HL Deb 08 December 1977 vol 387 cc1764-6

Debate resumed.

4.8 p.m.


My Lords, before the two Statements were made I think the noble Lord, Lord Melchett, explained quite clearly to your Lordships the load of debt on the Northern Ireland Electricity Service and the resulting burden upon industry and commerce in Northern Ireland, and I shall not weary your Lordships by going over that ground again. However, I wish to make two brief observations. Before this order goes through, I think it should be said that, as the Shepherd Report on the financial position of the Northern Ireland Electricity Service of last year made clear, the position in which the Service found itself and the escalation in costs was due to factors which were really outside the control of the Service. I feel that that should be repeated as being understood on this side of the House.

The other point I wish to make is that the Shepherd Report concluded that there were five factors which would be critical in determining the financial performance of the Northern Ireland Electricity Service: they were, the growth in sales, the cost-structure, the level of capital spending, the structure of long-term capital debt and inflation; and from what the noble Lord has said in his explanation of the order, I think the measures which this order is taking go to meet all those factors except, I suppose, for the factor of inflation, which is an unknown one and in which we are all in the same boat in the United Kingdom.

I should like to ask one question. From what the noble Lord said I did not detect any forecast about the future financial performance of the NIES. The noble Lord touched on the way in which it was hoped that tariffs would move—tariffs for both the private consumer and for industry and commerce—but I do not think he gave any financial forecasts. If the noble Lord will turn to paragraph 9(3) of the Shepherd Report, he will recall that it recommended that the Government should, after discussion with the NIES, set a financial target for the operations of the Service and, within that framework, the Service should be free, subject to the Price Code, to fix its own prices, and I am wondering whether anything of that kind has been done.

It may sound rather a draconian suggestion coming from this particular Bench, but I really think that the Northern Ireland Electricity Service is in a special position. It is a comparatively small undertaking and it has fuel costs which are over SO per cent. more expensive than in England and Wales. The Service has additional costs with regard to keeping its plant secure from terrorism, costs which are not to be found in the United Kingdom. Thirdly, it has just received this enormous injection of public funds. I would, therefore, think it right that the Northern Ireland Electricity Service should voluntarily set limits on its expenditure, in agreement with the Government, particularly on capital expenditure, and on their side the Government should confine themselves to expecting only a modest return on the Service's operations, at least for the foreseeable future. It would appear that these constraints will be achieved only if the recommendation of paragraph 9(3) of the Shepherd Report is followed. Therefore, although I support the passing of this order, I thought I ought to raise this question at this time.


My Lords, I should like to reinforce what my noble friend says about making it clear that these enormous financial problems were not of the Electricity Service's own making. Above all, one of the most important decisions, which was a global United Kingdom decision made many years ago, was that Northern Ireland electricity should in fact depend on oil, that being the most sensible allocation of fuels for the United Kingdom as a whole. We shall go on paying the escalating costs of oil, and that is something which future Governments as well as the present Government will have to deal with. I should like to welcome most warmly the noble Lord's statement, and say that everybody in Northern Ireland will be very pleased with it. I suppose one must declare an interest; I certainly use a lot of electricity. I should like to emphasise that the people in charge of decisions in the past could not possibly have forecast the situation in which we find ourselves.

4.13 p.m.


My Lords, I am grateful to both noble Lords who have spoken for their welcome to the order, and certainly I entirely agree with them about the cause of the difficulties which the Northern Ireland Electricity Service has had to meet. I did make this clear in my opening remarks, some time ago now. Clearly, the world problem we have faced over the price of oil and the world economic problems, which have led to a decrease in demand for electricity, have worked together to exacerbate the problems. They have left the Northern Ireland Electricity Service facing greatly decreased demand for electricity, and with a very large project at Kilroot which will increase their capacity by no less than 60 per cent., entirely financed out of borrowing at a time when interest rates have been particularly high.

As to the future of the tariffs, and the financial performance of the Service, I do not have here any projected targets, but if any discussions on this have taken place I will let the noble Lord, Lord Belstead, know. The hope of the Government and the Service is that the subsidy which will be given to commercial and industrial users over the next five years, which will put the tariffs to those users on the same basis, more or less, as exists in Great Britain, will lead to an increase in demand, which will make better use of the capital investment at Kilroot than would otherwise have been the case. It is quite clear that the Government's view is that this massive wiping off of debt, coupled with the subsidy for industrial and commercial users, will allow the Northern Ireland Electricity Service to stabilise its prices. It will not lead to a reduction in prices for domestic consumers, but it should certainly prevent the very steep increases in prices which would inevitably have been necessary had we not been able to bring about this financial restructuring.

On Question, Motion agreed to.