In its main purpose this Bill is not dissimilar from other Electricity (Supply) (Amendment) Acts which were previously debated by the Seanad, all of which had the main object of providing for the growing capital requirements of the E.S.B. The main purpose of this Bill is to increase from £65,000,000 to £100,000,000 the statutory limit of expenditure which the E.S.B. may incur for capital purposes other than rural electrification.
This Bill is different from those that preceded it because it proposes to change the method by which the capital needs of the E.S.B. will be met. Heretofore, the board secured the capital required for development, within the limits fixed by statute, from the Exchequer. In future it is proposed to permit the board to have direct access to the public for its capital requirements. That change in the method of financing the board's development involves certain other consequential steps to which I will refer later.
The other main purpose of the Bill is to raise from £8,000,000 to £16,000,000 the statutory limit of advances which may be made to the board from the Central Fund for its rural electrification activities. The White Paper which was circulated with the Bill gives in considerable detail the programme of capital works upon which the board is now engaging or works in respect of which they have already entered into commitments. The full cost of these capital works already approved will involve the sanctioning of expenditure by the board up to a limit of about £120,000,000. The £100,000,000 limit fixed in this Bill will secure the position of the board until 1956. Before some date in 1956 another amending Act will be necessary, but it was not considered desirable to make the provision for the whole of the estimated expenditure on the present programme of the board in this Bill, in the belief that the Houses of the Oireachtas would prefer to have another opportunity of looking at the programme, at the progress made and the general situation prevailing in about two years from now.
I have said that advantage is being taken of this Bill, and it was necessary to do so because of the proposed change in the method of financing, to tidy up certain loose ends in the board's finances. The first and most important of these relates to the position of the Shannon works. The agreed liability assumed by the board in respect of the Shannon scheme which the Minister for Industry and Commerce was authorised to construct under the Shannon Electricity Acts was something over £6,000,000: to be precise, £6,030,066. The money required for the construction of the Shannon scheme was made available to the Minister for Industry and Commerce out of the Central Fund and, although the works were transferred to the board by the Electricity Supply Act, 1927, they remained vested in the Minister. It is now proposed to vest them in the board. One of the reasons for taking that step, apart from the desire to regularise the position, is that it is necessary to enable the board to make a charge upon all its assets as security for any stock it may issue.
In addition to the £6,000,000 representing the agreed liability assumed by the board in respect of the Shannon works, there is a further sum of something over £38,000,000 which represents the total of repayable advances made to the board from the Central Fund for purposes other than rural electrification from the date of the establishment of the board up to the 31st December last. That money has been expended upon various works which the board was authorised to undertake under the different Acts. Of the total liability representing the sum of these two amounts, £38,000,000 and £6,000,000, the board has already repaid £1,961,000, but for the purposes of this Bill no account is taken of such repayments in calculating the authorised total of capital expenditure.
Apart from its right of access to the Central Fund to meet its capital requirements, the board has two other sources of financing available to it: one is the board's own depreciation reserves and the second is the superannuation funds. The board is, as the House is aware, because it was a matter of some debate at the time, under a statutory obligation so to adjust its charges for electricity as to make adequate provision not merely for its day-to-day expenses but also for the repayment of the moneys borrowed by it and for the replacement of its wasting assets. In accordance with that statutory obligation to replace its wasting assets the board sets aside every year out of its revenue sums which, accumulating over the life of these assets, will, it is estimated, be sufficient to provide for their replacement when they reach the end of their useful life.
The board is authorised by existing legislation—in fact, by an Act which was passed for that purpose in 1941— to invest these reserve funds in trustee securities or in such other securities as may be approved by the Minister for Finance. But, in fact, the board has not availed itself of that power and has used these reserves for the provision of new capital assets according as they were authorised under the successive Acts. In other words, the board's depreciation reserves have been invested in its own undertaking, which is a desirable practice both from the point of view of the board and from the point of view of the Exchequer. Again, it is, of course, to be understood that all sums used by the board in that manner must be included in the authorised total of the board's capital expenditure at any particular time in order to calculate whether or not the level of that expenditure is within the limits sanctioned by legislation.
The Electricity Supply Board (Superannuation) Act, 1942, provided for the introduction of superannuation schemes on a contributory basis by the board's employees and for the management of those funds by trustees. That Act authorised the trustees of those funds to lend to the board such sums as they thought proper to lend and the board was authorised to borrow from these funds for any purpose arising out of the performance of its function. That arrangement is mutually advantageous. It provides for the trustees a very convenient and a very easily realisable form of investment, the value of which remains constant, and for the board it provides a convenient, additional source of finance. The total amount which the board has borrowed from the trustees out of the superannuation funds to date is £1,646,500.
I do not propose to go into detail now on the board's development programme. The House, as I have said, has an opportunity of considering that on the basis of the White Paper. The primary object of all this development is to increase electricity generating capacity to meet the growth in demand for electricity. The board now estimates that the demand for electricity will double in every period of five or six years. It is clear, therefore, that we have to contemplate continuous additions to the board's installed generating capacity, at any rate so long as that expansion in demand is anticipated. From the point of view of the state of development of this country, it is clear that that development can go on for a very long time because we are still well behind most European countries either in terms of installed generating capacity or in the consumption of electricity per head of the population.
The main aspect of the new generation programme, to which it is perhaps desirable to direct attention, is that it is based almost entirely on the use of our native resources. The programme puts emphasis on turf fired stations and on water power stations. In so far as the turf fired stations are concerned, the board's programme is, of course, complementary to the Bord na Móna development programme which I outlined here last year when the Turf Development Bill of 1953 was before the Seanad. When that co-ordinated programme has been completed, the generating stations using only turf or native coal will use annually, it is estimated, about 2,500,000 tons of milled peat, about 400,000 tons of machine-won sod peat, and about 120,000 tons of hand-won turf which will be consumed in four small stations which are being set up, mainly for social reasons, along the western seaboard. The average annual output of all our native fuel stations will be over 1,500,000,000 units, which compares with the total output of 1,300,000,000 units from all the stations of the E.S.B. in 1953. Indeed, I may say, that if our past experience is any guide, these estimates are likely to be exceeded.
In the two turf-fired generating stations which are now operating, not merely was the output of current considerably in excess of the original estimates, but the consumption of fuel is also, consequentially, in excess of the quantity originally estimated to be required.
On the completion of this programme we will have at least 63 per cent. and, possibly, more of the total installed electricity generating capacity of the country based upon native resources, either upon native fuel or water power, so that our dependence on imported fuel for electricity requirements will be very considerably reduced. That will be a happy position to be in when one considers our experience during the recent emergency.
The board, as I have said, has since its establishment been financed from the three sources which I have mentioned: the Central Fund, its own depreciation reserves and the superannuation funds. These sources will still be open to the board, but, as I have mentioned, it is proposed to confer new borrowing powers on the board. The principal new borrowing power is that contained in Section 4 of the Bill. That section authorises the board to borrow money by the issue of its own securities. It enables it to obtain its capital requirements in future from sources other than the Central Fund. The total of £25,000,000 which the board has been authorised to borrow under that section is, as I have said, estimated to be sufficient to meet the board's requirements in respect of actual expenditure upon projects, other than rural electrification, until the end of March, 1956. In each case, the terms and conditions of the issue will have to be approved by the Minister for Industry and Commerce and the Minister for Finance, and it is stipulated that the uses of the moneys to be obtained by the issue of the board's securities will also be subject to the approval of the Minister for Industry and Commerce.
These provisions are designed to provide the assurance that the board's development programme will be along the general lines of which the Government has approved, and that there will be no departure from that programme without the approval of the responsible Minister. In view of the magnitude of the programme and of the large proportion of national capital investment which it will absorb, I think it will be accepted as essential that such an assurance should be given in statutory form. From the investors' point of view, there are distinct advantages in the existence of a provision which will ensure that the programme for which they are being asked to subscribe has the approval of the Government.
I do not think that any fears may be entertained that the board will not now be able to finance its future development in the way proposed. The undertaking has developed to the stage at which it should be possible for it to obtain its capital requirements from the public and it need no longer rely on the Central Fund save in exceptional circumstances. The liabilities of the board are amply covered by its fixed and liquid assets, and it, of course, enjoys the great advantage of being the sole producer in a market which is constantly expanding and in which the scope for expansion is, as I have indicated, almost unlimited.
The securities issued by the board will be trustee securities and may be underwritten by the Minister for Finance. The Bill also empowers the Minister for Finance to guarantee these securities. To the extent, of course, that the board can obtain its capital requirements other than from the Central Fund, the State will be correspondingly relieved from the necessity of providing for its requirements. The House, no doubt, is aware that a considerable proportion of the proceeds of recent issues of Government stock have had to be earmarked for the Electricity Supply Board. It will also make available, on our rather limited security market, a new and attractive type of security which it is hoped will attract an additional class of investor who may not normally invest in Government issues but who, it is hoped, would be prepared to invest in the board's issues.
The type of securities to be issued will, of course, be governed by the statutory position of the board. That position does not permit of the issue of stock with voting rights, but the board will nevertheless have considerable freedom of action and these issues should be of the type to make a wide appeal to investors.
I mentioned that the Central Fund will still be available to the board, and the Bill authorised the Minister for Finance to continue if necessary to make advances to the board within the authorised limit. The sole purpose of that provision is to ensure the board will have available to it at all times the moneys required to enable its development programme to go ahead without restriction. It is intended, however, that the Central Fund will only be a secondary source of finance, and that in future advances will be sought by the board from the Exchequer only for the purpose of tiding the board over a period during which it might not be convenient or desirable for one reason or another to seek capital from other sources. The Central Fund will, therefore, be the lender of last resort, and is not likely to be called upon to any great extent.
We have kept rural electrification outside all these financial arrangements. The Bill provides for an increase from £8,000,000 to £16,000,000 in the total of advances that may be made to the board for rural electrification and, as I said, the board will continue to draw on the Exchequer for its capital requirements for the rural electrification scheme. The reason for that is that the rural electrification service will continue to be subsidised and it is, therefore, thought desirable that it should be financed exclusively by the State. Aside from the fact that it would be inappropriate to seek money from private investors for a subsidised service, the continuation of the present arrangements is more convenient and simple from an administrative point of view.
I mentioned in the Dáil that there were two developments in relation to rural electrification to which it was desirable to attract attention. The first was that a change has been made in the method of determining the priority of areas selected for development under the scheme. Up to the present the system was that the area which gave the board the best financial return got priority over other areas. While there was justification for that arrangement from the board's point of view it was often unfair to many rural areas where the financial return was not dependent upon the number of residents willing to take supply. On the other hand there was objection to going completely on the basis of the number of the local residents willing to accept supply because in a very thinly populated area 100 per cent. acceptance might be possible whereas in a thickly populated area the more normal level of 60 per cent., 70 per cent. or 75 per cent. acceptance would be regarded as good.
A formula has now been worked out which brings both factors into the calculation, the financial return from the area to the board and the percentage of local residents willing to accept supply and on that basis the order of priority is determined. The new system gives an added argument to those who are canvassing a rural area to get the scheme extended to it, pointing out that the larger the number of residents who accept supply the better are the prospects of early connection; at the same time it tends to weigh the selection in favour of the more densely populated areas as against the more sparsely populated.
The second point I mentioned in that regard was that the rate of development under the electrification scheme has been speeded up considerably. Last year, following discussions with the board, they agreed to increase the rate of development by 50 per cent. and so organise themselves as to get a further 50 per cent. increase this year. Therefore, from this year on the rate of development under the rural electrification scheme will be double what it has been previously and that holds out the prospect of the whole scheme being completed in five years' time. It also involves a very considerable increase in the number of people employed on rural electrification work which is not an unsatisfactory consequence either.
Those are the main provisions of the Bill but there are some other minor provisions to which reference should be made We are excluding the board from the application of the Public Authorities Protection Act. The Government is at present considering the possible amendment or perhaps even repeal of that Act but it has been decided that in so far as these statutory bodies are concerned that Act should not apply. Provision in that regard was made some time ago and advantage has been taken of this Bill to provide for the exclusion of the board from the application of that Act, that is, an Act which limits the time in which actions for tort may be taken against public authorities.
The second point I want to mention refers to the pension provisions for members of the E.S.B. itself. I am not quite sure what considerations induced me when introducing that legislation in relation to superannuation for board members to provide that they should get the very awkward calculation of 20/48ths of retiring salary, but when that legislation was being framed it was assumed that 20 years' service would be the normal in so far as men would go to the E.S.B. usually late in life and would not be able to give effective service longer than that period. The whole-time members of the board have now over 20 years' service. Apart altogether from adopting the normal provisions in relation to superannuation arrangements, that alone would justify changing this 20/48ths to the more usual 50 per cent., 24/48ths. I am taking advantage of this Bill to make that change which will provide that members of the board will receive half their salaries on retirement. These are the main provisions of the Bill. The Bill was, I am glad to say, received enthusiastically by all sections of the Dáil and I am sure that, having regard to its character, it will be received equally enthusiastically here.