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.