Orders of the Day — Electricity Surcharge (Scottish Islands)

– in the House of Commons at 7:44 pm on 1st May 1980.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope]

8.45 p.m.

Photo of Mr Donald Stewart Mr Donald Stewart , Na h-Eileanan an Iar

The need for the debate arises from the decision of the North of Scotland

We have had a very wide-ranging debate. It has been a very worthwhile debate, as these debates always are. I have done my best to answer all the points that were put to me. If there are any that I have omitted, I apologise to the hon. Members concerned.

Question put:

The House divided: Ayes 52, Noes 7.

Hydro-Electric Board to increase tariffs in the Scottish Islands by a surchange where the supply is generated by diesel stations. The proposals mean that consumers in these areas have faced an increase in their bills of more than 28 per cent. from 1 April. The rise for the rest of the country is 17·2 per cent. It also means that the tariffs in the islands have risen by more than 37 per cent. in one year.

When the North of Scotland Hydro-Electric Board was set up, Tom Johnston took great pride in the social clause that was written into the board's constitution. The clause took into account the longstanding deprivation of the Highlands and islands. The electricity board has almost completely ignored that remit. It has taken the line that the social clause became redundant as a result of the setting up of the Highlands and Islands Development Board, although that board states that at no time has it been called on, or offered, to relieve the electricity board of this obligation.

The board has also failed to carry out the duty laid upon it by section 6 of the Electricity (Scotland) Act 1979, which states: The North Board shall, so far as their powers and duties permit, collaborate in the carrying out of any measures for the economic development and social improvement of the whole or any part of their district.

In 1965, the electricity consultative council for the North district persuaded the board that island consumers should be treated in the same way as those on the mainland. It is the desertion of that principal that is the issue here.

There are also certain anomalies that call in question the justice of this additional tariff. There are, for instance, two hydro schemes in Lewis and Harris, and an oil-fired station at Peterhead, so that no area can be classified as totally deisel or totally hydro. It would be interesting to know what adjustments the hydro board intends to make in its accounts in respect of that factor.

There is another aspect of the board's operations that I challenge. According to The Scotsman of 20 March, the British Aluminium Company has refused to pay a bill due to the board of about £19 million. The aluminium smelter is at Invergordon in the area of the North board, and the North board has been saddled with the cost of repair and meeting lost production from the accident at Hunterston in the area of the South board.

The surcharge at issue is opposed by bodies such as the Highlands and Islands Development Board, the electricity consultative council for the area, the Highland Area committee of the Scottish Council (Development and Industry), the Crofters Commission and the local authorities. Mr. Ian MacAskill, the secretary of the Highlands and Islands Development Board, said: We would expect that economic development on the islands would lead to a higher demand for electricity. To attempt to contain demand is positively to discriminate against development in these areas ".

Already several firms in my area such as Alginate Industries, which provides a lot of employment, with three seaweed-processing factories in the Western Isles—many crofters make a reasonable income from cutting seaweed—have suffered from the reduction by the board of a tariff which they previously enjoyed. They are now affected by this new surcharge and are experiencing severe competition from imports. This surcharge may be the straw that breaks the camel's back.

I have had long experience of the hydro board, in business, in local government and as a Member of Parliament, and the experience has not been happy. I have always found the board to be totally inflexible. As a Member of Parliament, I have written scores of letters to the board on general and specific constituency affairs, and I cannot recall a single occasion on which the board agreed that I had a case and changed its attitude accordingly. I have never experienced that with Government Departments, private firms or any other organisation.

I draw the attention of the Minister to an allocation of EEC funds to extend electricity supplies in the Western Isles.

I asked the board to let me know which areas that were still without a supply of electricity would benefit from this grant by an acceleration in the programme. To my astonishment, the board says that this grant will make no difference. Here is an organisation receiving a handout specifically earmarked for the extension of electricity supplies in the Western Isles, and the only result for the isles is an unfair increase in prices.

Diesel generation is the result of a board decision that was taken when oil was cheap. It is a sick joke to tell the consumers in the area of the right hon. Member for Orkney and Shetland (Mr. Grimond) that oil prices have pushed up their electricity costs when they are up to their necks in oil.

The hydro board appears to have slept in when it came to considering alternative energy sources—something that it ought to be doing as an energy producing body. Nothing has been done, for instance, to utilise the enormous peat resources of Lewis, although Bord Na Mona, the peat board in Eire, has several peat-fired stations. The current experiments in the Western Isles with wave power are apparently being funded by the Highlands and Island Development Board, without the involvement of the North of Scotland Hydro-Electric Board. The Highlands and Islands Development Board concludes that the Western Isles could be lit by wave energy at a cheaper cost than that of the diesel-fired generators on which they now depend.

In my view, the hydro board is a callous, tyrannical, stick-in-the-mud body. Its only reaction to the increased oil price is the wooden and unimaginative expedient of slapping on increased tariffs. I ask the Government, on the grounds of fairness, and in the interests of the Islands, to reject this imposition by the board.

Photo of Mr John Mackay Mr John Mackay , Argyll 8:54 pm, 1st May 1980

I am very sorry to have to take part in this debate tonight. I do so because my constituents in Tiree and Coll have been affected in exactly the same way as the constituents of the right hon. Member for Western Isles (Mr. Stewart).

I say that I am sorry because, unlike the right hon. Gentleman, until last month my experiences of the North of Scotland Hydro-Electric Board in my year in this House had been very favourable. The board had been most helpful in a few constituency cases involving electricity problems. It is a great disappointment to me that the board has increased prices in this way.

The right hon. Gentleman did not mention the time scale within which this was sprung on us. I see from my records that it was in mid-March that we had the first public indication that the board intended to do this, and that the date for its implementation was to be 1 April. The board therefore did not give any time at all for my constituents or those of the right hon. Member for Western Isles and the right hon. Member for Orkney and Shetland (Mr. Grimond) to make a proper protest. It all had to be done in a most hurried way.

It is worth saying that the electricity consultative council for the North of Scotland board area, which represents, by and large, the consumers most affected, is utterly against this decision by the board. It is unanimous in its objections. I back it in this, and I am prepared to defend that support, even though the majority of my constituents might be asked to pay a little more. I am sure that the consumers on the mainland in the hydro-electric board's area would have been quite prepared to have an extra decimal point inserted in the second place of their unit cost in order to help the people in the more remote islands, who have enough difficulties. I have found that everybody outside the Islands has great sympathy with the islanders. For example, on Tiree, which has a population of 800, the one and only baker calculates that he will face a surcharge of £160. That could easily make the difference between his staying and going.

What annoys me—I am sure that it annoys my hon. Friend the Under-Secretary—is that the Government have made some sensible and reasonable decisions about the Islands in the last two or three months. They gave an extra £1 million to the airports authority, putting up the grant to £2·5 million. They gave Caledonian MacBrayne an extra £1·3 million and produced a discussion document on the road equivalent tariff. Then, just to hit us all over the head, the board took this action, which runs counter to the aims in the charter under which it was established, which are to generate and distribute electricity in the Highlands area and have some regard to the social consequences.

I know that Government policy is that nationalised industries should run their own affairs, but, when a nationalised industry makes a mistake such as this, the Government ought perhaps at least to tell it to think again and consider the alternatives.

My constituents on Tiree, led by the community council, are threatening, with almost universal support on the island, to deduct the surcharge from their July bills and to pay only a charge based on the mainland tariff. I have absolute sympathy with them in this regard.

I hope that my hon. Friend the Under-Secretary will indicate ways in which the board will consider alternative courses of action. The right hon. Member for Western Isles was quite right. This is the easy way out for the board. It will not examine other ways of saving money or of generating power, such as by harnessing the wind. The one resource that Tiree has in abundance, like all the Western Isles, is wind, which goes whistling past everyone's ears. An experiment could be conducted, and people would put up with some inconvenience if they could see some long-term benefit for themselves.

I ask my hon. Friend the Under-Secretary to have a discussion with the board and to put to it the point that I, as a mainland consumer who is probably consuming rather cheap hydro-generated electricity, may be looking, as some of my friends have suggested, for a reduction in my charges if the hydro board is to be true to its principles. Most of the electricity in my part of Argyll is hydro-generated. Perhaps we should get it more cheaply than anyone else. The board has opened a Pandora's box which could prove embarrassing for it in the future.

I speak for my constituents when I say that the people in the North of Scotland would far rather carry a tiny bit more of the burden if it meant helping the people of the islands and avoiding their carrying the extra charge that the board intends to place upon them.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 8:58 pm, 1st May 1980

I begin by emphasising what has already been pointed out by the right hon. Member for Western Isles (Mr. Stewart) and the hon. Member for Argyll (Mr. MacKay). namely, that our constituents in the islands have been singled out for an increase in electricity charges of 37 per cent. this year. They are paying up to 28 per cent. extra, where others are paying 17 per cent. extra. That is far outside Government policy.

The Government are on record as saying that they want to help the islands, and I agree with the hon. Member for Argyll that in certain directions they have done so. I support the right hon. Member for Western Isles when he says that everybody who is concerned with the welfare of the islands has protested against the charge. This includes the consumer council, the consultative council, the Highlands and Islands Development Board and the Crofters Commission. If the imposition were not made, the impact on electricity bills in the rest of the area would be very small. However, if it is made, the increase in the islands will be devastating to individuals and to industry.

Why does the hydro board complain of more demand? Why does an increase in demand apparently put it into difficulty? I fail to understand how it has made the losses that it claims. If it has, the Government should look into the way that it is run. Most industries—for instance, oil—would rejoice at an increase in demand.

That brings me to the subject of oil. In many parts of the country, it is believed that oil is of enormous benefit to the islands. I have pointed out again and again in this House that that is not so. It is of benefit to Britain, to those working on the oil construction side and to the oil companies. To the crofter, fisherman and ordinary person in Shetland, it means higher prices, high rates and disruption of local industries.

We are deeply concerned that, when the oil construction period is over and eventually oil runs out, we shall be left with no fishing industry, crofting in a poor state and no industries to take up the slack. In four or five years, we shall face a serious problem of depopulation. I agree with everything that the right hon. Member for Western Isles says about the effects of the increase. His example is all too true. All these little industries will be put out of business if it goes on.

As has also been said, the hydro board chose to make electricity by diesel. I impress on the Government that in the days of the Orkney county council the convener went again and again to the public authorities and beseeched them to get in touch with the oil companies in order to make use of some of the flared-off gas. They would not do so, and nor would they allow anyone else to make electricity on the islands. They sat on their monopolies and insisted on diesel generation. As far as I know, they did not even make use of the huge resources afforded by the oil companies in Shetland. That is an abuse of a monopoly, which should not be tolerated.

The right hon. Gentleman drew attention to section 6 of the Electricity (Scotland) Act 1979. I draw the Minister's attention to section 4, which reads: In exercising and performing their functions the Boards "— that is the North and the South boards— shall, subject to and in accordance with any directions given by the Secretary of State under section 33—(a) promote the use of all economical methods of generating, transmitting and distributing electricity ". That is a duty laid upon them, but, apart from a very small experiment years ago, they have done absolutely nothing about it. They have carried out no experiments with wind or waves. They have not approached the oil companies to see whether they could come in on their generation or make use of the gas.

The section continues: (b) secure so far as practicable, the development, extension to rural areas and cheapening of supplies of electricity "— the Board's action contradicts that; it is hardly cheapening supplies of electricity— (c) avoid undue preference in the provision of such supplies ". When the South board was arguing in Orkney about uranium, it laid stress on the fact that it was its statutory duty not to discriminate between different parts of its area. That is exactly what the North board is doing, to the detriment of the poorer parts of its area. It is doing it in areas that particularly need heat. We have long winters and an extremely cold and damp climate. Local authorities and the welfare services generally have been putting up houses heated entirely by electricity. Many people in my constituency will either have to refuse to pay their bills or suffer from cold.

I do not believe that it is the business of the hydro board to rely on the local authorities or the social services to make good its own inaction. It is the board's fault, and the blame lies fairly and squarely on it. Therefore, like others who have spoken in this debate, I ask the Government to exercise their powers under the Act and revoke this charge. It is contrary to Government policy; it is contrary to the 1979 Act; and it is an extremely serious blow to the Islands. Far from it being possible to make good the effects of this out of oil revenues, it will add to the high rates and all sorts of other charges that the Islands will suffer as a result of increased oil prices. The surcharge is to be levied to save the population of the rest of that area from an increase of about 2p a head on their bills. The charge is indefensible, and I ask the Government to use their powers to negative it.

Photo of Mr Alexander Fletcher Mr Alexander Fletcher , Edinburgh North 9:06 pm, 1st May 1980

The right hon. Member for Western Isles (Mr. Stewart) has taken the opportunity of this Adjournment debate to raise a matter which is of great concern to his constituents and to electricity consumers on the islands of Orkney, Shetland, Coll and Tiree, where, as in the Western Isles, elec- tricity supply is provided mainly from diesel generating stations.

I have listened most carefully to the comments that the right hon. Member for Western Isles, the right hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Argyll (Mr. MacKay) have made in pressing the case for some action under the statute. They have all pressed their points most fairly.

The decision by the North of Scotland Hydro-Electric Board to reintroduce a diesel surcharge has provoked, as we are aware, a very strong reaction from representatives of the communities affected. It is, therefore, appropriate that the matter should be aired in this House, although, for reasons which I shall explain later, I am not at present in a position to say a great deal in reply to the points which have been raised.

It might be helpful if I began by describing the background, as I understand it, to the hydro board's decision. The first notice of charges published by the board after its creation in 1943 made provision for a separate tariff to be applied to the diesel areas to reflect the higher costs of generation on the islands, and this arrangement continued until 1965. By that time, the introduction of larger and more efficient diesel generators had led to the elimination of much of the disparity between island and mainland generating costs. The board therefore decided in 1965 to introduce uniform tariffs to apply throughout the whole of its district.

Following the oil crisis in 1973, diesel prices rose steeply and the board began to incur losses on its diesel generation. Those losses have increased significantly in recent years as the price of diesel fuel has continued to rise. In an effort to contain the problem, the board first introduced in 1975 a fuel clause surcharge on all electricity users in the diesel areas with an annual consumption in execess of 1 million units and then reduced the level at which this surcharge came into operation to half a million units in September 1979. These measures were not, however, sufficient to eliminate the losses on diesel generation. The board has estimated that these amounted in 1979–80 to £5 million and could rise to some £8 million in the current financial year.

Against the background of losses of this order, the board concluded that it should reintroduce a differential tariff for the diesel areas. It therefore announced on 14 March its intention to apply from 1 April a surcharge of 0·3p per unit to all the diesel area unit rates, with the exception of the charges relating to consumption in excess of half a million units. Thus charges to consumers in the diesel areas have on average been increased from 1 April by some 28 per cent., whereas mainland consumers in the hydro board's district have had their charges increased;on average by only 17·2 per cent. I apologise for saying " only " because 17·2 per cent. is a sizeable increase. The board estimates that the surcharge will enable it to recover only about one-tenth of the expected diesel losses in the current financial year. One of the objects of the diesel surcharge has been presented by the hydro board as being to conserve a scarce and expensive fuel. Starting this month, the board is to mount a campaign to encourage energy conservation in the diesel areas in an attempt to hold back the growth of demand for electricity which in recent years has been very much higher than on the mainland.

The right hon. Member for Western Isles suggested that this was interfering with natural economic growth of activity on the islands. With respect, I think that, allowing for the natural increase and, hopefully, the natural expansion of economic activities, there was always a case—bearing in mind the cost of energy today—for carrying out conservation policies to the full. That, I think, is what the board has in mind.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

But does not the Under-Secretary remember that the board carried on an advertising campaign to encourage people to use electricity when gas was closed down in Orkney? A great campaign was mounted saying how splendid electricity was. We were encouraged to put in more and more electrical apparatus. The board now has the effrontery to say that that was all wrong and that electricity must now be conserved by doubling the price.

Photo of Mr Alexander Fletcher Mr Alexander Fletcher , Edinburgh North

I cannot argue with the right hon. Gentleman's logic because I agree with him. One of the aspects of State-owned monopolies which fascinate me is that, having no competition, they decide to compete with companies in a related field which are not making quite the same product.

I have never understood the urge of the nationalised industries to sell their products in the way suggested by the right hon. Gentleman. Perhaps it is because they feel they would be deprived if they were not employing the same PR and advertising consultants as other companies. I hope that the board will pay attention to the right hon. Gentleman's remarks, because he is perfectly right.

There has, however, been this attempt at energy conservation because electricity usage in the islands has been greater than that on the mainland. Perhaps that is the point that the board has been trying to-put across. The board is also investigating means of reducing its dependence on diesel generation, including the possible use of wind power and the sale of waste heat from its power stations.

My hon. Friend the Member for Argyll raised the question of wind power, as did the right hon. Gentleman. The hydro board has indicated that it intends to undertake experiments in its diesel areas to establish whether the costs of generation might be reduced by the introduction of a measure of wind generation. That is part of the board's programme.

As the House will be aware, the board's decision to reintroduce a diesel surcharge has given rise to a great deal of criticism and concern about the adverse effects which this additional imposition could have on the island communities. Representations have been received from a large number of sources seeking action by the Government to prevent the board from implementing its decision.

I should make it clear that the determination of tariffs is a matter for the electricity boards, and my right hon. Friend's powers to intervene in this area are strictly limited. If, however, on consideration of representations from an electricity consultative council, it appears to him that there is a defect in an electricity board's general plans and arrangements for the exercise and performance of its statutory functions, he may give a direction to the board to remedy that defect.

The electricity consultative council for the North of Scotland district has submitted formal representations to my right hon. Friend to the effect that the diesel surcharge constitutes such a defect. In putting forward these representations, the council has indicated that it has the support of all of its area committees, including those which represent the interests of consumers in the mainland areas of the hydro board's district.

The statutory provisions relating to representations of this nature, which are contained in schedule 7 of the Electricity (Scotland) Act 1979, require my right hon. Friend to consult the electricity board and the consultative council before forming a view whether a defect has been disclosed which would make it appropriate for him to give a direction to the board. The consultations are in hand and are being pursued urgently. My right hon. Friend's decision will be announced as soon as possible. For reasons which will be understood, I am not able to go any further in this debate on that important aspect.

The right hon. Member for Orkney and Shetland pursued the question of undue discrimination, which was also mentioned by my hon. Friend the Member for Argyll. The consultative council referred in its representations to the possibility that, in introducing the diesel surcharge, the board would be exercising undue discrimination. That would be contrary to the duty imposed on the board by section 22(5) of the Electricity (Scotland) Act 1979. I am unable to comment on that at present because of the legal aspects of the matter.

I appreciate the anxiety of the right hon. Member for Orkney and Shetland and that of my hon. Friend for Argyll, who paid tribute to the Government's policies generally towards the islands communities and to the help that has been given in a number of places in the last year. I appreciate the concern expressed by the right hon. Member for Western Isles on behalf of his constituents. However, we must await the outcome of my right hon. Friend's consideration of representations by the consultative council.

I hope that the matter will be concluded in the shortest possible time so that the right hon. Gentleman and others who are deeply concerned will be able to assess whatever action my right hon. Friend decides to take.

Question put and agreed to.

Adjourned accordingly at seventeen minutes past Nine o'clock.