Wednesday, 23 June 1976
Seanad Eireann Debate
That the Dublin Gas Order, 1976, proposed to be made by the Minister for Transport and Power and laid in draft before Seanad Éireann on the 10th day of June 1976, under sub-section 4 of section 10 of the Gas Regulation Act, 1920, be approved.
Parliamentary Secretary to the Minister for Agriculture and Fisheries (Mr. M.P. Murphy): Gas undertakings generally operate under  special Acts which authorise them to manufacture and distribute gas in certain specified areas and which impose certain controls on their finances. Modifications to these special Acts may be made by order under section 10 of the Gas Regulation Act, 1920. Before an order of this kind is made, it has to be laid in draft before both Houses of the Oireachtas. The Houses of the Oireachtas may, by resolution, approve the draft order in the form submitted or they may approve it with modifications or additions. When such approval is given, I may make the order in the form in which it has been approved.
The Dublin Gas Company have applied to me for a special order. The object of the proposed order is to extend the company's borrowing powers, at present limited to £1.2 million. This is substantially below the amount required to carry on its extensive business. The company's bankers have as a temporary measure continued to meet its current borrowing requirements. It is, however, desirable that all borrowings by the company should have the necessary statutory authority. This can be achieved by the making of the order now before the House.
The company have intimated to me that, up to the present, extensions to its borrowing powers have been limited to a definite figure in money terms. Today a borrowing limit in such terms is likely to be reached quickly because of inflation and other developments outside the company's control, such as the vast increase in raw materials costs which followed the energy crisis in late 1973. The company are, therefore, anxious to obtain an extension of borrowing powers on a basis which will make reasonable provision for future developments without the need for repeat applications within short intervals. The company is heavily involved in the supply of gas in the Dublin area and has been giving consideration to its future strategy, taking account of the possibility of further finds of natural gas in the Irish Continental Shelf area. It is only prudent that the company  now be engaged in making the preliminary arrangements for such developments. This implies a significant extension of its borrowing powers.
The company, accordingly, propose that the present statutory limitation on its borrowing powers should be modified to give it power to borrow a sum equivalent to one and a half times the amount of the stockholders' funds as shown in its accounts. The company say that it is almost universal with companies whose shares are quoted on the Stock Exchange that their borrowing powers are related to the stockholders' funds and that the directors are authorised to exercise such powers provided they do not borrow in excess of a fixed multiple of the stockholders' funds.
Having examined the company's proposal I am satisfied that the proposal that the borrowing limit as expressed by an amount equal to one-and-a-half times its stockholders' funds is not out of line with general company practice. The draft order accordingly provides for borrowing power for the company on that basis. The draft order further prescribes the manner in which the amount of the stockholders' funds shall be determined. Based on the company's accounts for the year ended 31st December, 1975, the amount of the stockholders' funds would be approximately £12 million so that in accordance with the proposal to which I referred, the company's borrowing powers would be £18 million.
The Dublin Gas Company makes a significant contribution to the supply of the energy requirements of the Dublin area as about one in three households use gas. In the recent past it encountered financial problems due largely to the massive increases in raw material costs which followed the energy crisis in 1973. Special arrangements were necessary to tide it over this difficult period including temporary advances from State funds and the nomination by me of four directors to the board. I am glad to say  that events took a favourable turn and the company's financial situation, as reflected in its accounts for the year ended 31st December, 1975, is reasonably satisfactory. The company is very conscious of the need to improve its performance and I gather that serious efforts are now being made to foster better labour relations and to increase productivity. As Minister responsible for fuel supplies I welcome and commend these developments and I am anxious to facilitate the company in every way open to me in evolving its plans for the future. I am satisfied as to the need for this Order and that there is nothing in it repugnant to the public interest. I, therefore, recommend the Order for the approval of the Seanad.
Mr. Lenihan: I am glad that the Order has the effect of sending the Dublin Gas Company's borrowing power to £18 million. As pointed out in the Parliamentary Secretary's speech, the need for this is very evident today, particularly in the light of the natural gas finds already established around our coasts and the potential gas finds which are of great interest as far as domestic and industrial gas consumption is concerned. The Dublin Gas Company, of course, is the organisation concerned with industrial and domestic gas consumption in the most developed part of the country—Dublin city and county.
One aspect which I would like to refer to which is probably more relevant on the Gas Bill but I think is relevant here as well, that is the utilisation of natural gas. Dublin Gas Company is getting the increased borrowing powers to engage in the required research and to build the required infrastructure in the way of pipes necessary to convey eventually natural gas to the industrial and domestic consumers within its area.
Unfortunately the Government have made a decision—a very serious decision and a very seriously wrong decision that runs counter to all thinking in regard to natural gas conversion. At present every country in Europe and I think North America  as well has made a firm decision based on the most expert scientific advice that converting natural gas for power purposes involves enormous waste and that the most efficient way to convert natural gas is to feed it into a grid for domestic and industrial purposes. The process involved in feeding it into a power station as in Cork, it is proposed to feed it into the ESB power station there, involves in terms of conversion, on my information up to 50 to 75 per cent wastage. It is a short-term advantage policy decision designed to give the ESB in the immediate years ahead the required powers easily to avail of the finds so far located off the south coast, but it involves very serious implications as regards the rapid wasting of a natural asset in the form of a natural gas that could be used at a far higher efficiency rate and more gradually over a long period of years if fed into the industrial and commercial use grid for ordinary purposes both in houses and factories. I would like to get elaboration on this. We can deal with it in greater detail on the Gas Bill when the Minister will be here.
My information is that the economics of piping natural gas from the south coasts—off which the only finds are located—to the Dublin area would make in the long term far more economic sense than wasting a natural asset rapidly in a highly inefficient method of conversion by converting it to power station purposes in Cork. I would like to ask the Parliamentary Secretary—and this is very relevant —is what I have said substantially the advice received from the Dublin Gas Company? I am told that it is. I am told that it is substantially the advice that has been received by the Minister for Transport and Power and his Department from all energy experts in this country. It is substantially the opinion of all the energy experts in Europe—I am aware of that from reading the papers—and it is substantially the opinion of energy experts in North America. The facts of the matter are that, whereas in some European countries they were converting natural gas to power, they have stopped it completely now and there is a complete cessation of any  attempt to start any new developments in the way of the conversion of natural gas to power purposes because of the massive wastage involved. Particularly since the oil and energy crisis there is greater recognition of the importance as far as the western world generally is concerned of conserving indigenous energy resources that are available and the outstanding one that we have positively located, of course, is the natural gas resource already there, some located off the south coast and we will probably have more of it.
It is nothing short of scandalous in this situation, in this day and age after the experience of the energy crisis, to opt for the very short-term gain involved in relieving the ESB of its responsibility of purchasing oil, thereby utilising natural gas which may be of benefit financially to the ESB and the State Exchequer in the very short run, but in the long run it is a very serious matter particularly if further finds of natural gas are located. There is evidence that there is more natural gas to be found. Whatever doubt there is about oil there is no doubt about the existence of natural gas.
I would like to know if any studies have taken place on the economics of piping natural gas to Dublin. This I appreciate is a formidable task, but any studies made of the economics of that vis-a-vis the very serious disadvantageous economics involved in wasting the natural asset by an inefficient method of converting to proper purposes when the maximum utilisation could be obtained from it over a long period of time by conversion to industrial and domestic uses.
Mr. Russell: I would like to add my voice to that of Senator Lenihan on the Gas Order. Obviously the Dublin Gas Company requires substantially increased powers to borrow money. This is the normal procedure in any company and it is a modest multiplier in regard to the stockholders' funds which I take to be the total of the paid-up capital and reserves. With regard to Senator Lenihan's remarks I would have thought that they would  be more in order in connection with the Gas Bill at present going through the Dáil, and I do not know whether it is the wish of the Leas-Chathaoirleach to allow discussion today on the merits or otherwise of utilising natural gas for the production of electricity. If it is I would be very glad to engage in such a discussion, but I would suggest that it is a matter for the Parliamentary Secretary to decide that it is out of order unless Senator Lenihan does not propose to contribute to the discussion of the Gas Bill when it comes before this House. I would have thought it to be a more appropriate occasion, and with all due respect to Senator Lenihan he is jumping the gun.
An Leas-Chathaoirleach: Before I call the next speaker I would like to point out with reference to Senator Russell's remarks that the Gas Bill will eventually come to us and a detailed discussion will take place on the whole question under that Bill. In the Parliamentary Secretary's opening speech on page 2 he did make a reference to the natural gas from the continental shelf. Therefore I allowed Senator Lenihan and will allow other Senators to make some remarks on the whole position vis-a-vis that. A detailed discussion is not in order on this Order.
Mr. Yeats: Like Senator Lenihan I certainly am in favour of this Order and it is one which presumably has to be made in order to enable the Dublin Gas Company to conduct its business in a reasonable way. However I refer to the Parliamentary Secretary's remarks in the third paragraph of his speech in which he explains that, whereas up to the present the company's borrowing powers are being limited to a definite figure, today a borrowing limit in such terms is likely to be reached quickly because of inflation and other developments outside the company's control, such as the vast increase in raw material costs which followed the energy crisis in late 1973. Of course the huge inflation in energy costs, particularly the cost of oil which is used by the Dublin Gas Company, took place in late  1973. Since then there has been only a relatively small further increase in energy costs, around 10 per cent. Certainly in the last three years since the end of 1973 the increased costs of oil have been somewhat less than the rate of inflation that existed in this country, so it is not this which has caused necessity to raise the borrowing limits of the company from the definite figure of 1.2 million to a figure of 18 million. The answer really appears to be that the Government have despaired of dealing with inflation. The speeches are couched in such a way that there is an assumption that inflation is going to continue in future years. There seems to be no hope of limiting it on the part of the Government. We are told simply that this very big increase in borrowing limits has to be agreed to because for practical purposes money is becoming worthless and to fix a figure in terms of pounds is useless because by next year or the year after or the year after that they will be worth steadily less money. We have to agree to this. Basically one can only regret that the Parliamentary Secretary, presumably representing Government policy in this respect, has apparently completely despaired of ever being able to deal with inflation or even to reduce it below its present rate.
Mr. M.D. Higgins: I should like to assure the House that I intend to avail of an opportunity of commenting on the general use of future resources that might be made available to us on another occasion when the appropriate legislation is before this House, that is if legislation is brought before us in relation to gas. This Order before us deals specifically with the Dublin Gas Company and it would be remiss of me if I did not remember that a motion dealing with the operation of the Dublin Gas Company was tabled in this House some time ago by Senators Noel Browne and Michael Mullen. On that occasion a situation had arisen concerning the inadequate reserves of oil which had been kept for use in the case of a serious emergency or an oil shortage and the necessity that might  be brought about for the usage of such reserves on a rationed basis. This on this instrument immediately gives rise to a very important point, that is the amount of money that should be made available to a company empowered with the provision of energy to a large number of households. One has to look at the kind of households being served by the company in question and by other agencies involved in the provision of energy. One point which immediately strikes one is that when a national emergency arises concerning the provision of the basic material for the gas it is not equal in its incidence. It falls in its harshest terms even if they do not indeed quantify the term on those who are domestic users. On the occasion in question when there were insufficient reserves held by the company in the Dublin area the people who were occasioned the greatest human suffering were particularly the elderly and people who were in the situation of being unable to make quick adaptation to an alternative energy.
It is a great pity that in the debate that has arisen so far in the committees of both Houses and in general public discussions, when people speak about greater resources being made available, that they would not draw a distinction between absolutely socially necessary usage and usage for office or industrial and profit purposes.
I agree with the giving of more money to the Dublin Gas Company. I would like to think that the situation is not as cynical as that reflected by Senator Yeats, that this is merely a reflection of increased costs and is more on the line of what the Parliamentary Secretary has suggested and will enable them to carry out research to see what their future needs are and how they might better serve their population of consumers. I reiterate, however, that their practice so far has been commented on by way of motion stated, even if it has not been discussed, in this House. It causes us some concern and it is very appropriate that we say when we are discussing measures like this that the  case that is made is not an economic case but a social case.
There is a tremendous necessity for legislators on both sides of this House to realise that the principles of social accounting are now accepted in political philosophy in most modern political systems and that the giving away of State money to develop energy agencies is no longer being measured by narrow economic criteria and it is not merely a matter of making a gas company efficient for any purpose. The principal purpose of legislation for a gas company in this situation should be to put it into such a position that it would never again imperil the most vulnerable sections of the community. When we come to discuss the broader issues it may well be that we will have to look at whether we may need separate pieces of legislation to deal with vulnerable domestic categories of the population and other legislation to deal with, for example, potential industrial usage likely to give profits.
It is a good thing that the Parliamentary Secretary has referred in his introductory speech to the role of the gas company. I am not as interested as I said in their being given technically the amount of money. Might I draw the attention of this House to something quite similar? On an occasion shortly after I came into this House I remember the situation of railways being discussed and once again we all fell into the trap of their justification being again on narrowly economic criteria. When decisions had to be taken which were harsh economic ones people began invoking social arguments. It is very useful when one is raising the amount of capital to which a company will have access to say in anticipation that we will cheerfully give this money if we know it will be expended for a social role. We would also give the money if more were available in order to create economic efficiency. I am not saying that economic efficiency precludes social responsibility or that the one cannot go along with the other. I am saying that it is high time that a rather primitive form of economic accounting was set aside and a more  important notion of social accounting responsibility introduced when orders and measures of this kind are brought before the House.
Parliamentary Secretary to the Minister for Agriculture and Fisheries (Mr. M.P. Murphy): As I mentioned, this order was brought in to satisfy the requirements of the order under section 10 of the Gas Regulation Act, 1920. I welcome its reception by the House. The questions posed by Senator Lenihan do not relate specifically to the order and can best be dealt with under the terms of the Bill which the Minister is finalising in the Dáil today. Were it not for that position obtaining he would be introducing this order here. Senator Lenihan's statement about the availability of State money to this company is incorrect. There is no involvement of State money. This order does not mean that the State will have to guarantee any loan the company may raise as a result.
From the information at my disposal, and from the recent annual report of the company, the Alliance and Dublin Gas Consumers' Company, they seem to be a very efficient concern. They are doing a very good job of work. They supply some 170,000 householders in this city and have an employment content of 1,240 employees with whom relations are reasonably good. Not only are they not a liability on the State but they are an asset in as much as most of the recent borrowings by the company from State agencies have been repaid and in the not too distant future balances outstanding will be repaid. That is a very good record. We could do with many more such companies.
The question of disruption of supplies at the time the energy crisis in 1973 was raised by Senator Lenihan. The disruption was a rather mild one. If this company was under public ownership, or a State agency, possibly the disruption would have been as much if not greater. I do not think there is any necessity to go into any further detail. I wish to thank the Senators, on behalf of the Minister for Transport and Power, for their reception. I am sure Senator Lenihan will agree that the questions he raised  are more appropriate to the main Bill.
|Last Updated: 14/09/2010 16:33:13||Page of 8|