§ Order of the Day for the Second Reading read.
§ THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT PEEL)
My Lords, I beg to move that this Bill be now read a second time. This measure, which originates in your Lordships' House, and which I now desire to present to your Lordships, is entitled the Electricity (Supply) Bill, an Act to amend the law with respect to the supply of electricity. It is an amendment of the Act which your Lordships passed two years ago, the Electricity (Supply) Act, and I may say generally, that unless this Bill, or some similar Bill, becomes an Act, a great number of the provisions of that Act, to which your Lordships then assented, will be rendered useless and ineffectual.
I ought to add that a measure containing many of the provisions embodied in this Bill was introduced into another place last year, 262 but there were certain controversial provisions and clauses in it which provoked a good deal of opposition, and as a result the Bill was withdrawn. These controversial clauses have been cut out of the present measure, and as far as the Electricity Commissioners know—at least, so far as any information has come to them—there are no controversial clauses, in the general sense, left in this. Therefore, I think I may present this Bill to your Lordships as an expurgated edition of the Bill introduced in another place last year, and I think it will be found to contain little that will offend or annoy the most delicate legislative palate.
Your Lordships did many things in the Electricity (Supply) Act of 1919. You recognised the necessity for development and co-ordination in the great electricity supply industry, and you passed very many important provisions. I hold the Act in my hand. Among other things you appointed Electricity Commissioners; you ordered that they should establish electricity districts—define electricity districts— and set up joint electricity authorities; and these authorities were to have power to acquire generating stations and the right to use for generating stations land acquired for that purpose. Under the provisions of that Act, during the last two years, a great deal has been done, and a great deal of information and experience acquired, by the Electricity Commissioners.
First of all, under the provisions of that Act, they have made, as it was their duty to make, a thorough survey of the existing conditions of the supply of electricity in this country. As a result of their investigations—and I am bound to say it is no surprise to those who are familiar with the conditions of the industry—they found that there was a wild and magnificent growth of every sort of system, showing great fertility of mind among those persons engaged in the creation of the industry, but a complete lack of any arrangement, or even understanding of arrangement, by which those undertakings might be linked for help or the exchange of energy; and that any proposal of that kind was both technically difficult and financially impracticable.
I pause for one moment to point out what enormous extra expense is caused by this immense variety of systems. First of all, these different authorities—and I am speaking equally of companies or 263 local authorities have, of course, to keep large numbers of spare parts, which have to he manufactured for all the different authorities, whereas if you had, I will not say standardisation or a cast-iron rule or system, but something approaching to standardisation, or two or three systems of standardisation, you would have enormously decreased costs and great facilities given to the export trade. I stated, generally, that one of the matters which first came under the observation of the Electricity Commissioners was the numerous and greatly varied systems of supply. To give only one instance, taken from Greater London, in the area of Greater London there are now seventy different generating stations, no fewer than fifty different systems of supply, twenty-four different voltages, and ten different frequencies. This is only an example of the great growth of variety which goes on in other districts which the Commissioners have already examined.
As a result of their general survey, they came to two main conclusions. The first was the general wastefulness and inefficiency of the present organisation for supply, and the second was the urgent need for joint action among the supply authorities, in order to economise in coal, to make better use of capital, and to produce, as a result, a cheaper article. Following on their general survey, the Electricity Commissioners proceeded, still under the operation of the Act of 1919, to map out the country into a number of districts called electric supply units. I suppose these may be generally described as units for the economic supply of electricity. They had to take into account a great many matters—the urban or rural nature of the districts, the number of persons, or companies, or authorities likely to make use of the electricity, and general geographical considerations. Up till now they have delimited or defined sixteen districts in this country. I believe that when they finish their work the number will probably rise to something like twenty.
In eight of these districts schemes for re-organisation have been considered, and, after long inquiry and consideration, have been provisionally approved. In the first four of these eight districts they have decided 'to set up joint electricity authorities. In two more of these districts joint electricity authorities have been proposed, and in the next two that they have ex- 264 amined an advisory board and advisory committee have been respectively suggested. The advisory board or advisory committee may be said to be inchoate joint electricity authorities, and the probability is that although they are not quite ready for the full blessedness, as it were, of the joint electricity authorities, when they have had experience of the advisor board or advisory committee, the authorities in the district will be invited, and will perhaps agree, to enter into some closer union.
Your Lordships will understand that these joint electricity authorities are mainly composed of representatives of the electricity undertakers in these different districts, and the general aim in setting up these authorities is, of course, to bring a system of co-operation and of orderly development within these districts. Among their general objects are these—to save and economise capital, to reduce the cost of production, and, through reducing the cost of production, to increase the area of supply, and, further, to make a great economy in the use of coal.
I should like to say that the general principles on which this amended Bill is based are three. First of all, the general note running throughout this Bill is consent, and not compulsion. I think your Lordships objected strongly to the measure of two years ago which introduced proposals of compulsion. If I may say so, with great respect to your Lordships, I think you showed much wisdom, because it has been found that there is so general a desire for co-operation, both among companies and authorities, that really these powers of compulsion have proved, as they were considered by your Lordships to be, not necessary.
The second point is that every encouragement is given throughout this Bill to private enterprise. There is certainly no weighting of private enterprise as against local authorities. And the third principle—and in the light of that principle all the clauses of the Bill must be read, many of them giving great flexibility in administration—is the desire to assist in cheapening this vital power for assisting our industries. There has been on the North-east coast a system which has been, to some extent, in working order as a kind of example of what is aimed at by these joint electricity authorities. There the authorities have among themselves done much to pool their 265 supplies, and to discourage the setting up of separate plants in individual factories.
One of the main objects of the Bill is to permit these joint authorities to raise money, to get., as it were, the sinews of action, and to enable them to function so that they may be able to acquire generating stations, or enlarge existing ones, or, if necessary, to create new ones, to erect the necessary ancillary works, and to provide working capital. The point I want to emphasise most strongly is that it is not a question simply of how much capital is to be raised. Capital has to be raised, and will be raised; but the question is how that capital can best be raised for the economical working of these industries. Let me establish' that point. In the year 1920–21 the Commissioners, who are the sanctioning authority for loans for electricity, sanctioned no less than £15,000,000 of loans by local authorities, and £9,000,000 of this was in respect of generating plants. At the same time large amounts were raised by companies, though the Electricity Commissioners had no control over the loans so raised.
I should like to say also that in the course of their two years' operations the Electricity Commissioners have found the greatest possible readiness, both among the companies and the local authorities, to combine and co-operate for the production and use of cheap electricity. I really would suggest. to your Lordships that, in considering whether these powers of raising money should be given to these joint electricity authorities, you should consider whether it would not be rather absurd to deny to those, co-operators the powers which they already possess as individuals.
The general result of these operations must be that less capital, rather than more capital, will be raised, because it is clear that the amounts that will be required for these joint generating stations will be less than would be necessary if the raising of money was left to the separate undertakers who have to raise money in order to meet their obligations. Unless they have this power of raising money some of the provisions of the Act of 1919 will become entirely nugatory, because under that Act the Electricity Commissioners have the right, if they think fit, to refuse to local authorities—and to companies as well—the right to enlarge their stations or to build new ones, in order to keep some check on this multiplication of small producing 266 works. But, of course, these powers will be entirely nugatory if these authorities can come to the Commissioners and say: "There is no source from which we can get our supply. The joint electricity authorities are not functioning, and therefore you must give us leave to raise these loans and to produce electricity, which we are bound by our statutory duties to deliver."
I will give your Lordships a few figures about the development, and estimated development, of the electrical industry. Just before the war at all public generating stations there were produced something like 2,000,000,000 units of electricity for a population of about 45,000,000. If you compare that with Sweden, where, of course, they make use of water power very largely, that country produced no less than 1,475,000,000 units— three-quarters of the total amount produced in this country— although the population of Sweden was only 5,000,000, or one-ninth of the population here. To give your Lordships some idea of the money invested in the electricity industry, may I say that in 1916 there was no less than £91,000,000 in electrical undertakings. For £55,000,000 of that the local authorities were responsible, and for £36,000,000 the companies. And during the war there was a very large increase ill the electrical output. There was a great increase in the application of electrical power to industry, mainly in the direction of the making of munitions of war, and in 1918—only four years after the time for which I have already given your Lordships the figure—there was an output of 4,628,000,000, or more than double the number of units produced in 1914.
When the Bill of 1919 was before your Lordships it was in the charge of the noble and learned Viscount, the Lord Chancellor. He made certain statements—prophecies, if you like to call them so—as to the nature of the electrical development which was likely to take place in the next few years. I am able to present to-day figures which give some degree of body and colour to that statement of the noble and learned Viscount. These figures are not guesses; they are much more real estimates, produced after careful consideration by the different engineers of the undertakers, as to the amount of their statutory requirements in electricity during the next five or the next ten years.
The figures I have selected for this purpose apply to eight out of the sixteen 267 districts which have been already delimited by these Commissioners. In 1920, the combined maximum demands in these districts was 833,000 kilowatts (I omit the hundreds for the sake of clearness). It is estimated by the promoters that that amount will be increased in 1926 to 1,542,000, and in 1931 to 2,207,000 kilowatts. This will mean an enormous increase in output. The unit output in 1920 in these eight districts was 1,923,000,000 the estimated total for 1926 is 3,799,000,000 units, and for 1931 no less than 5,624,000,000 units, or more than two and a half times the amount for 1920. This, therefore, gives an increase of 165 per cent. in maximum load in 1931, and the increased output in units ill 1931 will be 192 per cent.
Under these provisions and by the establishment of these authorities it is estimated that the following saving will be effected. The coal consumed under the eight schemes which have been submitted to the Commissioners, as compared with the coal which will be consumed if the existing organisations continue to develop independently, shows a saving in 1931 of no less than 1,148,000 tons. Again, as to the saving in capital, I take three districts—the South-east Lancashire district, the North-west Midlands district and the West Riding of Yorkshire. For the Southeast Lancashire district there is an estimated saving of £1,400,000; for the North-west Midlands district a saving of £1,000,000, and for the West Riding a saving of £644,000. Taking the annual cost of production, the estimated saving in that regard in the district of West Lancashire is £276,000; in the West Riding, £1 36,000; and in North Wales, £138,000.
Now let me give some figures of the comparative cost for Greater London. The cost of generation in Greater London in 191920 was 1.55d. per unit sold, representing a total of £3,927,000. In 1931 it is estimated that this figure may be reduced to 1.055d.; representing a reduction of no less than 32 per cent. Applying this reduction in cost to the output in 1919–20, the total cost would have been £2,673,000. The amount saved in other ways, in transmission and so on, I pass by, because it is very difficult to estimate.
Again, several railway companies have had to erect their own independent stations, because they could not get a supply from elsewhere. In the course of these investiga- 268 tions it has come to the knowledge of the Commissioners that the companies express a strong desire to save this expenditure where they can, and to buy current from some public source, if only a reliable supply at a cheap price can be assured to them. I think those figures are interesting as showing, after very careful estimation, what might be the saving in production, in management, in annual cost, in coal and so on, if there is, through the medium of these joint authorities, a cheap electricity supply. All this depends, of course, upon whether you are prepared, or are not prepared, to give powers of raising money, or of borrowing, to these joint electricity authorities.
This is the general principle on which the Bill is founded. I am afraid that the Bill is in many respects rather difficult to understand and I propose, if your Lordships so wish, to go rather more into the details of the specific clauses than is usual in moving the Second Reading of a Bill. To begin with, I will deal with the first four or five clauses which give power to these joint electricity authorities to borrow money and to issue stock. I should like to say that the fullest control will be exercised over these powers, because this borrowing is to be strictly under the control of the Electricity Commissioners and subject to Regulations made by the Minister of Transport and approved by the Treasury. Clause 2 contains a general provision, which is common to most local Acts just now, under which the sinking fund is suspended for a certain number of years, with an upper limit of five, until there is a working balance in the accounts of the authority. Clause 3 gives power, where necessary, to raise money by the issue of stock instead of by borrowing, and applies the particular Regulations under which issues of stocks are made by the larger corporations. Clause 4 enables a joint electricity authority, by agreement with the authorised undertakers who have sold their undertaking to the joint electricity authority, to make payment in securities of the authority in lieu of cash.
These first four clauses relate entirely to the different machinery by which the joint electricity authorities can raise money, but Clause 5 gives power to companies and persons taking supplies from the joint electricity authority and also local authorities in the district of the authority—whether they take a supply or not—to 269 lend money or to subscribe for stock issued by the joint electricity authority, or to guarantee securities issued by the authority, and in other general ways to give financial assistance to these joint electricity authorities. It will be seen that the clause is drawn in very wide and general terms in order that the different bodies who compose, through their representatives, the joint electricity authorities may be able to assist those authorities, certainly in the earlier years of their activities, and enable them either to borrow money or to raise it more cheaply than they might otherwise be able to do. I should like to say that there is a very strict check on their activities in this particular way, and your Lordships will see that all these authorities can only do that with the consent of the Minister of Health. An exception is made in the case of the London County Council, whose finances, of course, are regulated in a different manner.
I ought to call attention to subsection (4) of this clause because it makes provision in respect of the administrative expenses of the joint electricity authority, and charges them upon the authorised undertakers in the area. All the authorised 'undertakers in the area are included by representation in the joint electricity board. This provision is necessary, of course, because an authority might be constituted which would be, anyhow for some time, a co-ordinating body for the existing supplies in that area without, at least in the earlier stages, being possessed of any undertaking or any sources of revenue, so that they must have something to grease the wheels of their administration in their earlier years.
The general object of this clause is, of course, to give the widest possible field for the raising of such money as the joint electricity authority may, under the earlier provisions of the Bill, have been authorised to borrow, and is really no more than a corollary to the provision already contained in Section 19 of the Act of 1919. That, I think, deals pretty well with the first five clauses.
Clause 6 deals with the method of raising money for the payment of the Commissioners. I think your Lordships are aware that already, under the Act of 1919, the Commissioners are paid not by the taxpayer but by a levy upon the local authorities or the companies, according to the number of units that they produce. I 270 may say here that the Commissioners, during their two years of work, have gained the general approval of the electrical trade. Some of them come from the trade itself, and therefore they are not regarded in the same way as ordinary officials are sometimes regarded by industries outside. They do not look through those dark-rimmed spectacles with which many of the inhabitants of Whitehall regard outside industries, and they have, by persuasion, gained the confidence of the trade; in fact, their only trouble is, I believe, that their ante-rooms are sometimes too much overcrowded by the number of suitors who come to them for consultation and advice. This clause merely puts on a fresh footing, and makes some slight alteration in, the method by which this money is to be raised. It also prevents an unfortunate hiatus that might take place between the first two years during which the Treasury have advanced the money under the Act for the payment of the Commissioners and the period when they will be able to make their first assessment upon the producers of the electricity. Clause 7 merely describes the method of payment of the purchase price payable to the local authorities.
Clause 8 is one of the flexibility clauses, as I have described them. It says that use may be made of main transmission lines by the joint electricity authorities by agreement, in order to avoid the necessity of building new lines. It is considered that when the production of electricity in this way has been concentrated a certain number of stations for the production of electricity will become comparatively useless, and power is taken to dispose of stations and works that are not required. Clause 10 deals with the question of way-leaves. All it does is to extend the provisions of the Act of 1919, which applied to future wayleaves, to wayleaves already existing when that Act was passed. Claus! 11 sanctions arrangements under which a joint electricity authority, in whom any existing works have become vested, can leave the actual operation of the works to the particular authority from which those works have been acquired. Clause 12 permits the joint electricity authorities to delegate, where they are specially authorised to do so, any of their powers to an authorised undertaking within the district. I desire particularly to call your Lordships' attention to Clause 13, which is an important one. By this clause it is secured 271 that the undertakings of the joint electricity authority shall not become a burden upon the local rates or revenues of the constituent bodies. It also provides that the prices to be charged shall be such that the revenues, taken over a term of years, will be sufficient to cover expenses. Clauses 14 and 15 are also very important to the public. Generally speaking, Clause 14 makes new provisions as to the method by which consumers shall be charged for electricity, and it enables revision to be made of the charges for electricity every three years, instead of every five years. Moreover, it extends the power for the revision of those charges from the companies where it already exists to local authorities where it does not exist at present. The particular provisions which show how this can be done will be found in the Schedule.
Clause 15 is based upon the general principle that a consumer ought not, except under special arrangement as to payment, to have the statutory right to require undertakers to put a supply into his premises and then not use it, except in the ease of a breakdown of his existing supply. 1t is understood that that provision did apply beforehand to those who possessed separate electrical supplies, but it was not certain whether it also applied to those who had separate supplies of gas or steam or other forms of energy, and this clause makes it quite clear that the provisions of that section do so apply.
Clause 16 again, in the interests of cheapness, is of great importance. It makes it possible for consumers who cannot otherwise obtain a supply to get it from a generating station belonging to a railway or traction company who are not authorised undertakers. There are many cases, or there might be in rural areas, where factories might be set up and could not get cheap electricity from any authorised undertaker, but who might be very ready to obtain it, if they could, from the railway which might have a surplus supply, and be ready to sell it to the factory. I should like to say that the interests of all those who might possibly suffer in that way are very carefully safeguarded, and this provision can only operate—I lay stress upon this—by agreement among all the different parties concerned.
Clause 18 is somewhat technical. It provides for dealing, by schemes under the control of the High Court, with debentures which have been charged on a generating 272 station which has been transferred to a joint electricity authority. Clause 19 makes provision for winding up a statutory company whose undertaking has been taken over. Clause 20 is useful for Scotland, because it puts the Scottish authorities on the same basis in regard to the length of time for the repayment of loans as the English authorities. At present they have to repay the money for their generating stations in thirty years, and under this provision they will be able to repay it in sixty years. Clause 21, which is very necessary now, provides that this Act shall not apply to Ireland.
I thought it necessary to go into these details, though many of them are rather technical, and perhaps rather uninteresting, but I think, if your Lordships are prepared to pass this measure, that it will probably do a great deal more towards the production of cheap electricity for our factories and in giving wings to our trade than many other measures with far more resounding titles. I beg to move.
§ Moved, That the Bill be now read 2ª. (Vicount Peel.)
§ THE MARQUESS OF SALISBURY
My Lords, I think your Lordships are placed in a rather difficult position in respect of this Bill, owing to the circumstances under which it is being presented. I believe it is entirely due to inadvertence that this Bill was not circulated until the day before yesterday, and, as we have just heard in a very interesting speech' from the noble Viscount, it is a. Bill of a very complicated character, and one that it is difficult to understand. It is true that the noble Viscount has given us a most detailed and interesting speech, and I admired, not for the first time if I may venture to say so, his mastery of intricate figures and details. Nevertheless, we have some difficulty in appreciating exactly what the effect of this Bill will be.
I do not doubt, of course, that the assurance of the noble Viscount is well-founded that the Bill does not embrace any of the Controversial parts of the Bill which was before another place last session. At the same time, a measure of this kind is so intricate, and involves interests of such importance, that it does seem right that we should have an opportunity for studying it before your Lordships are asked definitely to read it a second time. I can assure the noble Viscount that there is 273 no desire on my part to obstruct the passage of the Bill. Like every other man who has studied the question at all, I am very anxious for the promotion of the electrical industry in this country.
As he has reminded us, the subject has a little history in your Lordships' House. Two years ago it was dealt with very carefully by this House. As a result of that careful scrutiny the Bill to which I refer issued from your Lordships' House in a very different condition from that in which it came to us; and that different condition is now the Act of Parliament itself. In these circumstances the House will not be surprised if I suggest that it would be wise not to press the Second Reading to-day. The noble Viscount has given us a very elaborate statement of the case and no time will be lost if we have an opportunity not merely of reading the Bill carefully (which many of us have not done so far) but also of considering in our own studies the speech he has just delivered, which is a very valuable commentary on the Bill and without which many of your Lordships would be unable to follow it at all. I respectfully submit, on behalf of many noble friends in this House, that tie noble Viscount should not press the Second Reading to-day, but allow it to stand over for a few days.
§ VISCOUNT PEEL
My Lords, I am not so much surprised that the noble Marquess has asked for time to study the Bill because I understand he has been engaged for sonic weeks in studying some other portion of His Majesty's Dominions. I am very sorry that the Bill did not come earlier into the hands of your Lordships. I interposed a week between the First and Second Reading and the delay is due to the Printing Office, where, no doubt, large economies have taken place, which constitute perhaps one of the reasons for the delay. I regret that owing to the semi-obscurity of my speech he finds it a little difficult to understand the Bill, but I hope that after pondering it in his chamber he will come to the conclusion that it is really an admirable measure. The noble Marquess, on behalf of himself and other noble Lords, has asked me to postpone the Second Reading. I will certainly agree to that, and perhaps next Tuesday would be a convenient date for the resumed debate.
THE EARL OF BESSBOROUGH
My Lords, in view of the sympathetic response 274 of the noble Viscount to the, appeal made to him, I beg to move that the debate be now adjourned.
§ Moved accordingly, and, on Question, Motion agreed to and debate adjourned till, Tuesday next.