§ Order of the Day for the Second Reading read.
§ THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR THE COLONIES (THE EARL OF PLYMOUTH)
My Lords, this Bill deals with a number of matters concerning the operation of the national grid system by the Central Electricity Board. Perhaps you would allow me in a few sentences to remind you of the position which exists in that industry now, as a result of the operation of the Act of 1926. Under that Act the Central Electricity Board was constituted an authorised undertaker for the whole of Great Britain, for the purpose mainly of co-ordinating the generating of electricity by concentrating the production in a limited number of interconnected generating stations, which under that measure are termed selected stations. Those selected stations have to be operated by their owners under the direction, and on account, of the Central Electricity Board. That Board have to take the whole of their output, and in return they must provide the owners of these undertakings with all the electricity they require for their own purposes. In addition to that, they have to provide bulk supplies of electricity to other undertakers on terms which are set out at length in the Act of 1926. In other words, the Central Electricity Board has been constituted the central supply authority for the country, from which all other undertakers have to obtain their supplies in bulk either directly or indirectly. On the other hand, the distribution side and the commercial development of electricity have been left in the hands of the various undertakers themselves.
The national grid system is now practically complete and it is actually in full commercial operation in several of the regional areas which were set up. The various schemes have also determined what are to be selected stations. The experience gained during the construction and bringing into operation of the grid system has brought to light certain 541 doubts and difficulties arising in connecton with the provisions of the Act of 1926, and the Government feel that those doubts and difficulties should be resolved or removed in order to ensure the efficient working of the national grid system, as undoubtedly it was envisaged by the Act of 1926. That is the main object of the introduction of this Bill, and I think that the simplest thing for me to do would be to deal with the Bill clause by clause.
Clause 1 seeks to enable the Central Board and any undertakers who are the owners of a non-selected station to enter into arrangements on such terms as may be agreed for the control of the station by the Board, for the interchange of supplies between the undertaker and the Board, and, if necessary, for the closing down of the station. There are upwards of 450 existing generating stations owned, by authorised undertakers in Great Britain, and the national scheme, adopted for the whole of Great Britain with the exception of the North of Scotland, provided for 119 existing stations and sixteen new stations to be selected stations. There are already provisions in the Act of 1926 by which a non-selected station can be closed down if it is shown to the satisfaction of the Electricity Commissioners that the cost of production would substantially exceed the cost which would have been incurred had the owning undertakers purchased the like quantity of electricity directly or indirectly from the Central Electricity Board.
But there is another class of station to which I want to refer, besides these selected stations and that class of station which can be dealt with under Section 14 of the Act of 1926. These are the stations which, I think one might say, are not sufficiently important to be made selected stations, but which can produce for themselves at a total cost lower than the cost of taking a supply from the Board at the general tariff rates, and at the same time themselves continuing to bear the capital charges which remain to be paid on their own undertaking. This is the class of station with which Clause 1 is intended to deal. At present there is no particular inducement to these undertakers to become connected with the national grid system, but under the arrangements contemplated in this clause this class of station could very usefully be operated in conjunction with the grid 542 system for the remainder of their economic lives, with advantage both to the Board and to themselves. The Central Electricity Board have hitherto dealt with these stations by making special arrangements with the undertakers owning these non-selected stations for the control of the station and for the interchange of supplies between the grid and the system of such undertakers. Lately, however, doubts have been raised as to whether such arrangements can competently be made within the provisions of the Act of 1926, and this clause has been drafted to resolve that matter and to validate all such arrangements as have already been made.
Clause 2 seeks to enable the Central Electricity Board, in cases where they are satisfied that special circumstances exist, to quote special prices for electricity supply directly from the grid system to authorised undertakers to enable these authorised undertakers themselves to quote special prices to particular consumers, such as large industrial undertakings in their area of supply whose demands for electricity are of an exceptional nature. By the Act of 1926 the Central Board are only empowered to supply the undertakers in bulk, and may not supply direct to any industrial or other consumer in the area of the undertaker. The object of the clause therefore is to enable large industrial loads, which might otherwise be made by private generating plant, to be secured for the general benefit of the grid system in cases where the resources of the undertakers concerned would not permit them to quote a competitive price for the load in the absence of this provision. It is now already within the powers of authorised undertakers in general to make contracts for supplies at special prices in special circumstances, and it is in the general interest of the grid system and of industrial development generally—and I think your Lordships will agree—that the Board should have power to quote special prices to undertakers to enable the latter to meet the electrical demands of large industrial developments which might otherwise be beyond their resources.
Clause 3 deals with the terms on which supplies of electricity, taken directly or indirectly from the grid system by certain authorised undertakers, are to be passed on in bulk to other authorised 543 undertakers. I am afraid this clause deals with a very complicated matter, but I hope your Lordships will bear with me for a moment while I try to explain the point at issue. The Act of 1926 envisages that in the development of bulk supplies under the cegis of the Central Board the fullest use will be made of organisations such as joint electricity authorities and power companies already possessing powers to afford supplies in bulk to other authorised undertakers in their districts or areas. The Act makes provision that the supplies taken directly or indirectly from the grid system are to be passed on in bulk to the other authorised undertakers upon the same terms as they are received, together with specified charges and allowances to cover the transmission costs. A number of these undertakers possess extensive networks of interconnected transmission lines which are used not only for giving bulk supplies but also for industrial power supplies and possibly other supplies as well.
In attempting to apply the provisions of Section 12 of the Act of 1926, which deal with this particular point, difficulties have arisen in the past in determining the extent to which such transmission systems are used for the purpose of giving particular bulk supplies. It has also been shown that the application of Section 12 as it stands would in some instances result in considerable inequalities in the charges to be passed on, and would also upset the uniform basis of charge for bulk supplies which has hitherto obtained in various districts. I do not think it is anticipated that difficulties will arise in the application of Section 12 in very many cases, but it has been thought desirable by the Minister to introduce into that section a certain measure of flexibility. The way in which it is proposed to do this is by giving power to the Electricity Commissioners, if the Commissioners are satisfied that it is in the general interest of the undertakers concerned, to direct that the whole or a specified portion of a transmission system of any particular undertaker shall be taken into account, and the costs and charges applicable pooled and properly apportioned, in arriving at the transmission charges to be added by that undertaker in respect of individual bulk supplies passed on through the system.
Then we come to Clause 4. Clause 4 gives effect to a recommendation made by 544 Lord Weir's Committee on Main Line Railway Electrification, and it would enable the Central Electricity Board to give supplies for haulage or traction services to railway companies direct from the grid system. Provision is made in this clause whereby such supplies may not be given by the Central Board in the areas of undertakers who own selected generating stations without the consent of the said undertakers, provided this consent is not unreasonably withheld. Under the Act of 1926 the Central Board may not supply electricity to any consumer in the area of an authorised undertaker, and a railway company desiring to obtain a supply in that area from the grid system for railway electrification must do so through the authorised undertaker. The Act lays down the terms on which the supply received by the undertaker directly or indirectly from the grid system is to be passed on to the railway company for haulage or traction purposes, but I think your Lordships will agree with me that there is great inconvenience in the position as it at present obtains.
For the electrification of any length of railway line passing through the areas of a number of authorised undertakers and requiring supplies at more than one point it would he necessary for the railway company to negotiate contracts for separate supplies from the undertakers at each of the proposed points of supply. Under this clause, subject of course to the limitations which I have mentioned, the Central Board and the railway company would be in a position to enter into direct negotiations for supplies for railway electrification purposes from one or more points on the grid system; and I think I might point out in connection with this clause that it differentiates between the use of the supply for haulage or traction on the one hand and the use for other purposes of the railway company's undertakings on the other, and provision is made in the clause for the consent of the Minister of Transport to such other uses. This arrangement merely preserves the position which was laid down in Section 47 of the Act of 1926. That is a brief explanation of the only clauses that are of substance in this Bill. I do not think it is necessary for me to say anything more at the present stage, but I shall naturally at the end of the debate do my best to answer any 545 questions that may be put. I beg to move.
§ Moved, That the Bill be now read 2a—(the Earl of Plymouth.)
My Lords, my noble friends on this side of the House have asked me to speak on this Bill and to offer general support to it. We look upon the measure as useful and constructive, and I wish personally, if I may be allowed to do so, to congratulate the noble Earl on his clear and explicit explanation of this very technical measure. When the 1926 Act—the measure that this Bill seeks to amend—was introduced into Parliament, your Lordships will remember that originally it was intended that the Board should not only control the generation and transmission of electricity but should also be allowed to distribute. There was a very strenuous contest on that point, and the cave-men in the other place were so strong that they prevailed on the Government of the day; and the rights of the Central Board to supply direct were very severely curtailed, as your Lordships are aware. Nevertheless the 1926 Act was, I suppose, the greatest measure of collectivism, or perhaps Socialism even, we have had since the end of the Great War and, more remarkable still, it was introduced by a Government with an overwhelming Conservative majority. We now have the present Bill which carries the original intentions a short step further, and it is certainly very remarkable that it should have been introduced by another government with an overwhelming Conservative majority. As I say, my noble friends on this side of the House are agreeably surprised, and naturally we offer no opposition in principle.
I will, if I may, raise two questions with the noble Earl which are not absolutely clear even in his very lucid explanation, and not indeed quite clear in the Bill. Take, for example, the clause which will attract most public attention—namely, that enabling the Board under certain consitions to supply electricity in bulk to the railway companies. May I ask the noble Earl whether we can be assured that industrial consumers of electricity—and here, in passing, may I remind your Lorships that one result of the grid system has been to extend the use of 546 electricity in the country districts very considerably—will not have to pay for the cheap bulk electricity supplied to the railway companies? It is, I believe, a fact that the supply of electricity during the off-peak period in bulk to the railway companies will be most advantageous, but while being advantageous it will also have an effect on the general working costs of the whole system. I believe my noble friend will agree with me that these benefits should be passed on also to the general body of consumers, and certainly that the general body of consumers should not pay for the special advantages given to the railway companies. I do not think that is the intention, but if the noble Earl could make the position clear it would be an advantage.
Again on Clause 4, may I ask the noble Earl to make this point clear? Your Lordships heard the explanation of Clause 3, but I understand that Clause 4 will also be governed, broadly, by the provisions of Clause 3. In other words, will the railway companies bear the appropriate share of the costs of the frequency changes in respect of supplies received directly from the Board under Clause 4 to the same extent as proposed under Clause 3 with regard to what they will have to pay in respect of supplies from various sources? I am sure it will be recognised by your Lordships that that is a fair proposition; in other words, what is sauce for the goose is sauce for the gander, and the railway companies should pay their fair share of the costs of the frequency changes.
I would now like to raise a matter of general principle on the Bill, and again with regard to the enabling clause to allow bulk electricity to be supplied to the railway companies. As your Lordships know, the electrification of the railways has been talked about now for some fifteen years, perhaps longer, and so far the Southern Railway is the only railway that has electrified to any great extent. Since the Weir Committee's Report there have been certain technical changes in railway engineering, and I understand now that there is a hot debate between those who believe that the whole railway system of the country should be electrified—that is, not only in the thickly-populated industrialised areas where there is very frequent running of trains, as in the Southern Railway's area, 547 and where there is obviously a clear case for electrification, but also in the sparsely-populated areas through which the long-distance lines run—and those who take a contrary view. If the view of those who want all the railways electrified prevails, it will benefit the grid considerably, because the Central Board want to use their electricity in the more sparsely-populated and less-industrialised districts. The other school say that there should be no electrified railways except in the great centres of population and industry, and that the Diesel engine should be used.
I do not know which school of thought will prevail, and I am certainly not going to attempt to say which is right; but this is certain. Supposing in the next fifteen years the other three railway groups are electrified and "Dieseled," or entirely electrified, whichever prevails there will be a saving in the coal used. That will affect the mining industry. It will throw more miners out of work and create troubles in the mining industry. So we shall have this situation, that the Central Electricity Board, by supplying bulk electricity cheaply to the railway companies, will enable the railway companies to use a great deal of electricity in place of coal, and that will displace miners and depress the mining industry generally. And who benefits? The nation as a whole? Yes, but one section, a great number of workmen engaged in the important mining industry, will suffer. Members of the Party to which I belong have been advocating in this House and another place for many years that there should be an even greater co-ordination, not only of the generation and distribution and sale of electrical power, but also of the supply of coal from which the greater part of the electricity supply of this country is generated. May I put it in another way? If you are going to benefit by electrification, a part of the profits or savings which result should go to support the great mining industry. If you put mining and the winning of coal in one water-tight compartment and separate it from the use of coal for the generation of electricity—and for that matter for the production of oil for use in the Diesel engines and chemicals and so on—you will be doing an injustice to a great industry. It is all very well for the financial people who control mining, the power 548 stations, and the chemical factories. They do not suffer. But we are thinking of the 600,000 men employed in the mining industry, who have been through very hard times indeed. It is admittedly a part of the Socialist policy that they should not suffer.
There is one other point of broad principle to which I would like to refer. Your Lordships will presently be invited to consider an emergency measure dealing with the supply of water. This affects the supply of electricity very intimately. As your Lordships are aware, in a national water system you would use the very cheapest power for pumping, which is electricity, to a very great extent, and it is particularly appropriate to use electricity for this purpose, because here you can use the off-peak load, the electricity of the slack period of the day, for pumping and, therefore, you would level out the whole cost of your generation, distribution and transmission. The noble Earl explained to us that Clause 4 enables electricity to be supplied to the railway companies under certain safeguards. Have the Government considered a similar enabling clause for the Electricity Board to enable it to supply electricity to central water authorities for pumping purposes? I submit that that is a matter of great substance which has become more urgent owing to the water conditions in the country, and it will have to engage the attention of the Cabinet very seriously indeed. I would ask the noble Earl if that could be looked into by his very able advisers in the Department.
This Bill carries us a little step forward towards the public control of all power in electricity. It is, therefore, to be welcomed. We none of us want to see any injustice done to those who have developed the electrical undertakings. I believe they are safeguarded, but there may have to be some further safeguard to see that they are not unfairly treated. I think we are justified in asking that the general body of consumers shall also have their interests safeguarded. With those observations I offer the support of my noble friends to this very useful measure.
My Lords, I must congratulate the noble Earl, Lord Plymouth, upon the admirable and, if I may say so, the ingenious way in which 549 he has introduced this Bill on Second Reading. If it were not that I had some knowledge of the subject with which he has dealt I might have found myself convinced by the arguments which he set forth this afternoon in favour of the Bill. But I have studied the Bill very carefully indeed and I have come to the conclusion, in spite of the arguments advanced by the noble Earl, that this Bill ought not to be allowed to pass through your Lordships' House without very important modifications. If I had had any doubt in my mind as to the Bill when. I came to your Lordships' House, those doubts would certainly have been dispelled by the speech to which we have listened from the noble Lord who has just sat down. I feel inclined to suggest to my noble friend that this Bill may become a hornet's nest. I will ask your Lordships to bear with me while I put the other side of the question to that presented by my noble friend.
As I construe this Bill it is in direct contravention of certain very definite principles contained in the Electricity (Supply) Act, 1926. By that Act, as the noble Earl has said, the Central Electricity Board was established. That Board was to create a grid system circulatory of Great Britain. When it began to function it was to supply electricity in bulk at wholesale prices to authorised undertakers. Those authorised undertakers in turn were to give retail supplies in their authorised areas. There were, in addition, certain provisions in that Act for dealing with the interim period during which the grid system was being formed. The main principle of the Bill was that, except in one case—that was the railway companies—no preference or favour was to be shown to individual undertakers, and that they all should be treated alike. Another definite principle was that so soon as the authorised undertakers in any area had been approved by the Electricity Commissioners—and subsequently by Parliamentary Order—any electricity in that area, whether obtained from the grid or otherwise, was to be supplied only through the authorised undertakers. The grid was only to supply electricity in bulk and not retail. There was a third very important principle contained in that Act. That was that although the railway companies were to be preferentially treated, in so far as they were to 550 receive supplies at the same cost as authorised undertakers, nevertheless it was very definitely laid down that supplies to railway companies could only be made through the authorised undertakers of the areas in which the railway companies received their main supplies.
Those very important points of principle were included in the Act of 1926 only after considerable discussion in Standing Committee in the House of Commons and in your Lordships' House. Not only that, they were emphasised by members of the Government of the day to be essentials of the Act. That was the case no doubt because of the fact that this Act of 1926, as the noble Lord, Lord Strabolgi, has said, was the greatest Act of Collectivism passed by any Government. The provisions of the Bill which is before your Lordships' House to-day are in direct opposition to the important principles I have enumerated. Not only does the Bill make definite provision for preferential rates, but it also authorises the Central Electricity Board to supply direct to any area and at any rates they may please to charge. Further, the Bill places the railway companies in such a favoured position that not only may it be arranged for them to receive supplies at wholesale rates from the Central Electricity Board for haulage and traction or for lighting vehicles used on the railway, but they may utilise their supplies—which is not permitted at present—for other purposes and other undertakings which may be of an entirely different nature.
In addition to that, the Bill, as I read it, legalises certain illegal acts performed by the Board since the 1926 Act was passed. That was referred to by my noble friend as removing a few doubts and difficulties. I venture to submit that illegal acts can hardly be classed, or should not be classed, in that category. This part of the Bill relates to cases where the Board have granted to undertakers preferential tariff rates contrary to the provisions of the 1926 Act. Those preferential rates are obviously prejudicial to other electricity undertakings and also—this is an important point—to private 'consumers and industrial consumers in that they have to bear any extra cost which may result from these preferential arrangements. The Act of 1926 lays down very clearly indeed the prices at which the Central Electricity Board are to sell electricity. The present 551 Bill, if it passes, will not only give the Board a free hand to make preferential arrangements, but it will give the Board power to take away from existing electricity undertakers a great deal of their most lucrative business. I regard this Bill—and I am strengthened in that opinion by what has been said by the noble Lord, Lord Strabolgi—as the thin edge of the wedge leading to nationalisation of electricity supply in this country.
If I am correct in that, then I think the Bill ought to be strenuously opposed or, at any rate, drastically amended in Committee of your Lordships' House. I believe that it is only by private enterprise and free competition and by progressive commercial development that we are going to reach that peak of electricity retail supply in this country which many of us are aiming at and all of us wish to see. Now I should like to turn to the clauses of the Bill and make certain comments upon them. Obviously, Clause 4, dealing with the supply of electricity to railway companies, is the most controversial clause, but before dealing with that I should like to make a few comments on the preceding clauses. Clause 1, as I read it, designs to make lawful retrospectively certain agreements into which the Central Board have entered contrary to the procedure laid down in the Act of 1926. In addition—and this is an important point—it enables the Board to make agreements in future outside the provisions of the Act of 1926; and these agreements, if they are made as intended, and as outlined or indicated in the speech of the noble Earl, Lord Plymouth, must certainly be prejudicial to other electricity undertakings, that is to say, undertakings in other areas. The Act of 1926, as I am sure my noble friend will admit, gives protection, and definite protection, to electricity undertakers in that they cannot be forced—the noble Earl himself referred to this point—to take a wholesale supply from the grid unless the Central Board can prove that that supply is cheaper than the local supply. This clause as included in the Bill will take away that protection from the electricity undertaking and alter the whole intent of the 1926 Act.
The noble Earl shakes his head. Naturally I did not take down his words 552 as he was speaking, but if I rightly recollect, he did tell us in the course of his speech that there were in certain places generating stations which supplied more cheaply than the grid, and that it was intended to take over those generating stations and to incorporate their supplies into the grid system.
The noble Lord says, "Only by agreement," but there is such a thing as force majeure and I see force majeure contained in a great part of this Bill. In addition, under the Act of 1926 the Central Board were empowered to make temporary arrangements with any electricity undertakers pending the building of the grid, but such temporary arrangements had to come to an end as soon as the grid came into commercial operation. What has actually happened? In actual practice the Central Board, instead of making temporary agreements, has entered into long-term arrangements with certain electricity suppliers, thereby gaining control —and this is the same point—of these small generating stations as distinct from the selected stations. The Central Board, moreover, in order to obtain this control, have granted to these electricity suppliers prices very different from those provided under the Act and very much to the advantage of those particular suppliers.
It is obvious that the burden of any preferential and, as I venture to call them, uneconomic prices given in such special cases has to be borne by other undertakers. Where else can it be borne? In other words, the burden has to be borne by other consumers, that is to say, by private and industrial consumers in other areas, as the only revenue which the Central Board has to draw upon is the revenue derivable from the supply and sale of electricity. Let me give your Lordships an instance of this —a case that is very well known in the electrical world. The Central Board have entered into an arrangement with the Wimbledon Corporation whereby control is given over the Corporation's generating station. In return for this, the Central Board have granted a supply to Wimbledon at a price which is lower by 40 per cent. than the price paid by undertakers in other and neighbouring areas 553 And that is not an isolated instance. There are a number of other instances in the country, but that is such a very good one that I will not take up your Lordships' time by citing any more. Therefore this Clause 1, I venture to believe, requires considerable amendment when this Bill reaches the Committee stage.
Now let me say a word about Clause 2. From this clause it appears that the Board, having taken steps in certain cases to give special prices without following the procedure under the 1926 Act—and I cannot understand why they did not follow the procedure laid down by the 1926 Act, under which, if they are going to give special prices, they are supposed to obtain approval of them by a Parliamentary Order—are now asking Parliament to whitewash. if I may use that word, what they have clone and to legalise these illegal acts. What is more, they are asking it in this way, that the prices which they have granted are prices which they are to be deemed always to have had power to grant. I should have thought that the powers contained in the 1926 Act had sufficient elasticity and were sufficiently large to give them all the powers that they need. I cannot say that I was at all convinced by the explanation of the clause which was given by my noble friend.
Then Clause 3 of the Bill seeks to give power to the Electricity Commissioners under which prices may be equated over a grid area, and its obvious purpose is to mitigate the fact that in certain cases the prices for supply charged by the Central Board are higher than the prices for supply at present being given outside the Central Board. It is obvious, again, that whatever relief may be obtained by a particular undertaker under the clause will have to be borne by a higher charge to other undertakers. In the case of all these clauses, whatever relief is given elsewhere has to be borne by other undertakers and passed on to the consumers in other areas.
Now, my Lords, I come to the most controversial clause of all in the Bill; that is Clause 4. What is the present procedure with regard to supply to the railway companies? As a matter of fact, the Act of 1926 already puts them in a most favourable position. Under the procedure laid down by Section 12 of that Act, whilst railway companies are 554 bound to obtain their supplies of electricity through authorised undertakers, nevertheless they have the advantage of obtaining those supplies at the same price the undertakers pay to the Central Electricity Board, but, unlike the undertakers, they do not have to contribute to the expenses of the Electricity Commissioners or to the standardisation expenses of the Central Electricity Board. The result is that in any area in which a railway company draws its main supply the railway company is preferentially treated in relation to the other consumers in the area, not only in regard to the direct price, but also because the proportionate cost of these expenses which I have enumerated has to be spread over the cost of electricity supplied to the other consumers in the area. On the other hand, I agree that as a set-off against this the undertaker receives certain compensation in the shape of what is called diversity factor. This does help to compensate him, and also the consumer, for the expenses which I have named.
But what is going to be the effect of this Clause 4 as it now stands? The Central Electricity Board, I have no doubt—I say this because they have already taken the precaution to have inserted a cautionary clause in the agreements between the undertakers and the railway companies—will in time supply all the railway companies direct, whether the undertakers like it or not, in spite of the point connected with unreasonableness and so on contained in the clause. In that event the private consumer will not only have to defray the proportion of the expenses of the Electricity Commissioners and the standardisation expenses of the Central Electricity Board properly chargeable to the railway company, but will also lose the advantage of the diversity factor. When I examine the clause still further I observe that it contains the following words:…the Central Electricity Board may supply electricity directly to any railway company upon such terms and at such prices as may be agreed.I want to emphasise those last few words —"upon such terms and at such prices as may be agreed." This means, read in conjunction with the earlier clauses of the Bill, that the prices to be charged to the railway companies in the future may be, if the Bill becomes law, even lower than they are to-day, and the result 555 of this may be that the private and industrial consumer will have further charges placed upon his shoulders.
Then again, in the last paragraph of the clause there is another point to which I think it is important I should draw attention, because it is a grave departure from the present procedure. At the present time railways may only use the electricity supplied under the special bulk terms for their haulage and traction and, of course, for the lighting of the vehicles of the railways themselves. They may not use such electricity in their workshops or flats, or offices or hotels, stations, signal boxes, and so on. The electricity used for those purposes is supplied by the undertakers under the ordinary tariffs, but under the proviso in subsection (2) of Clause 4 it is now provided that the electricity supplied to the railways may be used for other purposes of the companies' undertakings. The word is "may," but when you use the word "may" so often it is turned into "shall." The electricity may be used for these other purposes which are at present supplied through the authorised undertakers, and if that is so there is another charge which will be placed on the shoulders of the private and industrial consumer in the area whence those main supplies are drawn. I suggest that, apart from its being quite uneconomical, the whole of this Clause 4, as well as some parts of the other clauses, are utterly unfair to the private and industrial consumer. Not only that, but it is absolutely contrary to the whole policy involved in previous electricity legislation, under which the right of electricity undertakers to give supplies to the railways has been definitely preserved.
I should like to give an instance of this. When the Act of 1926 was being debated in the House of Commons an Amendment was moved by Major Glyn, to give power to the Central Board to supply a railway direct. The Chairman of the Standing Committee immediately ruled it out of order, and there was no challenge to this. On another clause of the Bill the then Attorney-General, Sir Douglas Hogg, now the Leader of this House, emphasised that the Central Board was only set up to give wholesale supplies to other electricity undertakers, and that if ever they gave a supply in an unoccupied territory, when that 556 territory became occupied the right of the Board to supply would cease. There are two of the most important members of the Government of the day, one of whom still holds a very important position in His Majesty's Government, making definite statements in connection with the policy contained in that measure, and I venture to hope that the representations that will be made in the course of this Bill, and will no doubt be made outside as well, will induce His Majesty's Government to reconsider the policy which they have incorporated in this Bill.
The question of the electrification of the whole railway system in this country has been raised by my noble friend and by Lord Strabolgi, and therefore I need not apologise for detaining the House while I deal very shortly with that point. I would not have mentioned it but for the fact that I see in Clause 4 an instrument which might be used for the purpose of bringing that policy into effect. So far as I am concerned, I would content myself with observing that if wholesale electrification of the railways is to be undertaken the country ought to be satisfied that it can be done economically and without prejudice to other interests, such as private and industrial users of electricity and users of road transport, and of the coal-mining industry, to which Lord Strabolgi referred. I am afraid I take a rather different point of view from that which Lord Strabolgi takes on this subject, because whilst he has raised the issue of the coal-mining industry, it was rather from the point of view that if there were any additional profits to be made out of electricity they should be applied in assisting the coal-mining industry and the coal miners, in the event of less coal being mined as the result of the electrification of the railways.
I take an entirely different attitude. I do not believe that the total electrification of the railways is justified at all. From what I have always understood, and I have discussed the question with many experts, the only economical electrification of the railway system is that in urban areas, or in some area where there is a sufficiently dense traffic to warrant it. There are exceptions, of course, in a country like Switzerland, where there are exceptional conditions, and exceptional water-power, and so on, but for 557 all practical purposes the electrification of long-distance haulage is utterly uneconomic, and I venture to submit that these factors must be taken into consideration before we are launched into a project of this magnitude and nature. I wish your Lordships to realise that apart from the other matters I have mentioned this clause might launch us into this project, and, speaking as one closely connected with the electricity industry, I am very much opposed to any such step being taken without the gravest consideration. I am certainly very much opposed to its being "slipped through" by means of a clause in a Bill like that before your Lordships' House this afternoon. I have nothing more to say except that I am sorry the Government have thought fit to present this Bill to your Lordships' House, and that I hope your Lordships will not allow it to pass in its present form.
§ LORD ELTISLEY
My Lords, I think that it is a somewhat fortunate chance that the issue of the sixth Annual Report of the Central Electricity Board coincides with our debate here this afternoon on this Bill. It is a fortunate coincidence, because we are now considering what further powers should be granted to the Central Electricity Board, and therefore it is not altogether unfitting that we should review for a moment or two some of the doings of the Central Electricity Board during the time it has been in existence. I would like to tender respectful congratulations to the Board for the prompt manner in which they have issued their Annual Report. They have, indeed, in this respect at any rate, set a good example to some of the older Departments.
It is, I think, a striking thing to note that, while the world output of electricity for consumption from the years 1929 to 1933 has only increased by 5 per cent. we in this country have increased our consumption during the same period by no less than 30 per cent., and we have done that in spite of the difficulties with which we have been confronted—trading difficulties, and difficulties of the reconstruction of the electrical industry, the re-arrangement of the productive capacity of the industry and renewals of equipment, which have inevitably had to be undertaken during this transitional stage. It is also very comforting to think that, 558 comparing the year 1931–32 with 1932–33, we find that while in 1931–32 the consumption had increased by 7 per cent., in 1932–33 it has increased by no less than 10.7 per cent., and I understand that the advance recorded in 1932–33 has been more than maintained during the months that have passed this year. That is a great achievement, and credit must be given for it to the undertakers of this country as well as to the Central Electricity Board and the Electricity Commissioners.
The Report makes reference to the electrification of part of one of our railway systems. It is good to see that the electrification which has been carried out has met with success, and that there are proposals for the extension of the system. For my part I feel that the electrification of the railway systems of this country has been lamentably slow and ineffective when we judge it by the results already attained in countries overseas. I welcome the powers of this Bill—subject to the incorporation of some minor safeguards—which will assist the further electrification of our railways. At any rate I feel that it is interesting to note that, so far as those responsible for the electrical industry are concerned, they at any rate have not placed any obstacles in the way of the electrification of the railways of this country. I would never support any policy which in any way tended to sting the railway companies, because they obviously have to pass through territories of many small undertakers who are themselves quite unable to give the service which they have the right to expect; and in so far as the railway companies' lines pass through the territories of the larger undertakers, with their selected stations, no doubt those stations will give that supply. Personally I accept the principle of this Bill that railway companies should not be called upon to carry on piecemeal negotiations, and that the Electricity Board should be furnished with wider and more general powers.
Reverting to the Report of the Board, it is good news to see that the last tower of the initial scheme has been erected, that no less than 4,000 miles of overhead lines have been put into place, and that 3,000 miles are working at the very high voltage of 132,000. I am also glad to see it hinted that means have been devised 559 now for tapping these overhead high tension lines more cheaply. I hope that this line of advance will be actively pursued, because there has been a great deal of opposition in rural areas, owing to the fact that landowners, farmers and other dwellers in the country see these great lines passing through their territories and near to their homes while they are unable to obtain supplies. Therefore, it it were possible to devise some system of tapping more generously, not perhaps the highest voltage lines, but at any rate some of the intermediate voltage lines, it would be of great benefit to the countryside, and tend to allay the uneasy feeling which at. present obtains among those who dwell there. I cannot help feeling that unbiased observers will admit that the Central Electricity Board have met their responsibilities with courage and foresight, and have carried out, to the satisfaction at any rate of the majority, the duties imposed by the Act of 1926. It was a tremendous change which that Act brought about, and it was quite inevitable that teething troubles would have to be overcome; but, happily, the main objectives—namely, the security of supply by an inter-connected system and the reduction of redundant plant—have been properly and effectively met, and are being met, with very little disturbance or dislocation of the industry as a whole.
I also think that Parliament may take some credit for the fact that, although seven years have passed, so little amendment is now asked for in the 1926 Act. The further powers sought for in this measure are, I think, justified. They arc required if the Central Electricity Board is effectively and efficiently to discharge the duties imposed upon them in the national interest. I support the Bill on the broad general ground that the position should be clarified. It has been said that the Board have been exceeding their powers in certain respects, although it can be argued against that that the action which they have taken has never been challenged in a court of law. In this Bill I see nothing revolutionary, although noble Lords who spoke from the other side of the House appeared to welcome it rather on those grounds. To me it seems to contain nothing revolutionary or sensational. It is a clean, straightforward attempt to deal with difficulties, 560 to link up the grid system with, or to weave it into, the system which is at present in operation.
Fears have been expressed that the Central Electricity Board would adopt the policy of under-cutting prices. I cannot say that I in any way share that fear, but the fear has been expressed and it is strongly held in certain quarters. These fears should be met by Amendments which I think can easily be introduced into this Bill. After all, the Central Electricity Board are wholesalers, and it is no part of their duty or functions to sell current retail; that is the duty of the authorised undertakers. The policy of the Central Electricity Board is to provide electricity on such terms as will promote the interest of their customers—that is to say, the authorised undertakers—and it is not their policy to depress or cut into the prices so as to reduce them to an uneconomic level.
Reverting to some of the clauses in the Bill, on Clause 1, for example, we have had a rather alarming picture drawn by the noble Viscount, Lord Elibank, who preceded me. He has suggested that Clause 1 will authorise arrangements with non-selected stations which will be detrimental to other authorised undertakers or that possibly non-selected stations will be induced to enter into agreements with the Central Electricity Board by reason of force majeure. All I can observe on that point is that, having regard to the personnel of those engaged in the electrical industry, I cannot imagine they will be forced into anything by force majeure. I think the industry is run by men of good will who would not attempt to exercise power in that way.
If I may intervene, I did not say that individuals are going to use force majeure. I said that as a result of this Bill force majeure might obtain certain results.
§ LORD ELTISLEY
I am very glad to have that correction, and I am sorry if I failed to interpret correctly what was said. But I would like to point out that as far as the industry is concerned parent companies frequently enter into special arrangements with their own subsidiaries, and I think this proposal is very much on a parity with what is already being done. The Bill enables the Central Electricity Board to run out 561 generating plant to the best advantage and utilise to the full the remaining economic life of that plant, and it can often be with considerable advantage to the country as a whole and the industry as a whole, and of real advantage to the particular undertakers concerned, if the burden of outstanding capital charges which have been amortised are taken into account. I would like to point out that the argument Which has been used that these stations should be selected stations is not a sound one, because there are many of these smaller undertakings whose stations could never be advantageously turned into selected stations—possibly for geographical reasons or because there is no room for their expansion or development.
Clause 2 contemplates special terms for large consumers in a position to take heavy and steady loads, and I suggest that the point we are really concerned with here is that the special tariffs which are given must not involve undue preference to one consumer as compared with another consumer operating under approximately similar conditions. Also, that the tariff rates for other consumers must not, as I believe they need not, be unduly increased, and there must not be any undue preference to the non-selected stations as compared with other undertakers who have not got any stations. I would also like to suggest that when the agreements are entered into they should be given the fullest reasonable measure of publicity. Reference has been made to the case of Wimbledon where a 40 per cent. reduction in tariff had been granted, it is said, unreasonably. I do not wish to go into the merits of that case, but I would like to point out that in any arrangement made there are two factors which have to be taken into account. One is the cost of the current and the other the capital commitments already entered into or amortised; and these two factors must be both taken into account at the same time.
Personally I regard as one of the safeguards of the proposal contained in this clause, the establishment of the technical consultative committees. I believe they are very valuable bodies. It is true they have been set up by the Central Electricity Board, and nominated and appointed by them and presumably can be dismissed by them, but nevertheless I consider they are very valuable bodies 562 which can do much to advise and assist the work of administration, much to see that tariffs are not unduly cut, and that abuses do not creep in under this proposal. They have a very strong personnel, and I am sure they provide a very valuable safeguard. Then we are entitled to consider at the same time the personnel of the Board, which is composed of business men of high standing, with a very able chairman, Sir Andrew Duncan, and with men like Sir James Devonshire and Mr. Richard Fox, the secretary. I cannot believe they would do anything unreasonable or unfair because, after all, it is not to the advantage of the Central Electricity Board to depress prices to an unremunerative level and to upset the industry.
It is true, perhaps, that under the provisions of this Bill the Board could act autocratically. There is a possibility of inroads into certain classes of business now being successfully carried on by various undertakers, but my answer to such a possible misuse of powers is that safeguards can and must be added to this Bill. I suggest that the greatest safeguard is already there. Briefly stated, that great, safeguard is that any weakening in the general position of undertakers, whether they be municipal undertakers or company undertakers, would inevitably react, and react at an early date, on the financial results of our great grid system. Therefore it is abundantly clear that it is just as much the interest of those who are running the grid to keep up a proper level of prices as it is of the undertakers themselves. The grid, with the assistance of the various undertakers, is making and will continue to make a real and valuable contribution to the solution of the great problem of unemployment, by assisting in the industrial revival of the country, and for these reasons I venture with great respect to offer hearty support to this Bill and to hope that, subject to certain Amendments, it will speedily reach the Statute Book.
My Lords, I would not have ventured to address your Lordships' House after the speeches we have heard if the case of Wimbledon had not been mentioned. I think the case of Wimbledon was also mentioned by the noble Viscount, Lord Elibank, when he criticised Clause 1 of the Bill. I am a member of the London and Home 563 Counties Electricity Authority which was largely responsible for the Wimbledon negotiations. It is true that the price at which electricity is sold to Wimbledon is below the grid price, but that was arranged after most careful calculations and after it had been discovered what the cost of generation would be at Wimbledon. It was found, after the figure had been carefully analysed, that the cost would be such as was eventually agreed to when the contract was made between the Board and the Corporation of Wimbledon to take a supply from the Board. This Wimbledon arrangement is in no way detrimental to any other user of electricity, or to any individual generally; in fact it is rather to the advantage of London. Wimbledon being shut down, the load is transferred to other stations in the London area, and the diversity factor increases, with a general benefit all round in the case of electricity in the London area.
Clause 1 will enable this type of arrangement to be made permanent throughout the country in cases where it is considered to be an advantage in connection with non-selected stations. I think Clause 1 will meet with very considerable approval in many parts of the country where the question of cheap electricity is of great importance. As regards Clause 2, there great benefit also will be derived, but I would like to say that I feel that some reservation should be included in Clause 2 whereby the Electricity Commissioners, or some other body, should have a say in what the prices are, and be definitely certain that no undue advantage is given to anybody at the expense of other undertakers. It is a criticism that has been made by several other of your Lordships who have spoken on this Bill. As regards Clause 4, I was a little anxious when I first read it. I felt that it was perhaps rather revolutionary, but on closer inspection I realised that Clause 4 must necessarily be taken in conjunction with the 1926 Act and be read with that Act. It will be seen that authorised undertakers give a supply to railway companies under Section 12 of that Act—that is to say, at the cost of production. The only real advantage to the various undertakers from a railway load is that it includes a diversity factor. It always seems to me that the advantage of this diversity factor which 564 is derived from railway electrification should not belong to any one authorised undertaker but should be distributed amongst all the various undertakers throughout the country, or, more properly, should be handed over to the Central Board who would then reap the advantage and pass it back to the other undertakers they supply.
I do not think that the authorised undertakers need be excessively alarmed by Clause 4, because the present position is that a railway company takes a supply from an authorised undertaker, and it can transmit that supply throughout its whole system and use the current in areas which belong to other authorised undertakings. Take, for example, the Brighton Railway. I do not know the existing conditions of the Brighton electrification scheme, but it is possible that a load can be taken on at Brighton and transmitted by the railway company throughout its system up to London, passing through the areas of a number of other authorised undertakers and offering no advantage to those authorised undertakers whatever, they having no say in the matter. A load like that can only be of advantage to one undertaker. I do not see why just that one authorised undertaker should reap the advantage of this load: it should be distributed amongst all the authorised undertakers on the system.
But I do not feel there is any injustice in this clause in this respect; in fact it has considerable technical advantages. Naturally a railway company will not want to negotiate with a very large number of authorised undertakers dotted up and down its system. It will only want to make contracts with one or two large authorised undertakers to take the load off at certain points of the system and transmit the load along its system to the various sub-stations where it is transformed and rectified. This means, as the law stands, that the railway companies have to have their own transmission system. As we know, the grid has been established throughout the country, and is at present operating very satisfactorily. The grid, in many instances, runs in the near neighbourhood of the railway line, and it seems far and away the most reasonable thing that the grid should be tapped here and there, wherever it is considered economically sound to do so, and the electricity used 565 from the grid by the railway company, so saving the railway company the expense of having its own transmission system.
There is a very considerable advantage in Clause 4, and I hope that your Lordships will agree to it. There is, however, one exception which I think requires a certain amount of consideration and that is the proviso on page 4. Here, it appears to me, an injustice might be done in the case of an authorised undertaking which is supplying large railway goods yards or railway workshops with electric current. At present they are carrying on this part of their business in the same way as they carry on any other part of their business of supplying electricity for lighting or general industrial purposes. It is conceivable, under the proviso to Clause 4, that the loss of this load to authorised undertakers might be a considerable injustice to them. I think it is only justice that these authorised undertakings should be compensated for the loss they have sustained and which, in many instances, they will sustain, owing to their having embarked upon considerable expenditure to supply a load which was subsequently not required
Certain noble Lords stated that they considered it unfair that the railway companies should not have to pay the charge for the standardisation of the frequency which other consumers of electricity have to pay. I rather think when this matter came up for discussion in the 1926 Act one of the principal reasons why the railway companies were excused from this charge was that it was felt that, unless the railway companies were excused, they would put up their own generating stations. That is a thing which I am certain all your Lordships will realise is undesirable. The railway load is wanted very badly indeed by the grid and the selected stations up and down the country, and they do not desire that any inducement should be given to the railways to put up their own stations because they could generate more cheaply than they could buy if they had to pay this charge. A change of frequency would be very detrimental to the development of the electrical supply throughout the country. I hope your Lordships will agree to the Second Reading of this Bill, which, I feel, will be of considerable advantage to the electrical supply industry.
§ THE EARL OF PLYMOUTH
My Lords, I have no reason to complain of the reception of this Bill at your Lordships' hands, and I will endeavour to answer some of the questions that have been put to me and some of the criticisms made regarding the measure. The noble Lord, Lord Strabolgi, asked me two specific questions. He asked, first of all, will the industrial and rural consumers in the vicinity have to pay for the cheap bulk supply given to the railway companies? I cannot imagine anything more unlikely. I think the chances are that they will gain as the result of any transaction of the kind contemplated by the clause. I think the result of transactions of that kind would be to spread the overhead charges of the undertaker—the Central Electricity Board—and in that case to reduce the cost to everybody concerned. Then he asked me another question to this effect: Will the railway companies bear their share of the cost of frequency changes such as are contemplated in Clause 3? I think that was the effect of his question.
§ THE EARL OF PLYMOUTH
The position at present is that the cost of frequency changes is borne by a general levy which is paid by the undertakers and the undertakers cannot pass it on to the railway companies.
Will the noble Earl excuse my interrupting him, as this is a point which very much interests some of my noble friends. Where the Board supplies under Clause 4 direct to a railway company and not through an undertaker, with the agreement of the undertaker, will the railway companies then pay any share of the cost of frequency changes?
§ THE EARL OF PLYMOUTH
I think my answer holds good in that respect also. I think I am correct in saying that, but I will make certain and if later on I find that I have misinformed the noble Lord I will correct my mistake. The noble Lord also raised a number of large questions which I think it is hardly proper to attempt to discuss when we are debating a comparatively limited measure such as this. He asked me whether the Government had in contemplation enabling the Central Electricity Board to supply such bodies as central 567 water authorities in the same way as Clause 4 would enable them to supply railway companies. On that I would like to point out that the positions of railway companies and central water authorities are not in any way analogous. Central water authorities can very easily obtain their supplies from the authorised undertakers in their areas. Their interests are limited to a comparatively restricted region and their position is entirely different from the position of railway companies whose lines invariably must pass through the areas of a number of different undertakings. Beyond saying that, I am not in a position to discuss the very big problems that he raised during the course of his speech.
I turn now to the remarks of my noble friend Viscount Elibank. After having levelled a number of criticisms at the provisions of this Bill he put forward the contention that in his view, at any rate, this Bill was the thin end of the wedge of nationalisation. Of that contention noble Lords opposite signified hearty approval. I do not think the noble Viscount often finds himself in agreement with noble Lords opposite. I regret, or I am glad to say, according to the way in which you look at it, that I am in disagreement with both the noble Viscount and noble Lords opposite. Nothing is further from the intention of the Minister of Transport than to insert the thin edge of the wedge of nationalisation. I think both the noble Viscount and noble Lords opposite have attributed to this measure an entirely exaggerated significance. It is a measure important in its way undoubtedly, but it is a measure comparatively restricted in its scope, and I think that they have exaggerated views as to the possible results of it.
Neither can I accept the view of the noble Viscount that the provisions of this Bill are contrary to the whole tenour of the Act of 1926. In one respect I am quite prepared to admit that the present measure is a reversal of a decision that was arrived at when discussion on the 1926 Act was taking place in regard to railway companies. To that my reply is that experience of these further years and of the operation of the national grid system has shown that the arrangement by which railway companies have to obtain their supplies from a whole series 568 of separate undertakers all down their lines is altogether too cumbersome and must militate against the electrification of railways. The case for this clause is set out very clearly in the Report of Lord Weir's Committee, and if your Lordships wish to remind yourselves of the views of that Committee on this particular subject may I be allowed to suggest that you refer to the section in the Report which deals with this question?
The whole burden of the criticisms which the noble Viscount levelled at the various clauses of this Bill was that they were going to be prejudicial to the interests of other authorised undertakers. To my mind that is an entirely false view. I do not agree with it at all. I think on the contrary that other authorised undertakers are very likely to gain profit when this measure comes into operation. Surely, the Central Electricity Board in their own interests will not conclude any arrangement with non-selected stations which is not going to yield an advantage to them. So far from placing an additional charge upon the remaining undertakings I think it will enable the Board to quote a lower general tariff to all undertakers than would otherwise be the case. We have heard a great deal about preferential prices, but I would like to point out that though those prices may be preferential it, does not necessarily mean that they are also uneconomic.
The noble Viscount, Lord Falmouth, has referred to the case of the Wimbledon Corporation. I do not think it is necessary for me to deal with that except to say that I have no doubt that the facts as he stated them are perfectly true, and that arrangements made in that case were advantageous not only to the Corporation but to the Board, and that that advantage will be reflected in the prices which, taken in the aggregate, they are able to quote to other authorised undertakers. Then the noble Viscount, Lord Elibank, put forward the suggestion that authorised undertakers other than the owners of selected stations might be forced under the provisions of this Bill to come to agreements with the Central Electricity Board. That point has been dealt with—I think the noble Lord Who sits behind me, Lord Eltisley, dealt with it—but I wish to point out that there is no element of compulsion whatsoever in the provisions of this clause, and that it 569 is entirely open to such undertakers to come to arrangements with the Central Board or not, as they think best from their point of view.
Certain criticisms were made by the noble Viscount of Clause 2, to the effect that what is desired could be attained under Section 11 of the Act of 1926. That is a matter of detail. As I am advised, Section 11 was not intended to deal with small matters of detail such as this, and it is therefore considered necessary to put into operation the provisions of Clause 2 to meet the situation. With regard to Clause 3, I think there was hardly any criticism at all. It is perfectly clear that the provisions for that clause are such as will on the whole help to ease the situation and to do away with any inequality that may arise unless the position is dealt with in that way.
I have already stated the point of view of the Government regarding Clause 4 of the Bill, dealing with railway companies. I am not in a position this evening to give answers to the various issues raised in connection with that clause, but I should like to mention the last proviso in the Bill, to which the noble Viscount, Lord Elibank, referred, and which I think he regarded as something quite novel. I do not think it is at all novel. As a matter of fact, I think that that proviso in the Bill really preserves the position which at present obtains as the result of Section 47 of the old Act.
Is my noble friend quite sure of that? Because under the arrangements of which I am aware, electricity supplied in bulk for the railways is only used, and at the present moment can only be used, for the haulage and traction and lighting of the vehicles, and for nothing else.
§ THE EARL OF PLYMOUTH
No, my Lords, I think I am right in saying that 570 that is not the case. There again, I am myself not very familiar with the working of this Act, but I will inform myself on the point. As I am at present advised, I believe that that is not the case, but that the electricity can, with the assent of the Minister of Transport, be used for other purposes as well. However, as I say, I will look into the matter.
I am very sorry to interrupt again, but if that is the case, why was it necessary to re-insert it in this present clause? If it is already provided for in the 1926 Act, surely that is unnecessary?
§ THE EARL OF PLYMOUTH
It is necessary because this clause deals with the Central Electricity Board and they were not dealt with in that Act. I should like to say a word with regard to the speeches of my noble friends Lord Eltisley and Lord Falmouth. They made no criticism which I think requires an answer from me now. I am very grateful to them for the general support which they gave to the Bill. I note that they think that minor Amendments may be necessary during the Committee stage of the Bill, and I wish to assure all your Lordships that if Amendments are put down they will receive the fullest consideration from the Government. I hope in these circumstances your Lordships will be prepared now to give this Bill a Second Reading.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.