges as well as the cost of renewals and repairs, will be put in full on the consumer of these times or whether repayments shall not be spaced out over a larger period of years.

Question—"That the Bill be read a Second Time"—put and agreed to.

Committee Stage fixed for Friday, 19th July.

The Seanad went into Committee.