PUBLIC UTILITIES (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The main aim of this Bill is to amend the Public Utilities Act (Chapter 261) to introduce new safety precautions for gas installation work and to reduce the incidence of damage to gas and water pipelines.

Currently, all gas service work is carried out by PUB's Gas Department or by contractors supervised by the Department. To allow the private sector to do some of this work, and supplement and complement the Gas Department's services, PUB has decided to introduce a scheme to license gas service workers. This will bring gas in line with the practice for electricity and water. PUB also regulates electricity and water supply installation procedures and practices. Private sector electrical contractors and plumbers can carry out the installation, provided they are licensed by PUB to ensure that high standards of work are maintained.

A new Part VA is therefore added to the Public Utilities Act to ensure that contractors take general precautionary measures when carrying out gas installation work. Part VA also deals with safety procedures and practices, maintenance of standards of work for contractors to ensure public safety, and safety of gas pipes affected by construction. It will require gas service workers to be fully trained and qualified for their job. It also stipulates the requirements and the circumstances under which a person will be allowed to perform gas service work. PUB will make the necessary regulations on these matters which will include the licensing of gas service workers and the control of standards and safety requirements for gas installations, appliances and accessories using PUB gas.

To curb the damage of water and gas pipes by contractors, a new section 96A makes it compulsory for contractors to determine the location of water and gas pipes before carrying out earth works. At present, there is no requirement for contractors to determine the presence of such pipes before they start work. In 1990, there were 289 cases of damage to water pipes by errant contractors, and 102 cases of damage to gas pipes. The cost of such damage is considerable, especially if we take into consideration the consequent disruption to supply.

For electricity cables, a similar amendment was introduced in 1988. This made it compulsory for contractors intending to dig holes near electricity cables to employ a licensed cable detection worker to find the electricity cables in the work site. This requirement has drastically reduced the number of cases of cable damage by contractors - by 80% between the last quarter of 1988 and the first quarter of 1991. Based on this experience, the proposed amendment should considerably reduce the damage to water and gas pipes.

Section 76(2) provides for the conviction of any person who damages any PUB electricity cable. However, under the existing provisions, it is very difficult to prosecute successfully a contractor for damaging a PUB electricity cable when his subcontractor or his agent or employee damages the cable, because of the legal requirement to impute knowledge of damage to the contractor. The new section 76(2A) will close this loophole and ensure that contractors bear the responsibility for any damage caused to PUB electricity cables.

The remaining amendments cover administrative matters. A new section 85A will allow PUB to impose a late payment charge on the minority of customers who do not pay their bills in spite of reminders being sent to them. A minority of PUB customers (about 11%) are persistent late-payers.

The opportunity is also taken to streamline PUB's operations and bring them in line with other statutory boards and to allow greater flexibility in the administration of the Board's affairs.

Sections 14(6) and 14(7) are amended to grant PUB greater autonomy in deciding on terms and conditions of service of PUB employees, salaries, appointment, promotion and disciplinary control. This is similar to the powers granted to other statutory boards and is in line with the Government's policy of giving greater flexibility in personnel matters to statutory boards.

Section 33 is amended to allow the Board greater flexibility and scope to invest its surplus funds. This is consistent with the financial operations of other MTI statutory boards. The present provision restricts PUB's financial operations as it can only invest in securities authorised for investment of trust funds. Section 73(1) is amended to make it compulsory for the Board to obtain the Minister's approval for the sale of land. This amendment is in line with the Government's policy to ensure conformity in the use of land in the public sector.

Section 87 is amended to widen the existing presumption against the customer in cases of tampering of electricity meters. PUB's experience investigating cases of tampering has shown that the culprits make holes in the meter cover in order to insert a wire or some other artificial means to stop the meter from registering. To prevent fraud through this device, section 87 is amended to include holes made in the meter cover.

It is intended that the amendments come into operation with immediate effect.

Sir, I beg to move,

Question proposed.

Mr Chew Heng Ching (Eunos GRC): Mr Speaker, Sir, I have some observations on some clauses in the Bill. Sir, I see this Bill as another step forward towards privatising the PUB. By this, I am referring to clauses 2 and 3 of the Bill. Allowing the Board to form companies for the purpose of carrying out its functions and to decide on the remuneration and terms and conditions of employment for its employees are just two clear indications that the Government is preparing for the privatisation of the PUB.

Sir, I welcome this idea so long as the end result of any privatisation exercise must be a more efficient use of our limited manpower, capital and land resources, so as to produce energy resources in the most cost effective manner. Ultimately, this exercise must benefit the general public and this could be in one or two forms. The public could benefit by becoming shareholders in the privatised company, or they could benefit, as consumers, by paying lower utility charges arising from whatever savings as a result of privatisation.

Sir, notwithstanding this argument, the question in the minds of some members of the public is: will the PUB be out to maximise profits after privatisation? If so, they fear that the utility charges may increase instead of decrease, and they are, therefore, not in favour of privatisation.

I have the following questions for the Minister:

(a) When will the PUB be privatised?

(b) In what form will the PUB be privatised, that is, will the public be invited to subscribe for shares?

(c) Will the private sector be allowed to set up similar services to compete with the PUB, after the PUB has been privatised?

(d) Will the Minister give the assurance that whatever cost savings that may arise from privatisation will be passed on to the consumers?

Sir, I have one more observation and this pertains to clause 11. The Bill empowers the PUB to charge a penalty for late payment. While I think the intention for introducing this late payment charge is fair and is aimed at recalcitrant late payers, we must allow for consumers who are genuinely facing financial hardships. I would like to suggest that the PUB consider setting up an Appeal Committee, within the Board, to look into hardship cases, so that consumers who are facing financial difficulties are not unnecessarily burdened by these late payment charges.

Dr John Chen Seow Phun: Mr Speaker, Sir, clause 2 of the Bill amends section 14(6) and (7) so that approval of the Minister is no longer necessary for the Board to make rules relating to the appointment of employees, the remuneration of such employees and the terms and conditions of their appointment. My question is whether this applies to bonuses as well, and whether the Board can now decide on the year-end bonuses without the approval of the Minister.

BG Lee Hsien Loong: Mr Speaker, Sir, the Board has always had autonomy in deciding how much it needs to pay its employees to match the market rate, although it normally consults the Minister. This also extends to bonuses. I do not foresee that there will be any unilateral declaration of independence on the part ofany MTI statutory board in the immediate future.

I come to Mr Chew Heng Ching's two points. First, on privatisation. He has asked a series of questions. I would say, just briefly, that PUB is still studying how best to privatise it. It is not the first statutory board which will do so - we have said that will be Telecom. Even that will take some time and PUB will only follow after we have had experience with Telecom. Because we are not in a hurry and we want to make sure, as Mr Chew says, that the public will benefit, firstly, as shareholders and, secondly, also as consumers. PUB has not completed its study yet. They have management consultants advising them. When they are ready, we will give a full explanation. If Mr Chew would care to file a question in a few months' time, I will give him a fuller answer.

We are not privatising in order to increase utility charges. We have always maintained utility charges as low as possible, consistent with recovering cost and operating economically. This must continue after we have privatised. The hope, of course, is that by privatising, we will make PUB operate even more efficiently than they are now doing. Probably, there are some savings which are possible. If you ask PUB, because they have done a good job, they will tell you that it is not likely that these savings will be huge because, if there were, that would be an indictment of what the PUB is doing. The PUB has, in fact, been doing a very efficient job. If you compare our utility rates with other countries in the region even oil producing countries, they are very reasonable.

Private sector participation in providing services. In the case of gas, I think that is possible because already PUB is competing with liquefied petroleum gas (LPG). And PUB thinks that it is unfair competition, unfair against them, because the LPG suppliers do not have to manufacture their product. It is just surplus waste from the oil refineries which is being bottled and then sold to consumers for slightly less than what PUB is charging for town gas. But that will continue. PUB has no monopoly of gas.

For electricity, there is a certain economy of scale because there is one national grid and you cannot easily allow somebody else's power station to tap into the grid and supply electricity. The system is too small. If that single private power station misbehaves, the whole system may be brought down. So the scope for hiving off the electricity part is more limited. What is most important is that where a natural monopoly like that is established and privatised, there should be a proper regulatory control. If there is no control and the monopoly maximises profits, and creams off the consumers, this will lead to outrage and be totally unjustifiable.

So one of the major issues PUB must study and come up with a satisfactory solution before it can become privatised is what is the form of this regulatory control. It must be fair both to the shareholders as well as to the public. Now the Government is a shareholder, the regulatory control is MTI. If PUB wants to make a drastic change to the rate structure, raise tariffs, or reduce tariffs, MTI has a final say, and the Government, as a shareholder, bears the consequences. But if there are private shareholders, then the Government cannot fairly say, "you hold down prices regardless," just because it is politically convenient to do so. We may cause the private shareholders to lose money on their investments. So there has to be a fair, objective, long-term, open basis for revising prices from time to time, and for deciding what is the fair rate of return, taking into consideration cost, fuel, improvements in productivity and cost of living.

It is not a new problem. Electricity and utilities the world over, and especially the United States and Britain, are regulated more or less successfully. We have to find a model which will work for us.

Finally, Mr Chew's separate point on the penalty for late payment. Here, I would point out that while PUB will consider all hardship cases sympathetically, it has a responsibility to the shareholders and, in fact, to the other consumers who pay up on time. It is not able to waive either the charges or the late payment charges for people who do not pay on time. To do that is to encourage everybody else also to pay up late and take advantage. However, it will consider cases sympathetically and make arrangements for customers with genuine difficulties to pay their PUB bills by instalments. I believe this is the same arrangement which many Town Councils are introducing.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [BG Lee Hsien Loong].

Bill considered in Committee; reported without amendment; read a Third time and passed.