ELECTRICITY BILL (Hansard, 2 March 1972)

EARL FERRERS

My Lords, I beg to move that this Bill be now read a second time. The Bill has three main provisions: it increases the statutory limits on the borrowing powers of the Electricity Council and Boards in England and Wales and of the Scottish Electricity Boards; it authorises contributions to 1195 accelerated expenditure by the industry designed to promote employment; and it removes certain impediments to the transfer of property between Boards. The immediate effect of Clause 1 is to raise the limit on outstanding borrowings from the present figure of £4,400 million to £5,200 million for the Electricity Council and Boards and from £800 million to £950 million for the Scottish Boards. The clause makes provision for the borrowing limits to be raised further—by orders made by the Secretary of State—up to a maximum of £6,500 million for the Electricity Council and Boards and £1,200 million for the Scottish Boards. The interim limits are expected to meet the borrowing requirements of the industry up to about the middle of 1974 and the final limits up to March, 1978.

In the past two years the industry's borrowing has risen because increases in electricity prices have not kept pace with the increases in the industry's costs. The increases in electricity prices made by the Boards in the early months of last year were the first general increases since 1967, and were smaller than would have been justified by costs. Since July, 1971, further changes to match prices more equitably to costs have been restrained by the Boards' compliance with the C.B.I, initiative. Price increases are being made by most of the Area Boards at present, and these comply strictly with the C.B.I, guidelines; that is, they do not exceed 5 per cent. and follow after an interval of at least 12 months since the last increases. The Government recognise the strain that this is imposing on the industry's finances, and the question whether any assistance may be needed to restore the industry to a commercial footing is being considered with them. The need to check inflation was overriding, however, and the Government are most grateful for the industry's co-operation in this task.

In Scotland, the pattern has been a little different. Further legislation was needed to increase the borrowing powers of the Scottish Boards in 1969. The Electricity (Scotland) Act 1969 set the present limit of £800 million which took effect last August through the Electricity Borrowing Powers) (Scotland) Order 1971. The exhaustion of these powers is 1196 also in sight, however, and new powers are required in the present Session. The new borrowing limits provided for in Clause 1 of the Bill are based on estimates of capital requirements and internal financing submitted by the Electricity Council and the Scottish Boards. These estimates cover the period up to the end of March, 1978. Your Lordships will appreciate that in looking so far ahead there are bound to be uncertainties about the growth of demand for electricity, and about the longer-term forecast of costs and prices: uncertainties, that is, about capital requirements and the internal resources that will be available to meet them. The estimates of borrowing requirements can therefore be only tentative. The aim, however, is to provide for the legitimate borrowing requirements of the industry over the next few years. We are of course dealing with very large capital programmes. Over the seven years from April, 1971, to March, 1978, these are expected to average about £700 million a year for the Electricity Council and Boards and more than £100 million a year for the Scottish Boards. This investment is necessary to meet the future industrial, domestic and other requirements of the country for electricity.

Clause 2 empowers the Secretary of State, with the approval of the Treasury, to pay out of public funds to the Electricity Council or any Electricity Board contributions towards the expenses of the capital projects which they are bringing forward. This provision was foreshadowed by the Government's announcement last November, that the nationalised industries, at the Government's request, were making arrangements to bring forward about £100 million-worth of capital expenditure into the years 1972/73 and 1973/74 as part of the measures to promote employment, and that in some cases there would be special payments to these industries in respect of expenses incurred. It is the Government's view that the extra costs consequent upon the acceleration of expenditure should fall upon the community as a whole rather than on the industry's consumers alone.

Of the £100 million-worth of expenditure brought forward, about £60 million is attributable to the Electricity Boards, and Clause 2 of the Bill provides for the Secretary of State, with Treasury 1197 approval, to contribute up to £25 million to the expenses involved. This sum has been designed to cover all the projects now being considered and also allows for the possibility of the acceleration of some other small projects. The amount of compensation paid will depend on the extent to which the projects have been brought forward, in addition to the amount of capital expenditure involved. The contributions to be made by the Secretary of State will relate to additional interest charges and other expenses involved in advancing expenditure. The projects being brought forward include one major project: the construction of Ince B power station. It is not possible to estimate the full effect of these measures in creating employment. Their indirect effects will be spread fairly widely through the economy, by means of sub-contracts, capital work of contractors and sub-contractors and so on, and are difficult to assess. But rough estimates—and these must necessarily be rough—have been provided for some of the projects concerned, and these suggest that the projects being advanced by the Electricity Boards should create jobs for at least 5,000 in 1972–73.

Clause 3 extends the powers of the Secretary of State to transfer property between Electricity Boards. The transfer of property between Boards is necessary from time to time in the process of technical reorganisation; for example, the transfer of the 132Kv transmission network from the Central Electricity Generating Board to the various Area Boards. Financial responsibility for this network has already been transferred to the Area Boards with effect from April 1, 1969, but because of the legal complexities it has not been possible to transfer the assets. The C.E.G.B. has retained ownership, though Area Boards have responsibility for the network. The transfer of the various property rights, including wayleaves, some of which were compulsorily acquired, is a matter of considerable legal complexity and could best be effected by an order or orders made under Section 19 of the 1947 Act. However, in its present form the powers of this section would not be adequate. The amendment has been sought by the Electricity Council and Boards in England and Wales. At the same time, the Scottish Boards have asked that it should cover Scotland as well, although 1198 no immediate reorganisation is under consideration in Scotland. The clause is not concerned with the general organisation or reorganisation of the industry. The Government have no intention of reorganising the structure of the electricity industry in the immediate future. With that explanation, I trust that your Lordships will give this Bill a Second Reading. My Lords, I beg to move.