Committee Reports > List of Committees > Joint > 1979 > Committee on Commercial State-Sponsored Bodies > Report No. 08 - Bord na Móna

MIONTUAIRISC NA FIANAISE

(Minutes of Evidence)

Dé Céadaoin, 14 Samhain, 1979

Wednesday, 14 November, 1979

BORD NA MÓNA

Mr. L. D. G. Collen, Chairman; Mr. L. Rhatigan, Managing Director; Mr. J. Collins, Secretary; Mr. D. Tipper, Chief Accountant; and Mr. W. Maher, Sales Manager of Bord na Móna called and examined

1. Chairman.—We are concerned by the fact that the accounts before us are almost 20 months old which makes it difficult for us to get an up to date idea of the board’s finances. We propose to go ahead today, but we will not be able to issue a report until we see the board’s next accounts. When we see them it is possible that we may ask the board’s representatives to come back to discuss something else but that may not be necessary. When will your report and accounts for the year ended 31 March 1979 be available?

Mr. Collen.—On 14 December. There have been delays due to a fire in headquarters.

2. Chairman.—In relation to the degree of autonomy of the board, do the board feel that they have sufficient autonomy or is there any matter that would present any difficulties?

Mr. Collen.—In 15 or 16 years on the board I cannot recall ever having any major dispute with a Government Department. We have debated things and we do not feel inhibited by any action of the Department. Relations have been good. We have had informal discussions and we have not been restricted in any way.

Mr. Rhatigan.—That stands because our objectives are very clearly defined and this is an important factor.

3. Senator Cooney.—Has there been any occasion when some positive policy initiative that the board would have liked was stymied or objected to?

Mr. Collen.—A decade ago we had the odd battle, when peat was not as economical a fuel as it is now, to get a few thousand more acres developed and the turf sent to the ESB. But that was very natural. The protocol was there. It was obviously correct for the Department to give us the decision. It was not for us, but we put our case as best we could. We never felt greviously hurt because the ESB station went against us.

4. Chairman.—Does the intervention or the role generally of the National Prices Commission create any problems for the board?

Mr. Collen.—Since we met the Committee informally last July Government policy has changed. We have been asked to make a submission making a case for an energy-related price for our product. Up to this, our ability to generate capital for ourselves has been severely held back by the Prices Commission. We prefer to develop our capital resources as that means that the interest rate is lower.

Mr. Rhatigan.—This is almost a confidential area. We have been fighting a battle on this question of energy-related prices for some time.

5. Chairman.—In general terms has it been a problem over the years?

Mr. Rhatigan.—We have an excellent relationship with the Prices Commission. That is because our policy always was to put our facts very clearly on the table. We have a very good rapport with them but they have a job to do. In latter years in relation to the pricing policy of the board the outlook of the Prices Commission, where one is allowed allowable costs only, creates a problem for us particularly where we are on a major expansion programme where we are by and large selling cheap and borrowing dear. We made a very strong plea in our annual report to the Minister last year that this policy should be reviewed. We have had no opportunity to push this and I am hopeful that this Committee will support us.

Mr. Collen.—Preliminary discussions have just opened with the Department on this issue.

6. Senator Cooney.—Could you explain the difference that this energy-related price will make? What precisely does that mean in relation to the way you use your resources?

Mr. Collen.—If our projections for the next ten years are accurate we might be borrowing £80 million or £100 million. We could be generating half of that, £50 million, over the next five, six or ten years. Obviously the interest load on us would be much lower and the end price of our briquettes in ten years’ time would be much more competitive.

7. Senator Cooney.—Does it mean in effect, that the price of the board’s products on an energy-related basis would be dearer than they have been up to now?

Mr. Collen.—Yes, but one would be still buying energy cheaper than coal or oil.

8. Senator Cooney.—The board’s prices so far have been based on the cost of production plus allowable costs?

Mr. Collen.—Yes.

9. Senator Cooney.—What the board are asking now is to base their prices on the energy-related value of their product?

Mr. Rhatigan.—I want to stress that this is something that is under discussion at the moment. We are handicapped here in talking about this.

Mr. Collen.—We are just making a case for it.

10. Senator Cooney.—Will that not mean that the activities of OPEC will have a fall-out effect on the price of turf?

Mr. Collen.—Yes.

Mr. Rhatigan.—To put it another way. Bogs are a wasting asset. They are just as finite as coal mines. They will be cut out and we will have to replace them. We are embarked on a major expansion programme in a time of high inflation. Annual inflation has been in the region of 15 per cent for the past five years. There has been quite an escalation in our capital cost or capital programme. There are two aspects to this. We have to get a rational pricing policy here so as to regulate the market. We are in a desperate situation at the moment in that we are getting a desperate “clobbering” about the shortage of briquettes and turf. It has all the signs that a fuel famine will be created because our briquettes are priced well below their equivalent competitive fuel on the market.

The other thing is to ensure that we will have cheaper fuel and a more rational price structure in the long term. It would be absolute suicide for the board to be selling products considerably below market price and getting involved in heavy capital borrowing which has to be paid some time.

11. Senator Cooney.—Does “considerably below market price” mean considerably below the equivalent market price of other fuels?

Mr. Rhatigan.—Yes.

12. Senator Cooney.—But not necessarily at a price that would not produce a profit?

Mr. Rhatigan.—What does the Senator mean?

Senator Cooney.—Can the board sell at a non-energy-related price that will give a profit?

Mr. Collen.—Only a marginal profit. It would not be profit in the terms of the market place.

Mr. Rhatigan.—The basic philosophy is to pay our way.

13. Senator Cooney.—To use a philosophical point—not to use the word “political”—from the point of view of the consumer is the board’s present policy more advantageous?

Mr. Collen.—In the short term.

14. Senator Cooney.—Will the board go to an energy-related price and so generate more of their own capital requirements at greater cost to the consumer?

Mr. Collen.—Yes to this generation of consumer. The one ahead would suffer greviously if we were not to have an energy-related price because they would be bearing the heavy load of the interest of 12 or 13 per cent. You will be trying to win a war on a tactical basis instead of bringing out the strategy.

15. Senator Cooney.—Are there any figures to show on whom it is going to fall more heavily?

Mr. Collen.—A case has been made for that. We are looking for a nice progression. We do not want to be living in a false paradise here and then suddenly have to raise the price.

16. Senator Cooney.—Why should that follow?

Mr. Rhatigan.—One of our great difficulties at the moment as to why we have not instant briquette factories and instant turf is that it takes on average five to seven years to drain our bogs. That is a fact of life and there is nothing we can do about it. Indeed, the British Coal Board have the very same problem. We can build briquette factories quickly enough when the bog is ready. We are talking about, say, the middle eighties when the results of the third programme begin to come on stream. There are the financial implications of repaying capital dearly and meeting capital servicing charges at a time when we are borrowing dearly. When we look at the capital overhead charges today compared with what we paid in our first or second programme it is terribly important that we get a rational, continuous gradual curve on our price so that we play fair with the consumer all the time.

17. Senator Cooney.—In so far as the present consumer is concerned, if this new policy is adopted, is he going to be paying now for the future development and future consumer as well?

Mr. Rhatigan.—He will be paying the market price for energy.

Mr. Collen.—That poses a problem. In this document, here is the price, and here are the years. Under our old policy if we were to come along like this for seven or eight years and say that we want to go on this line—

18. Senator Cooney.—What would drive the price up?

Mr. Collen.—The capital charges of the present investment. It is the laissez-faire, the free market.

19. Senator Cooney.—What percentage difference will the new policy make in the price to the present day consumer?

Mr. Collen.—We could not really tell. We have only an indication of a possible change of policy and we are busy doing the figures. We will be going back to the Department maybe in a month’s time.

20. Deputy B. Desmond.—Is it fair to say, working off the top of my head, that a ton of coal at the moment is about £26 dearer than a ton of briquettes? What is the differential between a ton of coal and a ton of briquettes from the consumer’s point of view?

Mr. Maher.—We are talking here about prices Bord na Móna charge, not necessarily about the prices the consumer pays. This must be considered because prices generally of solid fuels vary greatly depending on haulage charges. Therefore, it is not possible to have nationwide standardisation. There could be confusion then if in a shortage situation you have less competitiveness in the distribution set-up. At present we have three briquette factories which were designed originally to produce a quarter of a million tons. During the sixties when the pressure was on Bord na Móna for solid fuel we upped the production of the factories to 360,000 tons and at the outbreak of the oil crisis we were capable of selling all those in a free, open market situation, on prices related to the realities of the market. We started in 1974 to develop further production of briquettes but these will not be on stream until next year some time. In the meantime energy prices generally have risen but the prices of our fuels have been contained by internal Irish costs rather than world market prices. The result is that you have a market cost to the consumer which involves distribution costs which means distribution prices are pushing up the prices. The question of coal was referred to. The present average price of coal as on 30 September is £65.70 a ton according to our surveys.

21. Deputy B. Desmond.—Is this the average for Polish and American coal?

Mr. Maher.—The average that the Irish consumer in the Twenty-six Counties was paying for coal in our reckoning on 30 September was £65.70 a ton. The price of briquettes at retail level is £34 a ton. The relative market price of briquettes to coal in our experience is in a ratio of two to three but the present ratio is one to two roughly.

22. Senator Cooney.—I do not follow that. Would you elucidate?

Mr. Maher.—We could sell briquettes when they were two-thirds the price of coal and sell the present production we have. At present briquettes are half the price of coal.

23. Senator Cooney.—What is the ratio in terms of energy?

Mr. Maher.—It is roughly the same, two-thirds.

24. Chairman.—Could the board charge more for briquettes?

Mr. Maher.—We could. Nobody would believe it, but we are producing slightly more briquettes than we were producing in 1973 and we are not able to satisfy the market. The reason is that more people want to buy more briquettes and this is not possible until we get the new factories into production. Our problem is that the capital costs of the new factories naturally will be far higher than the present costs and, therefore, the briquettes from those factories will be more expensive.

To keep a proper balance, bearing in mind that the prices charged for our fuels contain an element of extra distribution profits which are not going to the funds of the community as a whole, we would argue that if we were on market price, whatever the price was would come as capital for the community. In this sense we would ensure that the consumer would have fuel at an economic price if we had as much development as possible on Irish bogs.

25. Senator Cooney.—Up to now the board have been able to develop and charge a price based on costs as opposed to an energy-related price. Why cannot that policy continue into the future? If the board are going to change their price structure to an energy-related basis there is no point in us having a cheap fuel, because in effect the board’s energy-related prices will be determined by OPEC. What is your view on that?

Mr. Collen.—The real point is that we built those factories at a time when money was lent at 7 or 8 or 9 per cent.

Mr. Maher.—Now it costs between 15 and 20 per cent.

Mr. Collen.—One trebles the price of one’s factory really.

26. Senator Cooney.—Then the board’s briquettes will obviously have to increase in price in relation to such costs, but why not continue to relate the price of the board’s goods to their costs rather than to the cost of energy which is determined outside of the country?

Mr. Maher.—The consumer is not buying at our prices. We sell more machine turf than briquettes to the public. It is not possible to have a proper controlled price at retail level on machine turf because we are talking here about a commodity whose on-cost is mainly concerned with freight, distribution and, of course, distances from the works. Our ex-works price at the moment is £15. In a situation where one has not sufficient supply to meet the market, the only option open is to distribute the available supplies among previous purchasers, which means that they then are an agency for X tons of turf per year. There is a limited quantity and they are taking and can take higher margins because there is a scarcity because of the basic low price.

27. Senator Cooney.—Could the National Prices Commission not control their margin?

Mr. Maher.—It is not possible. We have a bog, say, down near Athlone, and if one goes five or ten miles on each side of Athlone one would have different prices because transport is a big portion of the total on-cost on top of our prices. But if one is in a situation in that kind of an area, where more people want turf than one can supply, the person who has the grasp on that turf can charge bargained prices. It is not feasible to devise sufficient levels of price control differentials.

At present with the price of briquettes, one retail price operates in the whole of the Twenty-six Counties at 44p a bale, except in west Cork, Kerry, Donegal, where the price is 46p a bale. Nobody can bring briquettes at £1.60 a ton from a briquette factory to those distant areas. One just could not haul it for that. There should be a variation of about 8p to cover the different costs, but it would be impossible for one to decide where to make the regions for the various gradations in price. When the people sell briquettes they sell at 44p, which is the controlled price, but they are entitled to charge delivered prices, which is not unreasonable. There again one has the problem where they may be delivering next-door or they may be delivering five miles or ten miles away. In fact the distribution costs would tend to go up where there is no competition.

28. Senator Cooney.—I can see that, but distribution costs will still be there. Even if the basic prices are energy-related, if one adds distribution costs one would have a higher price. Because it is energy-related the cost to the consumer will be higher. Is that not so?

Mr. Maher.—The cost to the consumer will be higher but the community and therefore the consumer will get the benefit of the price paid in the long run, whereas at the moment it is the distributors who are getting it.

Mr. Collen.—Also one has the margin for the distributor. Because of the competitiveness vis-à-vis coal, he has to take a small profit.

Mr. Rhatigan.—Could I just read one paragraph from our report for last year?

The case to be made in support of the policy of developing indigenous peat fuel resources is not solely an economic one,

—and indeed that is more so than ever today—

but the economic argument is most conspicuous against the back-drop of the present market for energy in an open economy. If the policy can be implemented on an economically viable basis then the concomitant benefits of wealth creation, employment opportunities, security of supplies, balance of payments advantage and so on are being achieved (as desirably they should be) by way of competitive pricing to the consumer rather than by deficit financing leading to Exchequer subsidy which uneconomic operations must involve.

29. Senator Cooney.—The board foresee a very heavy Exchequer subsidy unless the board go energy-related in their pricing?

Mr. Rhatigan.—Unless we have a realistic price for our products.

30. Senator Cooney.—Up to now have the board had excessive Exchequer subsidisation?

Mr. Rhatigan.—No.

31. Senator Cooney.—Why do the board think it will come from now on?

Mr. Collen.—We are in a new situation of very high inflation affecting the capital cost of our installations.

Mr. Rhatigan.—It is very capital intensive.

32. Deputy B. Desmond.—In the context of your plant to be built at Ballyforan, have the board submitted—I know this may be confidential—an economic cost of briquettes to the Department?

Mr. Collen.—Yes.

33. Deputy B. Desmond.—For the sake of argument, instead of £35 the board might charge £48 or £50 a ton if they are to run that particular plant on an economic basis. The board are dependent on exchequer advances and other loans and presumably are expected to raise some more moneys on their own account. On that basis, and looking at the fact that briquettes have been rationed now for about three years and the demand for them is enormous and will grow, without committing the board here unduly, is it logical for us to assume that the price of briquettes is likely to go up by 25 per cent in the near future?

Mr. Rhatigan.—It must.

34. Deputy B. Desmond.—If the board are to produce them economically?

Mr. Rhatigan.—That is right.

35. Senator Cooney.—At the moment the board are not selling briquettes at a loss?

Mr. Rhatigan.—No.

36. Senator Cooney.—The board invest in new works—and produce extra goods, extra turf and briquettes as the case may be —and in new machinery and so on. Will not the cost of that investment be reflected in the price of the product? Do the board have to get it back in the price of their product?

Mr. Collen.—Yes.

37. Senator Cooney.—Why not continue to do that as heretofore, instead of seeking to get it back through this energy-related price?

Mr. Collen.—We have two options. I go along with this gradual price. There was virtually a very low level of price increases allowed by the Prices Commission, in which case at some stage when we have our three big briquette factories built in 15 years’ time or before that, we would have a colossal rise, and we would suddenly have to start to service our moneys.

38. Senator Cooney.—Would the company not at this stage be building into the price of their products some of the costs?

Mr. Collen.—That is what we want to do.

39. Senator Cooney.—Why do that on an energy-related basis?

Mr. Collen.—It is one way of measuring. We will be putting a case on that to find out how the Department are going to react.

Senator Cooney.—They will be reacting for the best!

Mr. Collen.—Our job is to find the best in all ways, not only for ourselves. We take a national view.

40. Chairman.—Is it the case that the board should do it and also in present circumstances they could do it because of the energy crisis?

Mr. Collen.—Yes. That is exactly right.

Mr. Maher.—An important factor is that our previous borrowings were at an average of 8.4 per cent. Our present borrowings are at well over 12 per cent. On account of the long lead in time there is a heavy accumulation due to high interest rates on the true capital repayment necessary by the time we get to the production stage. We are suggesting basically that we provide from our own resources and we can provide only by having higher prices. Previously we had operated on the basis of repaying the capital that existed. The situation is such now as to enable us to develop the maximum amount of value from bogs that we can. We should be providing from our own resources while the market will tolerate it to improve the efficiency of the distribution system in the market because in the cost of fuel to the consumer upwards of 40 per cent is distribution costs.

41. Deputy B. Desmond.—What percentage?

Mr. Maher.—Up to 40 per cent. Therefore, it is vitally important with fuel to keep the distribution end of the product economical and this can best be done by competition in that section.

42. Deputy B. Desmond.—One thing recently remarked on was the large number of hauliers, agents, trucks and so on in the distribution side. To what extent have the board either got permission or wanted to enter into what could be called direct retail distribution? I am thinking in terms of major supermarket outlets and so on where there would be direct deliveries and direct points of sale on a direct contract basis by the board, thus avoiding some of the seemingly excessive costs.

Mr. Collen.—If you can get into a free market situation, the private haulier will beat a large organisation by a matter of 40 or 50 per cent. A good example is my son who happened to be in a transport business for three years. He had an owner-driver driving for him and they were doing three loads a day on a particular trip while CIE would be doing two. From the consumer’s point of view the best way is to let the hacker at it. Even Roadstone tend to let the fellows own their own trucks now. To help the finances it is much better to have an owner-driver. You get the mileage. What will happen in the EEC with the trucks and the lorries is another matter.

43. Deputy B. Desmond.—Will the board themselves not enter into a distributive network in their own right? Is there a policy there?

Mr. Maher.—The board have evolved the present distribution system quite consciously. In ordinary circumstances where we have adequate supplies to sell, we sell directly to everybody. We are continuously, in a normal market situation, encouraging people to buy directly from us, to get into doing business with us. The measure of the efficiency of this policy can be reasonably easily made by comparing in normal circumstances the cost of distribution of Bord na Móna fuels with the cost of distribution of imported coal. Although imported coal is less bulky than turf, the cost of its distribution has been considerably higher.

Mr. Collen.—Per ton.

Mr. Maher.—Per ton. We are quite satisfied that there is no method by which we can get the product as cheaply to the consumer as by the distribution system that we at present operate. The board has on occasion gone into the business of distribution where we were not satisfied that the merchants or traders that we could develop were active enough in our interests. We went in to develop business with the consumer. It is not possible to do it more economically from the consumer’s point of view than the way that we do it. We have no such thing as agents. We have no such thing as people who are recognised as trade customers. In ordinary circumstances the man in the street can go into our works and buy from us and at a price only 2 or 3 per cent higher than that of our largest customers. It is necessary for market development, but our objective from a sales point of view is simply to find the most economic way of getting distribution from our production centres to the ultimate consumer.

44. Senator Cooney.—To go back to the prices, am I right in thinking that what the board are looking for now is a price that will reflect at this stage some of the very large capital investment that they are embarking on so that it will not come in one gigantic increase in years to come?

Mr. Collen.—That is one objective, but I object to the word “gigantic”.

45. Senator Cooney.—A large increase. Is it proposed to the National Prices Commission or to the Department that the way to do that is to change the basis of the board’s pricing from the cost of production plus allowable costs to an energy-related basis?

Mr. Collen.—Yes. Whether we get it fully to the energy-related basis is a matter for the Department obviously. We are putting forward our policy for them to look at.

46. Senator Cooney.—Can I take it that exercises have been done showing the cost to the consumer of turf priced on present cost plus allowable charges, present cost plus some of the future allowable charges and on a present energy-related and possibly future energy-related basis?

Mr. Collen.—They are being done. They will not come to our board for a fortnight so I have not seen them. We can discuss it but we cannot give you a rational answer because we do not know the answers. Those are the right questions and if we are asked in three months’ time we will be able to give the answers. Our chief accountant is doing the figures and will be presenting various options to us. We will select one of those options and then it goes to the Department. I have not seen the figures.

47. Senator Cooney.—When will the customer buying turf know?

Mr. Collen.—In all sincerity, I could not say. They are coming up on Friday week, are they not?

Mr. Tipper.—They are.

Mr. Rhatigan.—This is an on-going thing, a price review every year. Senator Cooney is very tenacious on this point. We would not like to give the impression here that we suddenly want to salt every customer in the country. We do not. We have a major job, which is to develop every acre of bogland in the country. Unfortunately, we are coping with inflation and with high capital costs. There has to be a more realistic attitude to our overall pricing policy. We are aiming in the long term at giving the community a fair crack of the whip. We could be talking improvidently today and could continue borrowing, but there is a rational, a mean line here.

48. Senator Cooney.—I agree that one must have realistic prices in commercial terms, but what worries me is that in seeking that realism the board are not taking the criterion that turf is a cheap indigenous fuel, but rather the criterion set by OPEC and the current cost of energy. Comment?

Mr. Rhatigan.—The days of cheap fuel have gone. Taking what we are coping with, over the last four or five years, since the energy crisis, the average inflation has been 15.3 per cent a year. Energy is dear, the days of cheap fuel and cheap peat are gone. People will have to face it.

Mr. Collen.—We are milling peat now that was developed 15 years ago. That has a very low load of interest on it, so, really each generation should in fact be paying more.

49. Senator Cooney.—What the board are asking now is to be allowed charge the same price as for, say, coal?

Mr. Collen.—It is not as straightforward as that. We want to just spread the load over a series of generations.

50. Senator Cooney.—At the moment, how does the price of briquettes compare with that of coal?

Mr. Maher.—The present average price of briquettes is almost exactly half the average price of coal.

51. Senator Cooney.—But the board do not want to double the price of briquettes to bring it up?

Mr. Maher.—No. What we are looking for is a good market price.

52. Chairman.—Is it not true to say that over the last few years your surpluses have increased as compared to previous years? Would it be fair to say that the board have been over these years achieving their policy of getting an increased price so as to cushion the very much increased price that we will have in years to come?

Mr. Tipper.—The surpluses have been in the region of about £500,000, and £800,000 in the previous year. It is in somewhat that region this year too. There is not a very significant difference in them.

53. Chairman.—As compared with seven or eight years ago, has it not shown an upward trend?

Mr. Collen.—Not as a percentage of the turnover.

Mr. Tipper.—I would not say it was significant at all.

Mr. Rhatigan.—We had a bad patch in the sixties. We had a succession of bad weather years. We had a run of good years in the early seventies, particularly during 1974, 1975 and 1976, when we have had bumper production.

54. Chairman.—It happened rather than that it was planned?

Mr. Rhatigan.—If we were not developing, or if we had not a basic remit to develop the remaining indigenous fuel in the country, then the board’s policy would be to pay their way, and perhaps show a modest surplus against a rainy day and to provide for the nation as cheap an indigenous fuel as we could. One will not develop bogs out of thin air; it costs money.

55. Chairman.—The various Turf Development Acts require the board to pay interest and to repay advances. There does not seem to be any other financial objective laid down in the Acts. Over the years have the Department added objectives or have the board adopted objectives? Is the board’s policy more sophisticated than merely to pay interest and to repay advances?

Mr. Collen.—That virtually has been the policy. If the Committee look at our statistics, the capital employed is £29 million, and our surplus is £500,000. If we were a multinational company we would be looking for a 25 per cent return, or an £8 million profit.

56. Chairman.—In the kind of new policy the board are discussing now, is it the first time the board have attempted to add to their financial objectives?

Mr. Rhatigan.—It is not entirely new. With the agreement of the Prices Commission and the Department—as stated in our annual report—there is a small incremental increase in our prices to help us to generate some funds for our capital programme. It is something like 3 per cent. There is no fundamental change. Our basic objectives if we were not developing new bogs today would be to pay our way, pay our costs, pay our overheads, show a modest surplus and provide for the nation a fuel as cheap as we could.

57. Chairman.—This is departing from the simple objective of paying interest and repaying advances?

Mr. Rhatigan.—We have to react to circumstances.

58. Deputy B. Desmond.—Is it fair to say that in terms of reserve funds for capital purposes the board are solely dependent on the Exchequer or European loans? What would happen if the State turned round, as has happened recently in relation to one piece of legislation, and said that the board may have authorisation to proceed with loans from non-Exchequer sources but without any State guarantee? What would the reaction be to that?

Mr. Collen.—It is very simple. If the Government give us an y-related price, we will raise the money ourselves.

59. Deputy B. Desmond.—Is the board prepared to go out into the open market?

Mr. Collen.—Yes, with an energy-related price. We would love it.

60. Deputy B. Desmond.—Would that affect your charges to the ESB? Do not the Department have a view on the board’s charges to the ESB? How do the board determine, for example, what they charge the ESB? Who decides that price? Is it the Department or the ESB in co-operation with the board?

Mr. Rhatigan.—It comes under the National Prices Commission.

61. Deputy B. Desmond.—Are ex-bog costs to the ESB NPC-controlled?

Mr. Rhatigan.—No. The NPC function is the overall allowable increase in costs to Bord na Móna. It is for us to determine then the spread of that across the spectrum.

62. Senator Cooney.—Are the board’s arms twisted to be more generous to the ESB than to other customers?

Mr. Collen.—No. We would fight it out with the ESB.

Mr. Rhatigan.—We are talking now about customer relations and we must remember that the ESB is a major customer. More than half our revenue comes from the ESB. The ESB will be buying our products for many, many years to come, so we have to be very realistic with a customer of that size.

63. Senator Cooney.—Is there any question that the ESB price would subsidise other activities or that other activities would subsidise the ESB price? There is no cross-subsidisation, is there?

Mr. Collen.—No.

Mr. Rhatigan.—Except that we are in a fortunate position in recent years. In the sixties, when oil was being given away, we were in the dog house over ESB prices; now the position is reversed.

Mr. Collen.—We are their favourite supplier.

64. Deputy B. Desmond.—At the moment presumably electricity generation costs in turf-powered stations are lower than in oil-powered stations?

Mr. Rhatigan.—Particularly in the milled peat stations.

65. Deputy B. Desmond.—Are the board not able to get a better price now from the ESB?

Mr. Rhatigan.—No, we are tightly controlled by the National Prices Commission.

Mr. Collen.—No, we are tightly controlled by the National Prices Commission in relation to our total overall allowable cost. It is for the board to decide how they will recover those costs through the prices.

66. Senator Cooney.—Will the board be looking for an energy-related price for all their products, from all their customers including the ESB?

Mr. Collen.—We will continue to spread it as equitably as we did in the past.

67. Senator Cooney.—From the ESB’s point of view will their milled peat stations become as expensive as their other stations?

Mr. Collen.—They might, but not necessarily. They will not be dearer.

68. Deputy B. Desmond.—Are the ESB looking for more output now?

Mr. Collen.—They are, at about 40 per cent.

Mr. Rhatigan.—Their basic load factors were 55 per cent and they have increased them to 70 per cent. A big increase in our third programme is to give additional milled peat to the existing milled peat stations. In addition they are building another 80 MW unit in Shannonbridge and a 40 MW in Lanesboro, so there will be very substantial demand.

69. Deputy B. Desmond.—Have the board guaranteed supply for that?

Mr. Rhatigan.—We have, for the next 25 to 30 years.

70. Senator Cooney.—So it goes on, whether the consumer pays an energy related price directly on purchases or whether the Exchequer funds the capital development by the tax-taker on the present pricing system?

Mr. Rhatigan.—That is right.

71. Chairman.—The board could charge more for briquettes and in fact are making a profit on them but what about machine-won turf? What category is that in?

Mr. Maher—It also makes a profit. I would prefer not to touch on moss peat pricing policies in public because it is mainly an export market.

72. Chairman.—I want to clarify one matter. In the case of machine-won turf is a profit made from all bogs?

Mr. Maher.—From some small bogs, like Glenties, there would not be a profit. On that aspect of it the cheap price of machine turf is a disincentive to people who might cut their own turf on small bog areas that are not suitable for machine operation. There is no way that anybody who has anything better to do with his time could produce turf at the price at which we are selling it. If there was a proper price I do not know what extra amount of energy could be produced on that. There are only small pockets of bog involved.

73. Senator Cooney.—Even at that, can you still sell your machine turf cheaper to the ESB than to other customers?

Mr. Rhatigan.—We do, because it is in very big quantities and the customer is there on the bog. The question of quality comes into it too. If you were to take all these variants into consideration the ESB are not perhaps getting as good a bargain as people seem to think they are.

74. Senator Cooney.—It is not as dry?

Mr. Rhatigan.—I will not say it is not as dry.

Chairman.—We will have to finish for today. We will have to ask you to come back next Wednesday, 21 November, 1979.

The witnesses withdrew.