Seanad Éireann díospóireacht -
Wednesday, 21 Feb 1934

Vol. 18 No. 6

Electricity (Supply) (Amendment) Bill, 1934 (Certified a Money Bill)—Second Stage (Resumed).

Sir John Keane

Senator Staines suggested in certain remarks that the Minister had no control over the Electricity Supply Board. I do not think that that is correct. He has not power of detailed interference, but he has power of general control over the officials and the Board. I do think that the Minister should take notice of and, if another opportunity occurs, give the House some explanation of the very wide discrepancy between the promises of his predecessor, as quoted by Senator O'Farrell, and the actual figures as revealed by the accounts. I should not for a moment suggest that it is possible to give close estimates in advance, but I feel that if a commercial manager showed in his estimates the wide divergence that is shown here, he would have to make a very convincing explanation to his board if he wished to hold his position. In this case, I think that the Minister is rather in the position of a supreme authority.

Like another Senator I was puzzled by the capital-figures given by the Minister. The accounts show that there has been somewhere in the region of £1,000,000 capital issued for the Shannon works and subsequent development. The Minister mentioned a figure of £5,000,000. I cannot reconcile that figure with any definite group in the published accounts. With regard to the items for which this further capital is required, I ask the Minister to consider them seriously and to convey to the Board his views with regard to the expenditure of £60,000 on new buildings. That does seem unnecessary extravagance. We all like to make a show in bricks and mortar, but experience has shown that people with any commercial understanding are now getting rather suspicious of people who make a show in bricks and mortar. They rather lean to those who work in poky offices, which would suggest that their business is being economically managed and that they have something put away for the rainy day. I suggest that this is not the time to engage in expenditure on swagger offices on, I understand, the Maple Hotel site. Before that is done, depreciation on the capital assets of the undertaking, at least, should be provided. It is well known that, in ordinary business undertakings, you have to provide for obsolescence and, in connection with this undertaking, there must be depreciation of a capital nature on the transmission system. Until reserves of that kind have been provided for, it is not, I suggest, sound finance to expend a sum of £100,000 or more on offices when the work is being done—no doubt at a little inconvenience, because of the scattered buildings—at present with quite reasonable efficiency.

I am glad to see that coal has at last come out of politics and that it has been judged on its merits. Where coal is cheapest it is, I understand, to be used. I always held that coal would prove the cheapest and I gather that that is what is happening, in view of the fact that extensions are being made at the coal harbour and that facilities are being provided for the handling of imported coal. I felt my usual sorrow when I heard Senator Staines talking of money going out. He would, no doubt, like to see money coming in, but it would be difficult to have money coming in if you had not money going out. Trade is reciprocal. If you like one side, you must like the other side or you will have no trade at all.

I ask the Minister to consider one matter which, I think, is fundamental. Senator Douglas talked about the cost of the all-electric house. It is not only a question of cost, it is a question of physical ability to have an all-electric house. I am wired in the country on the Shannon and, however much I should desire an all-electric house, I cannot have it. The distribution system is such that I am allowed only a certain strength of fuse for power purposes. I can use only one-third of the power-wiring I have put in—and put in largely in the belief that it was desirable that people should use as much electricity as possible. I am told that heavier wiring on the distribution system will be necessary before I can use the power wiring I have installed. I suggest to the Minister that he should at least consider whether it is wise to expend money on what must be unprofitable extension from now on. These extensions in the smaller villages, however desirable they may be from the point of view of social betterment, must, undoubtedly, become less and less productive. I suggest that it would be more productive to enable those who are not getting a complete service at present to get a complete service. That not only applies to some of the smaller villages but I think it applies to some of the areas quite near Dublin which have their power supplies controlled by fuses or some such means. That is a matter which, I think, the Minister should confer with the Board about—whether it is better to consolidate existing services than to extend and to what extent to do one or the other.

As one who has always been a critic of this electricity supply finance, I am glad to say that things have turned out much better than I, at one time, expected. Of course, Senator O'Neill supplied the answer, that when the scheme was originally under discussion it was never contemplated that the whole of the Dublin distribution system would be collared, and taken over for nothing, or that a very profitable source of revenue in the City of Dublin should go into the general profits of the Board. In the early days it was only contemplated, I understand, that the Shannon scheme, as it was then called, would sell electricity in bulk to various municipal and other undertakings. However, that is all past policy, and we have to face things as we see them to-day. It is because the assets of the Dublin ratepayers have been taken for nothing that the scheme has been so profitable. If it had to carry compensation to the Dublin ratepayers and consumers it would, of course, show a very substantial loss to-day. I am afraid if restitution had to be made it could only be made either at big expense to the taxpayers or increased charges to consumers. Considering everything, I think that progress has been made, but not as great as the estimate foreshadowed. The Board is to be complimented on the manner in which the accounts are set out, and. I think, the accountant deserves special thanks for the manner in which they have been issued. I support Senator Johnson's demand, that we should have comparative figures from the first years, say from 1931 onwards, as to the consumption of current and under various other headings, to enable the progress or otherwise to be accurately examined.

Mr. Lemass

A very large number of matters were raised, with some of which I am not in a position to deal, because I have no responsibility for them. I will endeavour to cover the ground as fully as I can, and to provide all the information in my possession, or to indicate the source from which Senators can get the information desired by them. I should start by saying that I must refuse to take any responsibility whatsoever for any estimates given by my predecessor or for any statement of the prospects of the undertaking for which he may be responsible.

Mr. O'Farrell

On a point of explanation, I should mention that the Board gave the estimates, and it was with that I was dealing rather than with a Minister's statement.

Mr. Lemass

I was not referring to Senator O'Farrell's remarks when I made that statement. Senator Colonel Moore spoke first, and I am taking the speakers in order. Referring to the estimates as to the total capital cost of the scheme, and the total capital required by the Electricity Supply Board, all of which appear to have proved to be totally inadequate, I am not responsible for these estimates. I am concerned with the fact that there is in existence an Electricity Supply Board, controlling a generating and distribution system, and it is my concern to see that the Board carries out its special functions as efficiently as possible. The estimates which may have been given by my predecessor in this connection, like other estimates given by him, and like most of the estimates given by his political associates, were usually inaccurate. At the present time not merely is this concern but other concerns are suffering public criticism, because of the fact that public expectations were aroused which could not possibly be fulfilled. The original cost of the Shannon scheme was fixed at a certain figure. That figure had to be increased. I can clear up the difficulties which Senators have concerning the total capital liability of the Electricity Supply Board by referring to the fact that roughly half the capital liability was transferred to the Board with the Shannon works. These works were constructed by the Government, and transferred to the Electricity Supply Board with a capital liability attaching. In addition, direct cash advances were made to the Electricity Supply Board to enable it to finance its own activities. These activities were associated with the construction and enlargement of the distribution system, the financing of hire purchase, sales of electrical equipment, the provision of public lighting, and other activities too numerous to mention. An original sum of £2,500,000 was provided for that purpose. The Act of 1927 provided that that sum should be advanced to the Board on demand by it.

Senators are aware of the position that arose in 1931, when it was alleged by the then Minister for Industry and Commerce, that the Board had exceeded without his knowledge the limit of expenditure contemplated by the Act of 1927. There was a discussion as to whether a certain sum of £700,000 was properly available for the Board, or was earmarked for the purpose of being set off against liabilities acquired by the Board when stations of local authorities were taken over. In any event, although the Act of 1931 increased the amount available for the Board by £2,000,000, it also provided that that amount should only be advanced when the Minister for Industry and Commerce was satisfied that it was reasonably and properly required by the Board. From the date of the passing of that Act, the Minister for Industry and Commerce acquired a control over the Electricity Supply Board which he had not previously. His control however is limited to this, that he must be satisfied, before any capital advance is made, that the money is properly required by the Board for the purpose of exercising its functions. In practice it boils down to an inquiry as to whether the expenditure of the money is likely to prove remunerative or not. That brings me down to the point raised by Senator O'Farrell and also by Senator Sir John Keane, namely to the development of the system. Senator O'Farrell said that the proper policy is to spread the distribution and the net work far and wide, and that that will mean a saving. On the other hand, Senator Sir John Keane suggests a more conservative policy, a more intensive utilisation of the existing system before extending it. I may say that I am quite prepared to sanction and would very much like to see a widespread distribution of the system, if it is going to pay. The more propositions the Board puts up to my Department for an extension of the system into new towns and districts, the better I will be pleased, if the Board can show that the revenue to be derived from the linking up of new consumers is going to meet capital charges arising out of the extensions.

It is possible that in the early days schemes of extension of that kind were undertaken which did not pay, and which never can pay, and the charges arising in consequence of these extensions have got to be met by the more remunerative parts of the system. It is obviously wise policy to utilise the existing system as much as possible to the extent that the Board may get for the existing system increased consumers or link up new consumers in areas fully wired, the better for the Board. I can assure the Seanad that there will be no limitation whatever placed on any proposal put forward by the Electricity Supply Board for an extension of the system, subject to their being able to show that the extension will be remunerative. I do not know whether we can improve the financial position of the Board by decreasing the rates of charge. It is probably true that by decreasing charges greater consumption could be secured, but whether that would improve the financial position of the Board is another matter which would require very careful consideration. Let me say that I am not going to defend here either the original rates fixed by the Board or the decision to increase these rates in 1931. Whether the original rates were too high or too low, or whether the increase in the rates was in any sense a breach of contract is a matter which has been fairly fully discussed in public. No doubt everyone has his own views on it. I am concerned with the fact that the Board is charged by the Act of 1927 with the responsibility of fixing rates of charges so as to provide sufficient revenue to meet working expenses, to provide provision for depreciation, interest charges, capital repayment charges, and to meet an obligation to provide a reserve fund for certain purposes. The Board at present is not meeting its working expenses if you include depreciation. It is meeting working expenses exclusive of depreciation. It is paying interest charges, but is not repaying capital and is not putting by any reserves. It is in relation to these responsibilities that the question of a reduction in the rates of charges has to be considered. I have no function in that matter, apart from seeing that the Board meets its obligations, or, at any rate, keeps these obligations before it, so that they will not be able to forget them.

If a question arose as to whether I should exercise whatever influence I have with the Board—arising out of the fact that it was appointed by the Government—in order to procure a reduction in the rates, I should have to consider if I could properly do that, having regard to the fact that the revenue from existing rates is far short of meeting the obligations imposed upon the Board by the Act of 1927. The position of the Board is improving; it is improving slowly, but not as rapidly as we would like to see it. It will be a number of years before its financial position, so far as we can see, will be as thoroughly satisfactory as we would like to see it. That does not say that there will not be a decrease in charges for a number of years, because of course there is always the possibility that the revenue position would be improved by a decrease in charges. The charges are, in fact, being decreased. The report which Senators have before them shows that the charges for cooking were reduced from 1½d. to 1d. per unit during the year, and that other reductions had taken place since. There has, however, been no general reduction in charges, and the increases decided in 1931 are still maintained. I would very much like to see the price of current reduced, but I certainly could not use pressure to effect that reduction until I was satisfied that the net result would improve and not disimprove the financial position of the Board.

Sir John Keane

Hear, hear!

Mr. Lemass

Senator Staines referred to the fact that the Pigeon House was extensively used for the generation of current in 1932-33, and was even more extensively used last year. The figures in the report show that out of a total of 166,000,000 units generated in 1931 and 1932, 143,000,000 units were generated at Ardnacrusha and 22,000,000 units at the Pigeon House. These figures make it quite clear that by far the greater part of the current was generated at Ardnacrusha. The extensions to the Pigeon House might very well, instead of resulting in a greater number of units being generated there, result in a lesser number of units being generated there, because the more stand-by capacity the Board has the more water it can use in the working of the Ardnacrusha station. If the Board's stand-by capacity was limited it would always have to keep in the Shannon a water reserve so that it could meet at any time the demands made upon it. The Board call that reserve its iron ration of water. The more its stand-by capacity is increased the less concern it need have about its iron ration of water. It can eat into its reserve in the Shannon with more ease of mind than would be possible if the stand-by capacity was less. Consequently, the effect of extending and improving the generating capacity of the Pigeon House is to permit of a higher proportion of the total current generated being generated at Ardnacrusha.

Last year, however, was an abnormal year. The Pigeon House station was working from either the end of April or the beginning of May. I think the Board had considerable foresight in bringing the Pigeon House plant into full working so early in the year. If, in fact, they had failed to do so, if they had been using water more extensively during those months, a very serious situation might have arisen towards the end of the year. Senators are aware that the last six months have been the driest months on record. This country has never had experience of an equally dry period. However, I think it would be unfair to criticise the Shannon scheme or any hydro-electric scheme upon the experience of last year, which was in every sense an abnormal one from the point of view of rainfall. I would suggest to those who deplore the importation of coal for the purpose of generating electricity to add their prayers to ours that rain may come soon.

Senator Staines also complained that the people were told that very cheap electricity was going to be available for farmers. I have no doubt that the people were told that, and quite a number of other things that were equally misleading. The fact, however, is that electricity is reasonably cheap here. It is true that in a number of towns in Great Britain and in other countries electricity is cheaper than it is here. Industrial users of current can get power in Dublin a lot cheaper than they could have got it from the Corporation station, and in many parts of the country electricity is cheaper than it ever was before. There is every reason to believe that the price of current must, in any event, tend downwards. It is quite easy to work out to what extent it is possible to effect a reduction in price as consumption increases, although increased consumption involves a necessary increase in capital expenditure, and, therefore, increased charges on revenue. Nevertheless, a reasonable increase in consumption over a number of years would permit of a steady reduction in the average price per unit required by the Board in order to meet its charges. The Board is prohibited by statute from making profits in the ordinary sense. Its prices must be fixed so as to meet the charges on it and no more. In so far as increased revenue is secured by increased sales, not entirely offset by increased capital charges, the price of current should come down.

Senator O'Neill assumed that I was not pleased to bring in this Bill. That is a misleading statement. I am quite pleased to bring in this Bill, and I would like to bring in a Bill for a larger amount if that larger amount were required to finance a more rapid development of the system during the three years. There is the Electricity Supply Board with all its equipment. This money is required by the Board to extend its system because of an increased demand for current. I am glad to bring in a Bill for that purpose, and would like to be bringing in a Bill for a larger sum if it were required for that purpose. I would like, at the same time, to see the accounts of the Board look a little bit healthier.

Mr. O'Neill

The Minister has only dealt with one of the points I raised.

Mr. Lemass

The Senator also talked about restitution to the citizens of Dublin. I am not quite sure, however, what the Senator meant by restitution: whether we should hand back the Pigeon House generating station or the price of it. If the Senator wants the cost of it handed back to the citizens of Dublin, I am not quite sure who, in his opinion, should pay it. I do not think it is possible to get it from the electricity consumers, or that it would be fair, and I do not think it would be altogether reasonable to ask the taxpayers to pay that amount. That is a matter upon which Senator O'Neill might let me have his views: how the restitution is to be made, and by whom.

Mr. O'Neill

If the Minister admits that the restitution is due I will tell him.

Mr. Lemass

That is another question. Senator O'Farrell and Senator Sir John Keane both referred to the discrepancies disclosed between the figures in the published reports and those given in 1931, both as to the revenue that would result from the increased charges and the expenditure of the Board. The increase in the charges did increase the revenue of the Board, but it may not have increased it to the full amount anticipated in the year 1931. The increase in the charges made have had the effect alleged in certain quarters: a slowing down of an increase in consumption. It is hard to say that. The increase in consumption has not been as rapid as I would like to have seen it, but other causes may have operated to hinder that. These are matters upon which various opinions are available and on which various opinions have been received. It is quite clear that one must try to form one's own conclusions from the facts available.

It was anticipated in 1931 that in this year the Board would be able to commence repaying capital advances. It is now clear that it will not be able to do that. Neither will it be able to make provision for a reserve fund on the scale anticipated. That is due partly to the fact that revenue anticipations were not realised, and to a larger extent to the fact that certain economies in expenditure which were anticipated were not achieved. I think that the Board in 1931 were far too optimistic as regards the reductions in expenditure which they thought they could accomplish. Certainly they could not accomplish them to anything like the extent which they indicated themselves. In addition, of course, the Board's expenditure has increased, due to abnormal causes, in a manner that was not anticipated, notably arising out of the fact that both 1932 and 1933 were very dry years, which necessitated the utilisation of the Pigeon House, and consequently the purchase of coal to a much greater extent than was expected. I may say, however, to Senator O'Farrell that there is no desire whatever on my part to slow down an extension of the system. I do not think the Board have at any time complained of the manner in which the powers conferred by the 1931 Act are exercised as restricting them in any sense except in so far as they are required to satisfy the officers of my Department that the revenue to be secured, as a result of any expenditure proposed, will bear a known relationship to the capital expenditure involved.

At the present time it is true that certain extensions which are projected are being delayed because of the fact that this Bill has got to go through. The Board had expended all the money available at the date on which the Bill was introduced, and it is awaiting its passage through the Oireachtas to draw upon the Exchequer to the amount indicated to undertake the opening up of certain new areas which it has in contemplation.

There is one other thing which I think I should say arising out of a remark made by Senator Staines, a casual remark which might be capable of being misunderstood. He referred to the people having to pay in taxation the amount required by the Board for the purposes which I indicated this money is being provided for. This money, of course, is not being provided out of taxation. It is being advanced to the Electricity Supply Board at interest, the Board being under an obligation to pay interest annually and ultimately to repay the advances made. In the main, the expenditure which will arise following the passage of this Bill will be of a kind which will produce revenue. All the expenditure incurred by the Board upon its distribution and transmission systems and upon the works, the nature of which I have indicated, will produce revenue to the Board. It will, in fact, produce revenue not merely capable of meeting the charges arising from the expenditure but will also improve the financial position of the Board in respect of past expenditure. Some of these sums that I have mentioned will not have that effect. The expenditure upon the Pigeon House and the expenditure upon the deepening of the River Shannon at Killaloe and the like has to be added to the capital liability of the Board, and will not in itself produce revenue to meet the charges arising from that expenditure. Those charges will have to be met by increased revenue resulting from other expenditure. The same applies in respect of the proposed new head office buildings. To some extent the capital expenditure upon those buildings will be off-set by economies effected resulting from the more satisfactory arrangements that can be made when they are available as compared with the arrangements necessitated by the existing structures. In the main, however, that capital will have to be remunerated by revenue derived from expenditure upon other assets of the Board.

I cannot agree that the present is not a suitable time to undertake this capital expenditure. The offices arc required. They will add to the efficiency of the Board's headquarters and they will effect certain economies. It is much more desirable that that expenditure should be undertaken now than at some other period, having regard to other considerations. The Board will be able to meet the charges that will arise from the expenditure which, of course, will not become due until the expenditure has taken place. On that account I felt quite justified in sanctioning the proposal to provide the £120,000 estimated for that purpose. I consider that at the present time capital expenditure of that kind is to be encouraged rather than discouraged.

These, I think, cover most of the points that were raised by the Senators. The Bill will be before the Seanad again, and if I have omitted to deal with any point that was referred to to-day by Senators, or if Senators desire to get additional information, then I will endeavour to provide it for them. I desire to stress, however, that I have no responsibility for a number of actions of the Board. The members of it are given independence by law. They are charged with certain functions and they are given independence in the discharge of them. My power in relation to the Board is very limited. It is quite true that the Board works in very close co-operation with my Department and myself, and I have no difficulty in procuring from them any information that I desire, but I have been at pains to preserve to them their independence. In matters in which they themselves have the responsibility any decision made will be their decision which they will have to justify. The power of the Minister for Industry and Commerce is really very limited and really arises from the fact that membership of the Board is limited in time. If the Minister is displeased with the way in which any member of it has discharged its functions he can be removed by the procedure set up by the Act of 1927, if the circumstances justify it. I think we can be satisfied that the Board will exercise all reasonable care in embarking upon expenditure and that checking by the Department is not necessary now. Whether it was necessary at any time is a matter on which I do not propose to express an opinion. That is under consideration. I said that no action upon these lines would take place this year, but I think at the same time we must contemplate putting the Board back into the position it was in previously by removing the measure of control that exists at the moment with regard to expenditure. It is probable that at a later stage the Board will get power to raise its own capital. While the Board has not this power Bills will have to come up in the ordinary way for raising capital as in the case of the telephone system. They are routine measures and necessary as measures for financing the scheme, as decided upon.

Question put and agreed to.

Committee Stage ordered for Wednesday, 28th February.