Vol. 53 No. 5
Before we take up consideration of the Committee Stage of this Bill, I should like to indicate that I have ruled that amendment No. 2, in the name of Senator Quinlan, is out of order on the ground that it is outside the scope of the Bill as read a Second Time.
The Senator has been notified accordingly.
I move Amendment No. 1:
In line 28, to delete "twenty" and substitute "ten."
If the Minister would indicate that he is prepared to accept this very reasonable amendment it might save discussion.
I cannot accept the amendment.
In that case, I shall have to make a rather lengthy case in its favour. Before I start that case, in the hope of putting the Minister into good humour, might I say that I agree the Minister's figure in Section 4 is correct, that is to say, the increase for the purpose of rural electrification is from £30 million to £32 million. It is a simple matter and the figure is correct. There are 800 areas and £40,000 an area is the established figure so it should be £32 million instead of £30 million.
This is a very different matter. Certain proposals were made in 1953 for an increase from 629 megawatts installed generating capacity of the E.S.B. to 1,042 megawatts by 31st March, 1961. They were to be installed in a few months' time but instead of that, all that has been installed since were 99 megawatts bringing the total installed generating capacity, as we stand in the year 1960, to 728 megawatts. The Minister was good enough in his brief on Second Reading to indicate that, between now and 1964, a further 80 megawatts installed generating capacity will come into use bringing the total up to 808 megawatts. Accordingly, the electricity requirements of this country at 31st March, 1964, will be fully covered by 800 megawatts—to put it in round figures—installed generating capacity as compared with the proposals seven years ago for 1,000 megawatts at 31st March, 1961.
If the Government in office in 1956 had been unwise enough not to lop off a chunk of that programme, an extremely expensive operation would have been completed because an additional sum somewhere in the region of £25 million would be required for the extra 400 megawatts generating capacity. The Minister makes the case now that for the coming years the additional capital expenditure for generation and transmission would need to be stepped up from £100 million to £120 million.
I find various figures which make it difficult for me to follow how the Minister arrives at that figure. First of all, the amount of generating capacity to come into operation between now and 1964 is only 80 megawatts and, secondly, in the year 1959-60, the expenditure of the E.S.B. on these capital requirements—leaving out rural electrification which I think is quite in order—was £4.6 million. That was the amount spent in the year 1959-60 on new plant brought into commission, as the Board put it in the annual report.
Let me continue dealing with the financial end for the moment. A number of people have written on this subject. In 1959, Mr. P.G. Murphy, Chief Engineer of the E.S.B., wrote in a journal called Administration published by the Institute of Public Administration. I would not mind reading the whole of page 32 to the Seanad but I shall just quote one sentence. By the way, this booklet was produced in the autumn of 1957. Mr. Murphy made various statements comparing us with other countries with a great deal more installed electricity power such as Sweden and Switzerland where there are exceptionally big drops in the rivers. He said: “In the future the exceptionally favourable load building conditions of the past are unlikely to be repeated.”
I shall just make the comment that the experience of the past few years has, to my mind, been seriously affected by the building of the huge transmission line to the St. Patrick's Coppermines in Avoca, and the large line to the Whitegate Refinery. They caused a fairly substantial upswing in the demand for electricity in the past couple of years.
I want to refer also to Mr. Whitaker's Economic Development which was really compiled by a number of public officials in the Department of Finance. On pages 181 and 182, there are some extremely strong comments, to put it mildly, on this subject of the amount of money spent in the past on generating capacity which has not been used. This booklet was published by the Stationery Office. On page 181, we read:
It will be seen that, despite the magnitude of the investment which has already been made, the capital requirements of the E.S.B. continue to be large. The development programme, as outlined in a White Paper published in 1954, was based on an estimated annual average growth in demand for electric current of 13.4 per cent., i.e. on an expectation that demand would double itself every five and a half years. This was related to experience in the pre-war and early postwar years. The expectation of such a rapid growth was not realised and early in 1956 the generating programme was revised downwards on the basis of an annual growth of 9 per cent., but this has again been too optimistic. In 1955-56 growth was only 7.5 per cent. and in 1956-57 only 4.7 per cent. It has risen to 7.7 per cent. in 1957-58 (equivalent to a doubling of demand about every nine and a half years) but this rise may have been exceptionally stimulated by the severe weather conditions in the March quarter of 1958. As heavy demand cannot be expected from the bulk of the new consumers remaining to be connected (i.e. persons in the poorer rural areas) and as there is severe competition both in town and country from oil and gases, there is no good reason to suppose that there will be a greatly increased rate of growth in the near future unless a rapid expansion of the economy occurs.
In recent years the provision of generating capacity has run ahead of the country's requirements, and the E.S.B. has surplus capacity, over and above a reasonable reserve for contingencies——
Now, this book was published in November, 1958, just two years ago. If I may continue:
The E.S.B. has surplus capacity, over and above a reasonable reserve for contingencies, which would enable it to supply current of 400-500 million units a year in excess of the present demand of about 1,775 million units.
Excess capacity at that time would enable it to supply an addition of well above a quarter to the demand.
This alone would suffice for almost four years of growth of demand at last year's rate. The period of excess capacity will be prolonged by the completion of new generating stations now under construction.
I take it they are the extra 80 megawatts which the Minister mentioned will come into operation soon.
The heavy excess investment in plant adds to fixed charges and represents a deadweight burden on the E.S.B.
Of course it has been shown in its accounts that there is now a deficit of, I think, about three-quarters of a million pounds where it always had credits up to comparatively recently.
And they are working one hundred per cent.
I continue:
Heavy investment by the E.S.B. without a commensurate rise in revenue has meant a steep rise in the proportion of capital charges (interest, sinking fund and depreciation) to revenue. In 1951-52 capital charges represented 30 per cent. of revenue and likewise 30 per cent. of working expenses; they now represent about 50 per cent. in each case or over £6 million a year, and will continue to rise.
The report goes on to make constructive suggestions, mentioning, for example, that the new oil refinery at Cork would require a substantial amount of electricity annually, thus bearing out my own understanding of the matter. What do I find in the Irish Independent of December 8th, just last week?
Well chosen.
Under the heading: "The E.S.B. had a record day," we read:
A record demand was made yesterday on the Electricity Supply Board by its 620,000 consumers. Weather conditions necessitated, for the first time, the generation of a peak load of 513,000 kilowatts. Last year's peak was 476,000 kilowatts.
A kilowatt and a megawatt are the same, I should say at this stage. They had to generate that peak load of 513,000 kilowatts on Wednesday of last week. The E.S.B. have at the moment, as far as I know, an installed generating capacity of 728 megawatts so that in fact if we just take the question asked so many times of the Minister and do a simple sum in division, we get the answer.
Where do you get it—from the paper?
You do not believe the Independent surely?
Do let me do my little sum in arithmetic.
The Senator should be allowed to speak.
If you divide 700 into 500, you get about 70 per cent. It is 728 into 513 or 513 over 728—whatever fraction that is. That is so far as generating capacity is concerned. I am on that at the moment and I shall talk about the financial end later on. That figure of 476,000 kilowatts means working at about 65 per cent. I know that the Minister says you could get in an exceptional year both a wet summer when you would have no turf and a dry winter when you would have no water, but in a wet summer, you would have plenty of water for generating so you would have something which you would have not in a dry summer—if those two things came together. And it would be an extraordinary coincidence if it happened here, because I think it extremely unlikely that you would have a long, wet summer and then by some miracle of Providence, a long, dry winter, a very unlikely thing to happen in this country indeed, with our average of 40 inches of rainfall spread over the whole year.
There is one other method. There are various ways of getting at this matter of whether the proposals in the Bill are reasonable or not. I can revert to the balance sheet of the E.S.B., the total assets of the E.S.B. in their balance sheet of March 31st, 1960, the last one. These include, do not forget, items other than electricity generating plant and transmission lines. They include things like sundry credits, reserve for contingencies and so on. The capital total in the balance sheet is £117,577,000— let us call it £118,000,000. What is the total part of our one hundred million pounds which the E.S.B. have already power to spend to make capital investment? There is £100,000,000, plus £30,000,000 for rural electrification, so that on 31st March the position was in fact that £118,000,000 had been spent out of a total of £130,000,000.
But remember, if practically all the authorised capital for rural electrification was spent there was a huge chunk of capital available for further expenditure on generating capacity. I cannot, of course, give an accurate figure, but unless there has been astounding expenditure—and I doubt if there has —in recent months, I cannot understand why the figure the Board will require say in the next reasonable period of years should be anything like the sum of an additional £20,000,000. What I would put to the Minister is that I think the Board have enough money to cover capital expenditure for two years and in giving the Minister £10,000,000, I was giving him two more years on top; I was providing the Minister with all the money that should be required up to the end of 1964. It is just possible that that might do the Minister.
There is another way of getting it if he is worried—several ways. The capital invested by the E.S.B. on generation plant and transmission lines was at 31st March, 1960, £108,000,000, according to the last annual report of the Board of Directors. But £26,000,000 of this related to rural electrification, so that the amount for generation transmission and so on, which is the money required in this section which I want to amend, at 31st of March, 1960, was £82,000,000; so that at 31st of March, on that basis, there was £18,000,000 left. I do not mind being frank. I do not understand how it came about or what the considerations involved were, but I should be glad of the Minister's explanation of his statement in his brief to us the week before last that the existing authority will be used up by 31st of March, 1961; that is to say, if my reading of this is correct, and I think it is, the Electricity Supply Board will have spent in the financial year 1960-61 on generation and on transmission lines, other than rural electrification, a sum of £18,000,000.
Again in fairness to the Minister, I think he changed his emphasis on the last occasion in the House. In his main brief in the Seanad debate on 30th November, 1960, he said at column 180:
It is, on occasion, suggested that the Board has an excess of generating capacity. I could deal with this suggestion at some length but it should be sufficient to refer to the annual reports of the Board for the last two years which indicate that, in 1958-59, due to shortage of both turf and water and in 1959-60 due to shortage of water alone, it was necessary to draw on the Pigeon House Station which is the stand-by station of last resort.
That leaves one with the impression that the Pigeon House is an old station, but it has been modernised and is a normal station now. Why it should be called "the stand-by station of last resort," I do not know, except to create an impression that the generators were scraping the bottom of the barrel to the very limit of their capacity.
The Minister gave a different impression in his reply at column 219, and I think his statement then was a good deal more correct. He said:
I have been supplied with figures by the Board whose chairman has my confidence, which showed that every single station at one time or another of the year is working at 100 per cent. capacity.
Certainly you can plug them in in turn. There is the point, of course, that the stations must be repaired occasionally, but anybody who did elementary physics—it is a long time since I did it myself—knows that there are no engines in this world that last so long as electrical turbines and generators. There are no engines to compare with electric motors. Their life is colossal compared with that of other machinery. And, of course, if you want to repair one and put in new turbines, say, at the Shannon where there are old turbines, you can do them one at a time, for they are in series.
I am not saying that the Minister has no case, but I think he has altogether exaggerated his case. I want to assure the Minister, and I hope he will appreciate it, that this is a deadly serious amendment. I believe it will provide for the requirements for the next four years, that is, up to 31st March, 1965, and I think that is a reasonable measure to give to a body like the Electricity Supply Board. Once the Oireachtas passes this Bill, all control over expenditure by a body like the Electricity Supply Board is gone. It goes into the hands of the managers. I do not want any inference to be drawn that I am condemning the way the Board has done its business. There is nothing like that involved, but there is a principle involved in this, that Parliament does not make available large sums of money for the repayment of which the people will be responsible, without being fully informed and without being convinced that the moneys are really necessary. That is the essence of my amendment.
I could make a number of other points about it, but I believe that I am giving the Minister enough money to last for four years, and I say that this is all the figures add up to. The fact is that there is an increase at present of about 10 per cent. a year in the demand for electricity. My figures may not quite agree with other figures, but I went to the trouble of calculating the way the demand has gone over the past decade. The extraordinary thing is that by far the biggest single increase was from 1st April, 1950, to 31st March, 1951, when there was a 22 per cent. increase. From 1951 to 1952, it was 11 per cent.; from 1952 to 1953, 11 per cent.; from 1953 to 1954, it was 13 per cent.; from 1954 to 1955, it was 14 per cent.; from 1955 to 1956, ten per cent.; from 1956 to 1957, it was four per cent.; from 1957 to 1958, it was five per cent.; and from 1958 to 1959, it was eight per cent. It has been nine per cent. on my calculation up to 31st March, 1960.
I think the Minister used the wrong figure of ten per cent., but I am prepared to accept that—I am not quibbling about it. It is extraordinary that if the Board was scraping the bottom of the barrel last year, it can stand an expansion of demand of 10 per cent. a year over the next three and a half years on the basis that there will be only 80 additional megawatts coming into operation—that a 10 per cent. increases in generating capacity will provide for a ten per cent. compound increases in demand. The case put before the Oireachtas does not hold water, and therefore, in the hope that the Minister will be satisfied with getting a reasonable part of what he has asked for, I have put down this amendment.
I am afraid that I am unable to accept the amendment. First of all, let me deal with one or two minor points the Senator made. He suggested that the Whitegate and Avoca installations were an important factor in recent consumption increases. It is true that these provided together 40 per cent. of the total increase in the year in which they came into operation, but since then, the rate of increase has gone up further and is now running at the figure of about 10 per cent., instead of seven per cent when this programme was originally devised.
Secondly, I should make it clear that the Pigeon House is an obsolete station. Two of the turbines are over 31 years old. One of them is now being repaired. Two are over 24 years old, and the remaining two are over 20 years old. The peak rate is little over half the nominal rate. It is purely a stand-by station.
The Senator also suggested that the deficit in the accounts of the Board resulted in some way from excess capacity. I could not accept that. The major part of the deficit is due to the fact that the subsidy for rural electrification was cancelled by the Coalition Government between 1955 and 1958. This involves the payment by the E.S.B. of an annual sum in interest and sinking fund of £529,000. If that subsidy had continued during that period, it might have been possible, for at least a short while, to avoid the recent increase of rates.
The deficits that arise are also due to the very heavy costs in rural electrification, in spite even of the subsidy given by the Government. This is largely due to the isolated character of our rural community—we are the most unvillaged community in the whole of Europe—and also due to the fact that so far the power has not been used to the same extent as we hope it will be used in the future for what might be described as agricultural industrial purposes. If consumption goes up, the position may be more satisfactory.
The Senator referred to the question of peak load. The peak load referred to by him on December 8th is not really the critical load, so far as the E.S.B. are concerned. If there happened to be an excessive capacity in relation to that peak consumption, that does not argue that we should not have the whole of this capital sum put into the Bill. The critical time is when there is insufficient hydro-derived power. I have some figures which might interest the House in that connection.
In the autumn of 1959, the 219 megawatts of hydro-capacity could only deliver 40 megawatts hence 179 megawatts of hydro-generating capacity were insufficient. Steam power to cover this gap must be available or loads will be shed. The E.S.B. have to have a considerable amount of excess capacity to deal with all possible situations that may arise, such as the unusual situation at the end of 1958 or in the spring of 1959—I forget which—when the hydro-capacity was low and there had been a bad turf season or when, for example, all the stations might be operating to provide power and there might be a serious breakdown in one of them. They have to provide for all situations, including a sudden and unpredicted increase in consumption in a given year.
One could argue this question of excess capacity all night. It depends how you interpret figures. I am convinced that the Board of the E.S.B. have given me a reasonable statement in regard to their future needs. The matter has been re-examined on a number of occasions but I could, if I chose, answer some of Senator O'Donovan's arguments because this is quite an interesting subject. For example, I could quote to him one of the methods of survey in regard to measuring utilisation of equipment in this country and in Great Britain. The measure used is the annual load factor.
The annual load factor represents the total units generated in the year as a percentage of the peak load, assuming the peak load to be maintained throughout the year. The annual load factor for the E.S.B. in each of the last three years was 49.1 per cent, 46.8 per cent. and 50.1 per cent. respectively. In Great Britain, they use a slightly different system in which they relate the percentage of units sent out rather than the units generated. They make that a percentage of the total capacity.
If we apply the English system in this country, we make what may not be an entirely satisfactory comparison. If, however, we make this comparison, using the British method, for the year ended 31st March, 1958, the system load factor, as this method is called, was 48 per cent. here and in England and Wales, it was 48 per cent. For the year ended 31st March, 1959, the figure for the E.S.B. was 45 per cent. and in England and Wales, it was 47 per cent. For the year ended 31st March, 1960, the figure here was 48 per cent. and 47 per cent. in England and Wales. One may remark, in making these comparisons, that, in Great Britain, there is an enormous amount of shift work industry consuming vast quantities of electricity.
One of the difficulties is that there are very high peaks in the winter months at the end of the day when all the lights are on and people are cooking. No assistance is provided by having to supply a 24 hour shift industrial demand of a very heavy order. I could keep the House a very considerable time arguing on this subject from the technical standpoint, but, perhaps, it would be sufficient to state, because some members of the House might doubt the figure we have put into the Bill, that the Board must obtain the consent of the Minister for Finance and the Minister for Transport and Power before borrowing money for generation, so that during the period in which these plans are formulated, the E.S.B. have to come to us and discuss with us how the programme is going on, how far the plans that have been made prove to be right.
They have to discuss the advance programme to see whether it requires amendment and this figure which is put in here is an over-all figure which enables the E.S.B. to plan in advance and unless they know they can raise the capital on a general basis, they cannot plan in advance adequately. It takes about five years to plan a power station from the time the design begins to go on the drawing board until the station is erected. Within that period, the Minister for Finance and the Minister for Transport and Power can exercise control which should relieve the minds of Senators who think the E.S.B. are going to involve the nation in grossly extravagant expenditure for generating capacity, which will not, in fact, be necessary.
As I have already indicated, the increase in consumption is greater than was envisaged when this sum of money was put in the Bill as being reasonable under the circumstances. I hope, if the economy continues to expand and if industries continue to grow in extent and number, that the E.S.B. may have to revise their plans in the upward direction, but I can assure the House that there is no movement within the E.S.B. which, for some strange reason, wishes to impose a huge amount of excess capacity upon the country or to involve the nation in unnecessary capital liability. We have gone into this in great detail. The Board, supported by their engineering staff, have made the proposal to us. There is not any minority interest in the Board among the higher staff who are opposed to this development. There is no sort of unseen plot; I do not know what the plot would be for or its purpose in connection with this matter. For these reasons, I must reject the amendment.
