§ 3.31 p.m.
§ The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett) rose to move, That the draft Electricity Service (Finance) (Northern Ireland) Order 1977, laid before the House on 9th November, be approved. The noble Lord said: My Lords, I beg to move that the draft Electricity Service (Finance) (Northern Ireland) Order 1977 be approved. The order provides for a major reconstruction of the finances of the Northern Ireland Electricity Service, and it provides for grants to be made to the Service which will enable it to reduce its tariffs to the larger industrial and commercial consumers to about the same levels as apply in Great Britain.
§ These measures are needed because of two key problems which, in the space of four years, have caused Northern Ireland electricity tariffs to rise from about the United Kingdom average to 20 per cent. higher than that average for domestic consumers and as much as 50 per cent to 70 per cent. more for industry and commerce. The first major problem has been the upsurge in the world price of oil. Some 90 per cent. of Northern Ireland's total distributed electricity comes from oil-fired generating capacity compared with 15 per cent. in Great Britain. It is estimated that this difference accounts for 30 per cent. of the extra cost of generation in Northern Ireland.
§ Secondly, the Northern Ireland Electricity Service has had to finance the cost of a major new power station which is at an advanced stage of construction at Kilroot on Belfast Lough. The new station will have a capacity of 1200 megawatts and it will increase Northern Ireland's total capacity by no less that 60 per cent. Although the projected rate of growth in demand for electricity that formed the basis for the decision to build the new station has not materialised, intensive investigation has confirmed that there would be no financial advantage in cancelling or deferring part of the new station. In the meantime, the capital cost of the project, some £300 million, has to be met entirely from borrowing—much of it at a time of very high interest 1751 rates—because the NIES had no financial reserves. Interest on borrowing amounted to almost £38 million at 31st March this year and, in the absence of this order before the House, will absorb about half the total revenue of the Service by 1980–81.
§ Despite having the highest tariffs in the United Kingdom, the accounts of the Service for 1976–77 showed an accumulated deficit of £26.3 million. Further tariff increases on the scale needed to keep pace with increasing costs, including interest charges, would have been self-defeating because they would have extinguished all prospect of further growth in demand. Ever-higher tariffs would be a major blow to domestic consumers, particularly as Northern Ireland has the lowest income per head of any region in the United Kingdom.
§ My right honourable friend the Secretary of State is also particularly concerned about the growing pressure on industrial costs which were threatening to undermine the Government's whole industrial strategy, which is designed to secure the investment which Northern Ireland so desperately needs to stem and reverse the appallingly high unemployment, now standing at 11.5 per cent.
§ This order will allow the Northern Ireland Department of Finance to reduce the amount owed by the NIES to the Government Loans Fund by about £250 million, thus relieving it of interest charges amounting to about £32 million per annum. The order also provides for payments to be made to the Service to extinguish the accumulated deficit of £26.3 million which I mentioned earlier. These two measures should enable the Service to stabilise all its tariffs, including its domestic charges, so that the accelerating move away from Great Britain rates is effectively halted.
§ The order does more than this for the main industrial and commercial tariffs. It provides for special payments of up to £100 million over the next five years, which should allow the Service actually to reduce these tariffs to about the Great Britain average. This will mean that electricity costs will no longer be a potential obstacle to the vital new industrial investment we need to attract to Northern Ireland. I beg to move.
1752§ Moved, That the draft Electricity Service (Finance) (Northern Ireland) Order 1977, laid before the House on 9th November, be approved.—(Lord Melchett.)