The main purposes of the Bill are to authorise increased capital expenditure by the Electricity Supply Board for general purposes and for rural electrification, and to provide for the continuance of State subsidy for rural electrification.
Section 2 proposes to raise the limit of capital expenditure by the Electricity Supply Board for general purposes, that is to say, for all purposes other than the electrification of rural areas, from the present limit of £160 million, which was set by the Electricity (Supply) (Amendment) Act, 1963, to £225 million. Actual capital expenditure is still far short of the existing limit—at 31st March, 1965 it was about £117 million but commitments entered into by the Board for additional generating capacity and for improvement of the transmission and distribution systems at that date were about £35 million bringing the total for expenditure and commitments to about £152 million.
At 31st March, 1965, the Board's total generating capacity was 10009.5 megawatts made up as follows:
hydro |
219 megawatts |
peat |
367.5 megawatts |
coal/oil |
423 megawatts |
Commitments entered into provided for the addition of another 400 megawatts by 1969-70. These commitments comprise an additional 40 megawatts at the milled peat-fired station at Lanesboro, County Longford; an additional 120 megawatts of oil fired capacity at Ringsend, Dublin, 60 megawatts of which has just been commissioned, and the new oil-fired stations at Great Island, County Wexford and Tarbert, County Kerry each with a capacity of 120 megawatts.
The additional set at Lanesboro is expected to be commissioned this year. The only further addition to turf-fired capacity possible with our present methods of bog development is a second generating set planned for Shannonbridge. With the installation of further oil-fired capacity, turf is now beginning to decline in relative importance as a fuel for electricity generation. The year 1964/65 was a rather good hydro year and 25.2 per cent of our electricity came from water power; 31.7 per cent came from peat; 2.7 per cent from native coal and the balance of 40.4 per cent came from oil. All the best of our water power is already being exploited for electricity generation, and no further significant addition to generating capacity can be expected from hydro stations. Indeed at the present high interest rates the hydro-electric development of the remaining few small rivers would be quite uneconomic. It seems unlikely at present that a nuclear generating station will be economic in our circumstances for at least about ten years.
Demand for electricity is increasing very rapidly. This is, of course, a mark of expanding economic activity and of improving living standards in the country. For the past four years, the increase in consumption compared with the previous year has been:
1961-1962—7.6 per cent
1962-1963—11.6 per cent (This was an exceptionally severe winter)
1963-1964—6.1 per cent (This was a mild winter)
1964-1965—12.9 per cent
This represents an average increase over the period of about 9½ per cent and a total increase for the four years of about 44 per cent. During these four years consumption for motive power increased by 38 per cent, for domestic purposes by 46 per cent and for all other purposes by 47 per cent.
The Board's long term plans related to the period of the Second Programme are based on an average growth rate of 9 per cent per annum, which is 2 per cent above the European average rate. To meet expected growth in demand in the years after 1970 the Board expect, during the next five years, to have to approve the construction of 720 megawatts of further generating capacity estimated to cost £47 million. This would bring total generating capacity to over 2,100 megawatts or more than double the existing capacity. Further improvements of the transmission and distribution network costing an estimated £30 million are also expected to arise for approval over the next five years. It is proposed that the limit of the Board's authorised expenditure should now be raised to £225 million. Further authority will probably require to be sought in 1969 to cover further expansion likely to arise for approval in 1970 and the following years. The present North-South discussions may, of course, suggest some alterations and economies in the programme of capital investment in electricity generation and distribution equipment for which the Bill proposes to provide, but we cannot anticipate them.
Section 6 of the Bill authorises the Electricity Supply Board to spend an additional £5 million on rural electrification, bringing the total authorised expenditure to £42 million. This expenditure should for practical purposes complete the scheme, and as the completion of the scheme is in sight, I should like to give a short synopsis of it.
A report on the electrification of rural areas was prepared in 1944 on the basis of experience in four trial areas. It was estimated that if 50 per cent of the capital cost were given by the Government as subsidy, supply could be offered at standard rates of charge to about 85 per cent of rural premises, that 80 per cent of these or about 70 per cent of the total would accept and that the scheme would be economic. To achieve this, supply was to be offered at standard rates to any premises, the annual return from the standard fixed charges on which would be at least 6.25 per cent of the capital cost of connecting the premises.
By the time the scheme had actually commenced, capital costs had increased, but the ESB adjusted the figure of 6.25 per cent downwards so that connection of about 70 per cent at standard rates of charge could be achieved. As, however, the more economic areas were connected first the loss to the ESB in the early years of the scheme was not great and indeed in the year ended 31st March, 1955 there was a profit.
From 1955 to 1958 the ESB paid the full cost of rural electrification and this, together with increasing costs initiated a loss on sales in rural areas which has continued since that time.
By 1962 practically all areas had had an opportunity to take supply under the Rural Electrification Scheme. Under the 1962 Act, the Government provided a special grant of £90,000 to enable the ESB to extend the scheme on the original terms to some areas which otherwise would have been completely uneconomic and could not have supply at all. In that Act the Legislature also authorised the new subsidy arrangement in respect of houses which had not been able to accept supply on the occasion of the initial development of the areas in which they were situated. The subsidy, instead of 50 per cent flat, as under the initial scheme, became 75 per cent with a maximum of £75 per house. It was expected that the new subsidy would enable the ESB without incurring any loss, to offer connection at standard rates of charge to about 70 per cent of those still unconnected. The ESB initiated a planned post-development scheme which will cover the entire country by 1968 and at the end of which it is estimated that there will be about 340,000 rural consumers.
In any case where the return from the fixed charges would be below the minimum percentage currently in force, the ESB rather than refuse supply, have been prepared to connect a premises if the owner was prepared to pay an extra charge sufficient to bring his return up to the minimum percentage. The minimum percentage return was not, of course, an economic return. In fact it was well below the economic return. This is the origin of special service charges in the rural electrification scheme.
Under the present post-development scheme some 70 per cent of the houses to be connected can be offered supply at standard rates of charge and a further 20 per cent can be offered supply at special service charges of not more than 50 per cent of their normal fixed charges. For a small farmhouse, a typical fixed charge without any special supplement amounts to about 4½d. per day and this together with unit charges compares favourably with charges abroad. The remaining houses, which represent little more than three per cent of all the rural premises in the country, would be so costly to connect that special service charges of more than 100 per cent of the normal fixed charge—very much more in many cases—would be required to enable them to show an economic return. It is a physical fact that in rural Ireland where houses tend to be scattered singly over the country it is impossible to design a network which will enable supply to be brought at a moderate charge to every premises, and the ESB have had to design the network as best they could to cater for those prepared to accept supply when it was offered.
Capital expenditure on rural electrification up to the end of April this year was £36½ million. It is expected that the statutory limit of £37 million will be reached in July and that the extra cost of completing the scheme, including the cost of necessary improvements to the distribution system, will be about £5 million. Section 6 of the Bill proposes, therefore, that the ESB should be authorised to incur expenditure up to £42 million, that is, an additional £5 million, on the rural electrification scheme. The degree of rural electrification which will by 1968 have been achieved, 90 per cent, compares favourably with other European countries in a similar state of economic development. Electricity has been persistently demanded by rural dwellers and the Government have gone as far as reasonably practicable to ensure that that demand is met. It is now our hope that those for whom the service has been provided at such substantial cost will recognise and exploit its many potentialities for increasing their productivity and improving their incomes.
The total loss on rural consumers for the year ended 31st March, 1964, the last for which the accounts have been published, was £900,000 and it is expected that when the present post-development scheme is completed in 1968 it will be about £1.2 million per annum. This loss is in practice made good mainly from the surplus revenue from urban domestic consumers.
Section 8 provides for the continuation of the present rural electrification subsidy until the limit of £42 million is reached. By then it is expected that the total State subsidy for rural electrification will have exceeded £12 million. The time limit of five years from the 17th April, 1962, for payment of subsidy is being dropped because it will take until 1968 before the post-development scheme can be completed in all parts of the country.
I should like to mention, at this point, that the ESB are covering the country with the post-development scheme in an orderly fashion, just as they completed original development in an orderly fashion. This is necessary so that new connections may be made as cheaply as possible and the charges which the new consumers must pay kept to a minimum. If particular houses or areas were taken out of turn, the scheme would be disrupted and the cost of making connections would increase with resulting increases in charges. The ESB local office is now usually in a position to inform interested parties about when the turn of any particular area will come around.
The consumption of electricity per consumer in rural areas has increased by 30 per cent approximately since 1960-61. The use of electricity for farm production is illustrated by the following percentage increases in the numbers of electrically-operated equipment since 1959:
Percentage Increase |
|
Infra red lamps |
17 |
Water pumps |
42 |
Milking machines |
98 |
“Burco” boilers |
77 |
Grain grinders |
92 |
Further evidence of the improvement in social conditions may be given by recording the percentage of farm residences using the following domestic equipment:—
Electric irons |
79 |
,, washing machines |
19 |
,, kettles |
47 |
,, cookers |
20 |
,, vacuum cleaners |
10 |
Sections 3, 4 and 5 are included in the Bill for the purpose of bringing the ESB into line with the State companies covered by the State Guarantees Acts, 1954 and 1964. These sections will enable the ESB to borrow and the Minister for Finance to guarantee their borrowings in currencies other than Irish currency. Section 3 establishes the method of calculating the equivalent in Irish currency of borrowings in foreign currency. The rules for conversion follow those in the State Guarantees (Amendment) Act, 1964. Such conversion is necessary to determine the value of the Board's borrowings for the purpose of section 2 of the Electricity (Supply) (Amendment) Act, 1954, which is the basis for Parliamentary control of the capital expenditure of the ESB. Section 4 is the section extending the power of the ESB to borrow, with the consent of the Minister for Finance and the Minister for Transport and Power, to include borrowing in foreign currencies. Section 5 extends the temporary borrowing powers of the ESB to include borrowing in foreign currencies.
Section 7 of the Bill is merely to give explicit sanction to a clause in the superannuation scheme for full-time members of the Board of the ESB whereby any dispute as to the applicability of the scheme or the amount of superannuation granted is decided by the Minister for Finance and his decision is final. While the clause does not conflict with any existing legislation it is thought better to regularise it by a provision in the parent statute. The Turf Development Act, 1953, has such a provision in respect of the superannuation scheme for full-time members of the Board of Bord na Móna.
I confidently recommend this Bill to the House. The Electricity Supply Board are one of the most effective of our State-sponsored bodies. They have always maintained a high standard of service and have in no small measure contributed to the economic progress of the country. The enactment of the Bill will enable the Board to continue their service to the nation.