HL Deb 02 February 1982 vol 426 cc1280-5

8.24 p.m.

The Earl of Gowrie

My Lords, I beg to move that the draft Electricity Service (Finance) (Northern Ireland) Order which was laid before the House on 19th January 1982, be now approved.

On 5th March last year my right honourable friend the Prime Minister announced that the Government would take steps to bring Northern Ireland electricity tariffs more closely into line with the highest charges in England and Wales and to keep them there. The draft order will give continuing statutory authority for the payment of the subsidies which are necessary to implement that undertaking in this and subsequent financial years. As a result of this commitment, the electricity tariff increase in Northern Ireland in 1981 was limited to 5 per cent. instead of 35 per cent. which would have been necessary if the Electricity Service had been required to break even without assistance from the Government. I think that that figure graphically illustrates the problem of energy costs in the Province. From April this year, all Northern Ireland electricity tariffs will be on par with the highest comparable charges in England and Wales.

Perhaps I may briefly sketch out the background to this decision about electricity tariffs. The problems inherent in a very small electricity generating system, as well as Northern Ireland's tremendous dependence upon oil for electricity generation and also the failure of electricity demand to grow as fast as was originally anticipated, have all meant that the Electricity Service has been faced with recurring financial and cash flow problems. In order to break even without assistance on a considerably greater scale than had hitherto been made available, the service would, as a result of the oil price increases in 1979–80—which were upwards of 100 per cent.—have had to increase its charges in the Province to unacceptably high levels.

In recognition of these problems the Government, in 1980, set up a comprehensive review of electricity matters in relation to Northern Ireland. On 5th March last year my right honourable friend the Prime Minister announced the main conclusion of that review: that electricity tariffs in the Province constituted an unreasonable burden on the Northern Ireland community there and that the tariffs should be brought more closely into line with those in England and Wales; and not as a one-off thing, but that they should be kept in line. As a result, the service was asked to limit its tariff increase in 1981–82 so that charges to industrial consumers would be made equal with the highest in England and Wales, and that charges to domestic consumers would be set at no more than 5 per cent, above the highest in England and Wales. In 1982–83 and in subsequent financial years, all charges will be kept in line with the highest charges in England and Wales.

If I may now turn to the detailed provisions of the draft order, Article 1 deals with its title and commencement. Article 2 deals with the interpretation of the draft order. Article 3 empowers the Department of Commerce, with the approval of the Department of Finance, to pay grants to the Electricity Service in respect of this and succeeding financial years and, again, in pursuance of paragraph 2, the amount of grant paid may not exceed the deficit on revenue account incurred by the Electricity Service in each year.

Article 3(3) provides that grants paid to the Electricity Service under this order shall be credited to its revenue account, while paragraph (4) repeals various spent or no longer necessary provisions in existing legislation for payments to the Electricity Service.

The new tariff policy for Northern Ireland involves substantial public expenditure and is one earnest from us—and there are many others—of the seriousness with which we view the economic position in Northern Ireland and our anxiety to try to help it. The overall cost has been estimated at £88 million in 1981–82, while £70 million has been earmarked for this purpose in 1982–83. These are very large sums of money, and naturally we are anxious to minimise the call upon public funds which the NIES has to make to implement the tariff policy.

To this end the service is currently considering how to make the best use of its present generating capacity in a situation of lower demand and also of reduced projections of future demand, and at our request the service is undertaking a comprehensive examination of the longer-term options for electricity generating policy in the Province. The studies which the NIES is carrying out include assessments of the merits of converting oilfired stations to use coal, of interconnection with other electricity supply systems, and also of newer generating technologies. On the Government side, we have established a system of regular monitoring of performance and finances of the service. The service's corporate plan for the period to 1986–87, which is being prepared in close consultation with us, will provide the basis for establishing future financing needs and for performance criteria. My Lords, I commend the order to the House.

Lord O'Neill of the Maine

My Lords, there is one small point about which I should like to inquire—

Baroness Llewelyn-Davies of Hastoe

My Lords, I do not know whether the Motion has been put?

Moved, That the draft order laid before the House on 19th January be approved.—(The Earl of Gowrie.)

Lord Blease

My Lords, the House will be grateful to the noble Earl the Minister for a comprehensive explanatory outline of this order. Although the text of the order is contained on one sheet of paper, in the context of energy problems and supplies and costs in Northern Ireland it is, indeed, a most important piece of legislation and regarding measures that are required.

The Minister has gone into a lot of detail and gave the reasons for the measures that have to be taken to meet the energy and fuel costs of consumers and industry in Northern Ireland. I would only say, in welcoming the order as presented to us, and the Government's announcement last March made by the Prime Minister that this was in train, that it is really following the previous Administration's policy in connection with the costs of fuel in Northern Ireland, and for that reason and for the reason that the Government have followed in that sort of train the measures are doubly welcomed by this side of the House.

While the measures to meet revenue deficits are very acceptable under the difficulties that we find ourselves in in Northern Ireland, I am sure that both sides of the House will be agreed that every effort must be made to achieve the optimum efficiency in the use of resources, in plant and finance capital and in manpower in order to achieve generation at its lowest cost and as high efficiency as possible. My knowledge and experience of the Northern Ireland electrical supply industry is that they have a very capable and experienced management team. The staff are public-spirit orientated to a high degree. I believe that the Northern Ireland Electricity Service annual report for 1981 will indicate that there is a continuing high standard of performance.

With this object of encouraging efforts towards high standards of performance, may I ask the Minister whether he can help me by explaining a few matters which I believe are relevant to this order. He said that relative tariff rates commencing 1st April 1982 for industrial consumers and for domestic consumers in Northern Ireland, as compared with those in England and Wales, will be at the highest rate pertaining for England and Wales. Perhaps when he replies he will confirm whether that is the basis upon which the new tariffs will be decided.

A second matter concerns the sale of capital equipment of the Northern Ireland electricity supply industry. As I understand it, there are considerable capital assets of the Northern Ireland electricity supply tied up in unused and surplus equipment and machinery contracted for the Camlough project and for the cancelled phase 2 of the Kilroot power station. Some of this machinery, including gas turbines and pump storage and generating equipment, has been sold and other equipment is on offer for sale. May I ask the Minister whether the finance realised from these sales is placed to the credit of the current revenue account or is the finance used to write off the capital account debts and loans? It is important that we have some explanation of this because it is directly related to the annual input from Government sources to meet the current running of supplies of electricity to consumers.

There is a further point I should like the Minister to give me some explanation about. In the annual report references are made to the methods of accounting and some of the problems that they have experienced in retaining the previous methods of presenting their accounts. May we have some indication whether there have been discussions taking place between the department and the Northern Ireland electricity supply concerning the matters of finance mentioned on page 26 of the report? It is a lengthy statement, and at this time of the evening I do not think I should go into details, except to say that on page 27 the auditors also draw attention to some need of clarification of the statement of accounts in this respect.

The Minister has already made reference to the dependence in Northern Ireland on the generating of electricity from oil fuel and the examination of other means of generating. He will be aware, of course, that many persons have said that we should now move over more rapidly towards generating from coal supplies. There is a considerable amount of talk and reports that the jetty at Kilroot would require a considerable amount of capital to be refurbished. I have to suggest that perhaps Belfast harbour could be used for the importation of coal and a spur put on to the Northern Ireland railways to facilitate that. It would not require the huge capital amouts that have been suggested for the jetty at Kilroot.

However, I am glad to hear from the Minister that considerable plans are being considered and reports being studied in connection with the new generating requirements. Will the Government undertake to publish perodically reviews of the energy policy for the Province? It is perhaps only in debates in this House and in another place that we get the information from time to time. It seriously affects new building designs and the purchase of domestic appliances and industry. It may be useful particularly to consumers moving from one form of domestic supply appliances to another if the Government from time to time would indicate what the future policy for at least the mid-term situation is in connection with supplies of fuel.

Finally, the Northern Ireland electricity supply industry has now attractive day and night economy rates. I was surprised that there seems to be a lack of knowledge that these rates arc available. May I ask that a fresh examination be made of the marketing of these new tariff rates and possibly a publicity campaign mounted in that connection. With these remarks from this side of the House, I support the order before us.

Lord O'Neill of the Maine

My Lords, it is now about 16 years since I invited Mr. Sean Lemass to come and visit me in Belfast. One of the things we discussed at that meeting was the possibility of running our electricity power systems together in some way. As a result of those discussions, it was eventually decided that there should be an inter-connector set up between the two electricity systems, and I remember being told by the chairman of the Northern Ireland Electricity Board, as it was in those days, about 10 years ago, that the situation would be reached when there would be a point of no return and that the two electricity systems would be so joined together that they could not be separated. Needless to say, shortly before that event arrived the IRA blew up the inter-connector, and I have forgotten how many times they have blown it up since, with the result that those excellent suggestions, discussed 16 years ago, have not come into operation.

I should be interested to hear from my noble friend how he sees the position in the future. Would it be possible, instead of having an inter-connector in South Armagh, to put it underground or even in the sea in order that it could go from some safe point in Northern Ireland to be landed at some safe point in the Republic, where it would be impossible for the IRA to blow it up yet again? It seems to be such a sensible solution—we should have surplus power in the winter in the Republic because of their water power and we should have surplus power in the North in the Summer, when it is needed for domestic reasons and so on—but, like all such sensible solutions in Ireland, they seem to be impossible of achievement. I should, therefore, be grateful, if my noble friend would tell us what is going on in regard to that and whether he is hopeful that it might be possible at last to connect the two electrical systems in Ireland.

The Earl of Gowrie

My Lords, the noble Lord, Lord Blease, paid tribute to the staff of the Northern Ireland Electricity Service and I am glad to thank him for that and endorse it wholeheartedly, and thank him for his "commercial", in marketing terms, for the favourable tariff rates we can offer industry settling with us. That was a very good point to make and I hope it will be attended to.

The noble Lord asked about the relevant tariffs from 1st April for industrial and commercial consumers as compared with those in England and Wales. I can confirm that they will be at the highest rate here and that that rate will apply to both industrial and domestic consumers. The highest charges in England and Wales average between 6 and 7 per cent. above the average charges in England and Wales, and I imagine that that ratio would be the same. The details of individual tariffs in particular places will have to await decisions by area boards in England and Wales.

On the question of the sale of surplus generating plant, which the noble Lord raised, I can confirm that the Electricity Service has sold some small items of generating plant from phase two of the Kilroot power station, which is not now to be completed, and we have received inquiries from several overseas electricity undertakings about the purchase of the remaining plant, but these matters arc still very much under discussion. The intention is that receipts, if such can be satisfactorily negotiated, from the sale of any such plant will be used to reduce the borrowings of the service, and thence the interest charged which the Electricity Service bears.

As for current and historic accounting conventions, the matters referred to on pages 26 and 27 of the service's report for 1980–81, about which the noble Lord asked me, they relate mainly to the continued use of the historic account conventions in the accounts. This is, in the first instance, a matter for the Electricity Service and its auditors, but I understand that the Department of Commerce were aware of the decision to continue to use historic cost conventions. In doing so, they are in line with their close neighbours in Scotland, but we shall of course keep the methods of accounting under review and I will take into account what the noble Lord said about that.

On the, literally, rather burning issue of reducing the Province's dependence on oil for electricity generation, which we should all like to do, we acknowledge that the present 80 per cent. dependence is of great concern, in view of high international costs and, as I said in my opening remarks, the service is carrying out a very comprehensive examination of our future generating options. The studies, when they are completed later this year, will enable us to consider with the service the relative merits of the main options for reducing that dependence: whether it is a matter of trying, as I said, to use more coal, whether it is a matter of interconnections with Scotland or the Republic—and I shall have something to say about that shortly in reply to my noble friend Lord O'Neill—or whether it is to do with the use of newer generating technologies.

The noble Lord, Lord Blease, asked me about the publication of reviews on Northern Ireland energy policy, but prior to that, he asked me a question about Belfast harbour, and I shall look at that as well; it is something to take into account and I am grateful for the suggestion. I shall also keep him informed on how we get on with that. Returning to the issue of a review, Northern Ireland is a fairly small place and I am not sure whether I find that that would be really necessary. We monitor the energy position very closely indeed and the Department of Commerce provides interested inquirers with any information on Northern Ireland energy costs. We have a vigorous and competitive overseas investment programme, and of course investors are given every detail of the kind of tariff advantages mentioned earlier.

My noble friend asked me about the inter-connector with the Republic, and I pay sincere tribute to him for the process which he initiated, as well as wryly noting the agonising slowness with which anything progresses in this field in the Province. He will be aware of the initiatives taken by my right honourable friend the Prime Minister and the then Taoiseach, Mr. Haughey, last year; and of course issues of inter-connected energy generally, not only electricity but gas as well, were high on the agenda.

We have, since then, followed that up and the then Tanaiste and Minister for Energy, Mr. O'Leary, has been to Belfast, and my honourable friend Mr. Butler will be going to Dublin at a later stage to discuss these matters. Of course, the inter-connector is a desirable thing to have, but it is also a vulnerable installation and there are problems of protecting those whose livelihood it is to keep it repaired and in good order. I am afraid that the options of burying the inter-connector underground or under the seabed would rule out all the practical economic advantages which make the inter-connector desirable in the first place.

So we have to bite the bullet and try to get a settlement and an improved security situation in the Province, so that people are not disposed to blow up inter-connectors, or when they are disposed to do so, they are easily caught, charged with and convicted of their crimes. But as we know, that is a long and slow uphill struggle. However, I very much hope that we can bring it off, because it would be of enormous benefit not only to the Republic, but also to the Province. I am glad that my noble friend gave us the opportunity of drawing that point to people's attention, and I am grateful for the way in which the Order has been received.

On Question, Motion agreed to.