ELECTRIC LIGHTING PROVISIONAL ORDER (No. 3) BILL. (Hansard, 29 June 1899)

THE EARL OF CRAWFORD

My Lords, I do not wish to stand in the way of the Third Reading of this Bill, but before it passes into law I should like to call attention to what I regard as the very serious principle which the Bill involves. Your Lordships may recollect that in the year 1882, when the Act was passed, a very short time was allowed before the purchase clause came into existence under which the local authority could take over the property of the under- 946 takers. As a result, no one could be found to put money into the electric lighting industry. In 1888, however, the period in the purchase clause was extended to forty-two years. As a result of this security, a large quantity of capital was put into the electric lighting industry, not only in London, but throughout the kingdom. After that Bill had passed your Lordships' House it went back to the House of Commons, where certain words were proposed to be inserted on the motion of Sir George Campbell. The insertion of the words was opposed by Sir Michael Hicks-Beach, who was then President of the Board of Trade, and also by the ex-President, the late Mr. Mundella. Without any further discussion the House adjourned, and when the House again had the matter before it the words were inserted without any discussion whatever. The words provided that, notwithstanding any existing Provisional Order, another Provisional Order or licence might be granted in the area to which the Bill referred. After the Bill had received the Royal assent, the Board of Trade instituted a public inquiry as to the best method of carrying out its provisions. The inquiry, which lasted, I think, eighteen days, was held at Westminster by Major Marindin, whose report resulted in the laying down of the principle by the Board of Trade that certain areas should be allotted to each undertaker, that there should be two undertakers to an area—this implied a limited competition—and that the current supplied to the consumers in that area should be varied—that is to say, one should be the alternating system, and the other the direct system. It was also laid down that, in the event of the local authority of the parish or area desiring to undertake the work itself, it should receive preference at the hands of the Board of Trade; and since that time, when a local authority has once started the supply in an area, no private company has been allowed to compete with it. During the whole of the inquiry it was never understood by the engineers or promoters of companies, or by those who were financially interested in them, that at any time a local authority would be allowed to compete against the existing company. Until the present time this has never been allowed. I have always considered competition a desirable thing; it keeps 947 down the price, and obviates, to a certain I extent, what are considered to be the evils in relation to the gas and water supplies of London. But I maintain, and I am supported by all interested in electric lighting in the contention, that it has not been hitherto contemplated, where a local authority is put in the position that it can, if it desires, purchase the undertaking of the company supplying its district at the end of forty-two years, that the local authority should obtain an order to supply the district, and in that way depreciate the property which it might purchase at a later date. I feel that I am not expressing myself very well, but it is extremely difficult to put a matter of this kind clearly before your Lordships. I do not object to competition upon an equal basis, but I do not regard, and I am borne out by the experience of others; the competition of a local authority as fair competition. I will explain why it is not fair competition. First of all, it is easy for a local authority to get capital cheaply on the security of the rates; secondly, it has a long period in which it can make a sinking fund; and, thirdly, it has no dividends to pay to shareholders. As to the technical part of the question, the local authority is not compelled to give notices in the same way as a company. When an electric lighting company desires to supply light to a house, it has to give no less than thirteen different notices, and these notices extend over a period of thirty days. The local authority only has to give notice when it proposes to disturb the mains of a gas or water company. Immediately it receives an order, the local authority can instruct its men to connect the house at once, whereas the rival company would not be able to do this within thirty days. Again, there is nothing to prevent a local authority from selling the current at cost price, or even below cost price. They can by that means reduce the price charged to the consumer to such an extent that the company could not exist, as the whole of the customers would naturally desert the company in order to take the cheaper supply. I have very great doubts in my own mind whether this is not the line of conduct which will be adopted in the present case under this Bill, because the local authority refused to accept a clause binding them not to supply current below cost price. The local authority also refused to pur- 948 chase the undertaking of the company at a price regulated by the amount of expenditure that had been incurred by the company. I cannot help thinking that, if this Provisional Order is allowed to pass without a serious protest, it will be followed to a large extent by other local authorities, who will apply for Provisional Orders to supply districts in which companies have large spent a large sum of money and have commenced working, and in that way defeat the clause which provides for purchase at the end of 42 years. Therefore, I would venture to ask the Board of Trade to say what I fear they cannot say—namely, that they will not make a precedent of the principle contained in this order, but will obtain an instruction from Parliament in another year as to how they should act, in order to prevent the grievous injustice which will arise from the passing of Provisional Orders of this kind.

§ * THE PARLIAMENTARY SECRETARY TO THE BOARD OF TRADE (The EARL of DUDLEY)

My Lords, if I may say so without disrespect, there is probably no member of your lordships' House who is better qualified to give an opinion upon a matter of this kind than the noble Earl who has just addressed you. I have listened with the greatest attention to the arguments put forward, but I am bound to say that I think the procedure he has adopted in making this protest on the Third Reading of the Bill is a little unusual, and also a little inconvenient. The Bill has already passed through the House of Commons in two sessions, and when it came before the Committee of this House the opposition of the company in which the noble Earl is interested was withdrawn, but a protest is now raised at the eleventh hour. Of course, I do not deny the right of the noble Earl to take that course, but I think it is a little different to the general principle under which Private Bill Legislation in this House is conducted. My noble friend seems to think that this Bill contemplates a serious change in the policy which has governed the granting of Provisional Orders for electric lighting, and that there is no precedent for a local authority being granted an order to supply electric light in a district where a company is already supplying it. There is a precedent in the case of Newington, and I believe the company in which the 949 noble Earl is interested was there supplying electric light. It is true that no opposition was offered on that occasion, but still the precedent is the same. The Vestry in that case was, as proposed here, given the power to compete with a private company. My noble friend also Seems to think that the Board of Trade have in some way introduced a new principle into this Bill by giving this power to the Vestry, but I would remind the House that in 1888 an Act was passed which distinctly authorises the Board of Trade to grant such power, and with the permission of the House I will just read the last words of the section: The granting of authority to any undertakers to supply electricity within any area, whether granted by licence or by means of a Provisional Order, shall not in any case hinder or restrict the granting of a licence or Provisional Order to the local authority, or to any other company or person within the same area. Those words clearly contemplate not only competition in different districts, but competition by a local authority. My noble friend seems to think that the danger of giving such a power to a local authority is that there is no security that they will supply electricity at cost price, and he said, I think, that they would not be under the same obligation as a company to make a profit. I cannot help thinking, however, that the ratepayers of a certain district would protest very strongly if their local authority contemplated supplying electricity at the cost of the rates, the effect of which would be that the general ratepayer would have to pay for the electricity used by a certain few. I do not believe a case has ever arisen in which a local authority has attempted to take such a course as that feared by my noble friend. The noble Earl also thinks that this Bill will be made a precedent, and that other local authorities will step in and apply for orders. The granting of Provisional Orders under such conditions must, of course, depend upon the circumstances of each case. What the Board of Trade has to remember, first of all, is that it has been undoubtedly laid down that competition is a good thing, and that, if the existing company is not performing its work thoroughly and well, the Board of Trade should grant an Order to a competing company so that a supply should be assured. Therefore, if ill the future a 950 local authority promotes a Provisional Order asking for power to supply electricity in a district in which the supply is already sufficient, that fact will, of course, weigh very materially with the Board of Trade, but in the case we are now discussing this was not so. The noble Earl will, I think, hardly deny that serious allegations were made before the Committee of the House of Commons against the company with which he is connected. I believe it was stated that, although his company had been in possession of their Order for nine years, none of the mains had been laid in any of the streets comprised in the compulsory area, notwithstanding the fact that by the Order the company were under the obligation to lay the mains in the compulsory area within the space of two years. A case of that kind would, at any rate, afford a strong reason for supposing that competition was desirable and justifiable. It has been proved in other districts that, before the inhabitants will use electricity to a very great extent, facilities must be given, and its utility must be demonstrated in an easy and tangible way. You cannot expect people to ask to be supplied with electricity unless the lamps in their streets and some of the shops are lighted by electricity, so that they may see the advantage of the light. Therefore, I think that on all grounds the Board of Trade have been perfectly justified, in view of the Act, and in view of the inquiry which Sir Francis Marindin made, in granting the Order in this case. To safeguard themselves the Board of Trade embodied this Order with another one—that of Marylebone—in a separate Bill, in order that Parliament might have every opportunity of considering these Bills, which are practically on all fours, and of deciding whether they would accept the principle or not. The House of Commons threw out the Marylebone Order, but on two occasions endorsed the Bermondsey Order, and, this being so, I think it would be a very strong step for your Lordships' House to take at this stage to throw it out.