CIE, ESB caught in cleft stick

While the ethos of the open market now holds sway in most State companies their decision-makers are still the meat in a triple-decker burger, wedged between incompatible forces; the political requirements of their task masters often at variance with the need to turn a profit and provide public services at reasonable cost.

Management at both the ESB and CIE are no strangers top the cleft stick syndrome. . The two State operations this week found themselves, to use that dreadful phrase, "singing from the same hymn sheet" in that, while both reported a profitable year, each seek unpopular price rises to ensure operational competitiveness. The financial transformation was most marked at CIE where the war on costs has turned the operation around from prior losses of £56.5 million to a modest £5 million profit. Group revenue, which includes the State subvention of £105 million, increased by £6 million to £341 million. CIE carried 302.5 million passengers last year, the highest in more than 20 years Chairman Brian Joyce reasonably pointed out that £5 million was but a drop in the ocean of the sort of investment required to keep the organisation on track and road. CIE is seeking a phased fares' increase of 10 per cent, Joyce pointing out that there had been no increase for seven years despite higher overall costs. Capital expenditure on rail and bus services last year amounted to £64 million, a whopping increase on the previous £37.5 million and further substantial spending will take place over the next eight years. Buoyant demand for electricity to feed the growing needs of a vibrant economy powered the ESB to record net profits of £160 million last year, a 21 per cent increase over 1996. The sting in the tail for the end user is that, despite the record performance, the State monopoly is pushing for a 3 per cent price rise. If approved prices for domestic consumers could rise by 5 per cent.

The ESB argues that, as by February, 2000 around 28 per cent of the domestic electricity market will be open to competition, the utility must be permitted to generate greater profits for investment in new plant and to upgrade existing generating capacity. It proposes to invest around £1.7 billion over the next five years. ESB chairman Billy McCann argues that the £160 million surplus represents only a 10 per cent return on capital employed, still short of the 12 per cent target set out in the corporate plan, a level deemed necessary to enable it to "meet the challenges ahead ". The real challenge for the ESB is that consumers may pull the plug on the old reliable ESB, switching into another server offering better value for money.