Sustainable Energy Authority of Ireland - 2009 Accounts

Mr. Aidan Dunning (Secretary General, Department of Communications, Energy and Natural Resources) and Professor J. Owen Lewis (Chief Executive Officer, Sustainable Energy Authority of Ireland) called and examined.

Today we will examine the 2009 annual report of the Comptroller and Auditor General and Appropriation Accounts: Vote 30 - Department of Communications, Energy and Natural Resources and chapter 26 - energy programmes, as well the financial statement for 2009 for Sustainable Energy Authority of Ireland.

Before we commence, I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to the committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions of Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies.

I welcome Mr. Aidan Dunning, Secretary General, Department of Communications, Energy and Natural Resources and invite him to introduce his officials.

Mr. Aidan Dunning

I am accompanied from the Department of Communications, Energy and Natural Resources by: Mr. Brian Carroll, corporate finance and planning division; Mr. Éanna Ó Conghaile, broadcasting division; Dr. Stjohn O'Connor, energy division; Mr. Dave Hanley, communications development division; and Mr. Ken Spratt, communications policy division. I am also accompanied by Professor J. Owen Lewis, chief executive officer, and Dr. Brian Motherway, from the Sustainable Energy Authority of Ireland. I am accompanied by Ms Stephanie O'Donnell and Ms Áine Stapleton from the Department of Finance.

They are all welcome. I invite Mr. Buckley to introduce the business to be conducted today. The full text of chapter 26 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie.

Mr. John Buckley

The Department of Communications, Energy and Natural Resources had gross expenditure of €473 million in 2009. It had income in the form of appropriations-in-aid of €241 million, the bulk of which was made up of broadcasting licence fees of €226 million. A clear audit certificate issued on the Appropriation Account. Chapter 26 records the results of an in-depth examination of three energy schemes funded from the resources of the Vote and implemented through the Sustainable Energy Authority of Ireland, SEAI. Much of the energy policy of the Department is implemented through the SEAI. It spent €83 million in 2009, of which €72.6 million was expended on energy programmes.

The schemes reviewed in the course of audit were the warmer homes scheme which had been running for seven years and on which €26 million had been spent up to 31 December 2009; the greener homes scheme which had been in operation for four years and on which €67 million had been spent and the house of tomorrow scheme which had been set up in 2001 and on which €27 million had been spent up to the end of 2009. The three scheme address energy policy objectives in different niches.

The warmer homes scheme attempts to make a contribution towards addressing energy poverty - an inability to heat one's home to a safe and comfortable temperature. It makes this contribution by installing energy efficient measures such as insulation, draft proofing and cylinder lagging and, since last year, central heating and dry lining in homes built before 2002. Up to 2009, the principal delivery mechanism was through community-based organisations, but latterly contractors have also been engaged.

The greener homes scheme focuses on renewable energy and gives grant support for installations such as solar panels, heat pumps and appliances that use renewable sources of fuel. The scheme which commenced in 2006 had a life of five years.

The house of tomorrow scheme dates back to 2001. Its focus was, through assistance for developers, on incorporating energy saving technologies in new homes. One third of the investment was in public sector areas such as regeneration schemes and the provision of sheltered accommodation.

The audit examined two main issues: whether the administration of the schemes was in accordance with scheme rules and whether the learning from the schemes had been evaluated. From an administrative perspective, the audit found that the scheme payments had been in accordance with the scheme rules and duly authorised.

The audit also looked at whether the learning from the schemes had been evaluated. In this respect, it is important that innovative approaches are formally evaluated after a reasonable period to assess whether the results are desired, intended and functional and the scheme objectives are being achieved. In the case of the warmer homes scheme, energy poverty can derive from factors that include family incomes, fuel price levels and household priorities, as well as the energy efficiency of the dwelling. However, it is important to assess whether and to what extent the scheme or the combination of State measures in this area is effective in addressing fuel poverty. It is also important to evaluate the effectiveness of the delivery systems. The forthcoming energy affordability strategy which I understand is at an advanced stage of completion should provide an opportunity to address these issues.

The greener homes scheme is designed to encourage a shift from fossil fuel usage, with attendant reductions in CO2. From an evaluation perspective, it is also useful to have a quantified indication of the additional costs and benefits of the measures. No doubt, the value for money review in progress will address this issue. In addition, given the level of issues around installation, the SEAI may need to generate better information on the overall effectiveness of installations. One way of doing this would be to separately evaluate a sample of random inspections annually since randomly selected cases would give a more reliable measure of the overall position.

The house of tomorrow scheme is coming to the end of its life. Again, it would be useful if the expected efficiency gains being attributed to the new standards incorporated in new building regulations could be linked in an evidenced-based way with results from the house of tomorrow scheme investments. I understand some post-occupancy research is being conducted which should help to bridge the gap between design effectiveness and actual operational performance.

I invite Mr. Dunning to make his opening statement.

Mr. Aidan Dunning

I wish, first, to address some issues relating to chapter 26 on energy programmes and then to highlight key features of the Vote accounts in 2009. The Comptroller and Auditor General's audit focused on three energy related programmes, the greener homes scheme, the warmer homes scheme and the house of tomorrow scheme. Cumulatively, €120 million has been expended to date on the three programmes since their introduction. While the house of tomorrow scheme has been terminated, the other two schemes continue to play a significant role in tackling energy costs through energy efficiency measures and in promoting renewable technologies.

The greener homes scheme was launched in 2006 as part of a package of measures designed to develop an initial market for renewable heating technologies and fuels in Ireland. The sector had a series of market failures at the time, including an almost complete lack of retail outlets for equipment, very few trained installers, no real heating market for biomass, and a distinct lack of information for consumers. The greener homes scheme was designed as a market development measure for the retail sector and provided capital grant aid for specific equipment types on the basis of strict conditions. These conditions included requirements that only equipment appropriately certified and included in a list maintained by the Sustainable Energy Authority of Ireland would be supported. Furthermore, as the scheme developed, qualified installers had to be used. In fact, the SEAI was instrumental in establishing the training syllabus for these courses, and it also established and ran an inspection regime. This regime was risk-based, being consistently aimed at newer installers and new technologies with a view to continually improving the service to consumers.

The outcome of the greener homes scheme, apart from the more than 40,000 homes that have had installations supported under it, has been the creation of a viable and sustainable market for renewable heating technologies. In turn, this allowed the amendment of Part L of the building regulations in mid-2008 which made having an element of renewable heating obligatory in all new homes. At this time, the scheme was amended so as to be applicable to existing homes only. This significantly reduced demand, as reflected in the lower uptake since. The cumulative cost to date to the Exchequer of the scheme is €72 million.

The warmer homes scheme was established in 2003 and provides for thermal efficiency upgrades free of charge for low-income households throughout Ireland. Measures delivered include attic insulation, wall insulation, lagging jackets, compact fluorescent lamps - CFLs, energy advice, heating controls and, in certain instances, heating system upgrades and external insulation. The programme was designed to assist those households unable to afford the capital cost of improving the thermal efficiency of their home and is the primary efficiency measure by which low-income households are protected from energy poverty. The programme relies heavily on a countrywide network of community-based organisations, of which 28 are active and which are assisted by a panel of private contractors. In recent years the programme has expanded considerably from upgrading more than 2,102 homes in 2006 to a position where this year will see nearly 25,000 homes benefit under the programme, bringing the total number of homes assisted under the scheme to around 60,000. The cumulative cost to date to the Exchequer of the scheme is €51 million.

Paragraphs 26.16 and 26.17 of the conclusions of chapter 26 refer to the fact that no external evaluation of the warmer homes scheme has taken place and the lack of a methodology to define and target households in energy poverty. The Department, in conjunction with the SEAI, keeps the scheme under ongoing scrutiny and recognises the need for ensuring households with the greatest need should be targeted first. To date, eligibility has largely been determined by the applying household being in receipt of the Department of Social Protection funded fuel allowance, although more recently this has been relaxed where there is a sufficiently pressing need. In this regard, the SEAI is in constant contact with the Department of Social Protection, MABS, the Society of St. Vincent de Paul and energy suppliers, not to mention GPs and health professionals, and will take referrals from all of these sources.

The Department and the SEAI are of the opinion that the warmer homes scheme is within available resources delivering measures where needed. Nonetheless, the forthcoming affordable energy strategy will address the issue of targeting and eligibility for the scheme. Any consequent changes will be implemented in 2011.

The house of tomorrow programme was established in 2001 as a means of testing the feasibility of extending the thermal efficiency aspects of the building regulations by 40% relative to prevailing standards. The programme was aimed at developers who were building more than ten units and successful in demonstrating that it was possible to increase the efficiency standards of the building regulations. Over 4,000 housing units were assisted under the scheme. Apart from the thermal efficiency benefits arising in these cases, the overall impact of the scheme was that the building regulations were revised in 2008 to reflect house of tomorrow standards. Full transformation in regulatory standards setting new performance norms in the new house market was the key objective of the scheme. Having achieved this objective, the scheme is now closed after a total cumulative spend by the Exchequer of some €27 million.

I will turn briefly to the account for the Vote and will point, first, to the savings made in the Department's administrative budgets in recent years. The total spend in this category was €40 million in 2007, €31.6 million in 2008 and €25.4 million in 2009, representing a reduction of 37% in a three year period. This partly reflects the transfer of some functions but mostly represents a major reduction in staffing resources in the Department from 339 at the end of 2007 to an estimated 269 at the end of this, representing a reduction of 70 or 21%. Notwithstanding this, the Department has continued to oversee and implement a wide range of new and existing programmes and provide policy advice in the areas of communications and energy, in particular.

As regards the programme spend in 2009, there was expenditure of over €47 million on communications, multimedia developments and the information society. Most of this expenditure was on broadband development, including the construction of phase 2 MANs, the Kelvin international connectivity project and the national broadband scheme. A total of almost €81 million was spent in the energy sector. Almost €80 million was provided for the Sustainable Energy Authority of Ireland in 2009, mainly for the implementation of energy efficiency programmes and the promotion of renewable energy sources. Schemes funded included the mainstreaming of the home energy savings scheme which was piloted in 2008, the warmer homes scheme and the greener homes scheme. Support was also given towards supporting energy efficiency in industry and the public sector.

Other programme expenditure in 2009 included €269 million on broadcasting, of which over €204 million was paid in grant aid to RTE in respect of the revenue from the sale of television licences. In addition, grants of €36 million and €4.5 million were provided for TG4 and the then Broadcasting Commission of Ireland, respectively. The commission has since been replaced by the levy-funded Broadcasting Authority of Ireland. No Exchequer liability will arise in that regard in the future.

More than €31 million was paid to meet the administration and operational costs of the central and regional fisheries boards and the Loughs Agency. As part of the agency rationalisation programme, the eight central and regional fisheries boards have been merged into one entity - Inland Fisheries Ireland. Under the natural resources heading, more than €14 million was spent, of which €5 million was by way of grant-in-aid to Ordnance Survey Ireland. In addition, €3.7 million was spent on mine rehabilitation, €3.5 million on the national seabed survey and €1.1 million on various geoscience initiatives.

I confirm that my Department has an internal audit unit which operates in accordance with a written charter. Its annual audit plans are approved by me and an independent audit committee. These audits may cover any area of activity involving public funds within the remit of the Department. The audit committee's written charter has been signed by me as Secretary General and by the chairman of the committee. The committee is headed by an external chairman and has three other external members and two internal members. Internal audit reports are circulated to the Comptroller and Auditor General and representatives of the Office of the Comptroller and Auditor General meet the committee annually.

The audit committee considered 13 audit reports in 2009. The audits were in the following areas: corporate - three; communications, broadcasting - two; energy - two; natural resources - four. A further two reports were on cross-cutting audits. I circulated the 2009 annual output statement of the Department to the committee in advance of the meeting.

May we publish the statement?

Mr. Aidan Dunning

Yes.

I welcome Mr. Dunning and his colleagues. The first few issues he raised were related to the Sustainable Energy Authority of Ireland. I am familiar with the greener homes and warmer homes schemes, but I was not familiar with the house of tomorrow programme. I do not think it is operational at present.

Mr. Dunning said the cumulative cost to the Exchequer of the warmer homes scheme was €51 million. He went on to refer to the conclusions of chapter 26 about the lack of external evaluation. The reports I have received from persons who have availed of the scheme have been extremely positive about the quality of the work done. Obviously, these are non-professionals. However, those availing of the service have been highly impressed with the level of work done. They measure it by how warm they feel in their homes afterwards and feel their homes are warmer. It is a marvellous scheme and I am delighted it is working so well. Are there any plans to address the problem of the lack of external evaluation of the scheme?

Mr. Aidan Dunning

I appreciate the Deputy's comments about the warmer homes scheme. They reflect the feedback that the SEAI has been getting in its efforts to try and carry out a sample survey of responses to it. There are no plans to carry out an evaluation of the scheme, but we will be talking to our colleagues in the SEAI to see if it can be done. It has to be put in the wider context of the energy affordability strategy which is being produced and almost finalised within the Department. It involves many other stakeholders. It will be submitted to the Minister and then to the Government for approval. We see it as learning the lessons, so to speak, which all of the stakeholders bring to the discussion in terms of how the energy affordability strategy should be tailored for the future, if required, with a view, perhaps, to targeting it better. Therefore, while there has not been a formal evaluation, there has been a great deal of discussion under the umbrella of the process.

It is our view that the target audience for the warmer homes scheme, those in receipt of fuel allowance - it was lately extended in order that it can also apply to the working poor - is the right target. Energy poverty is a function of three factors - the price of energy, a person's income and the thermal efficiency of the home. These three factors will inform the deliberations of the energy affordability strategy. We believe that by targeting the scheme at the areas we are currently targeting we are ticking these boxes. While an evaluation can certainly be carried out - I am always generally in favour of carrying out an evaluation at an appropriate time of schemes such as this - my gut feeling is that the scheme, as it stands, is hitting the targets it must hit. What we need to ascertain is whether it can be nuanced to hit targets even better, particularly persons who are not on social welfare but who might be the working poor or are on low incomes and might not have qualified for the scheme hitherto. As I confirmed in my statement and as the SEAI will confirm, efforts are being made to ensure they will be brought in under the scheme to the extent that we can within the resources made available to us.

Mr. Dunning has said it is normally funded for persons in receipt of fuel allowance but that this requirement has been relaxed where a more pressing need arises. In what way has it been relaxed? I was not aware it was being relaxed, although, in fairness to those who operate the scheme, they tend to take a common-sense approach which is not often common in State schemes. Perhaps Mr. Dunning would elaborate a little on it.

Mr. Aidan Dunning

I mentioned it in my statement, but I might not have conveyed it very well. The HSE at local level, general practitioners or the Money Advice and Budgeting Service, MABS, might come across people who are not on social welfare or in receipt of fuel allowance but where it is clearly visible that works to improve thermal efficiency are required. There is provision for them to bring this to the attention of the SEAI. In that instance the SEAI, again within available resources, will endeavour to provide for retrofitting to bring the house up to standard. It is not a question of relaxing the requirement but of trying to extend the scheme to the categories who are referred by the agencies mentioned.

I am puzzled about the figures listed on page 7 and those which appear on page 11 of the annual accounts to 31 December 2009. On page 11, in respect of State grants, a figure of €8.35 million is provided in respect of current expenditure and the figure for capital expenditure is €71.9 million. This means the ratio of current to capital expenditure is 1:9, which, at first glance, seems quite impressive. On page 7, however, a figure of €10.6 million is provided in respect of administration expenditure, while the figure for programme expenditure is €72.6 million. If one subtracts the figures on page 11 from those on page 7, this means €2.4 million of the additional income coming in is going on current expenditure and €700,000 is going on capital expenditure. There appears to be a complete imbalance. It is as if the figures are being massaged in some way to present a better picture with regard to State grants.

Mr. Aidan Dunning

I am not sure to which figures the Deputy refers.

To which accounts does Deputy Kenneally refer?

I refer to the annual accounts of the Sustainable Energy Authority of Ireland, SEAI, to 31 December 2009. The figures provided on page 11 in respect of current and capital expenditure are €8.35 million and €71.9 million, respectively. When these are added together, the total is €80.2 million. This amount represents the total of State grants and there is an impressive current to capital ratio of 1:9. On page 7, total income is listed as €87 million and total expenditure comes in at €83 million. An inordinate amount of the latter figure seems to have been spent on administration and programme expenditure as against what happened in respect of State grants. The figures do not appear to add up.

Mr. Aidan Dunning

I apologise but I am having difficulty in understanding the Deputy's point.

Some €80.2 million has been expended in State grants, while €83.3 million was expended in total.

Mr. Aidan Dunning

That €83.3 million is under-expenditure.

So approximately €3.1 million of the SEAI's expenditure is on non-State grants. Of this amount, however, €2.4 million appears to be on the current side and €700,000 on the capital side.

Perhaps we might allow the Comptroller and Auditor General to comment.

Mr. John Buckley

One must take account of the SEAI's total resources. It gets €80 million from the State but it also gets €4 million by way of receipts under the BER scheme. That is feeding into the SEAI's total resources.

The point I am making-----

Mr. John Buckley

Relates to the balance between administration and capital expenditure.

Mr. Aidan Dunning

With the Chairman's permission, I will ask Dr. Motherway, who deals with our accounts, to comment on that matter.

Dr. Brian Motherway

To clarify, the figures on page 11 represent the running costs associated with the grant programmes. However, some of our smaller programmes do not have capital budgets. I refer to the commissioning of research and policy and our work in supporting business on energy costs. What the Deputy refers to in the difference is the current budget associated with programmes that are purely current budget programmes. Their function is not to administer capital budget funding but to do other things directly related to the wider agenda of the authority.

That is fine. It is indicated on page 12 of the annual accounts that staffing numbers at the authority suddenly increased - from 43 to 51 - immediately prior the moratorium on staff recruitment coming into effect. Was this done to beef up staffing levels or were there other valid reasons for the increase?

Mr. Aidan Dunning

Again, I ask Dr. Motherway to comment on that matter. In fairness to the SEAI, however, the extent of the programme which it is obliged to administer has increased exponentially in recent years in the context of additional expenditure and preparations for the retrofit programme, which is due to be announced in the immediate future. In view of that level of acceleration of increase in spending, it was agreed with the Department of Finance that a special case could be made in respect of some increase in the number of staff at the SEAI so that the significantly heavier workload being placed on it might be administered properly. The increase in staff was not designed to circumvent the moratorium. The correct procedures were followed and approval was obtained from my Department and from the Department of Finance.

If that is the case, why did the number of agency or contract staff increase to such a degree during 2009?

To what part of the annual accounts does the Deputy refer?

I refer to page 12 of the accounts. The expenditure relating to agency or contract staff increased from €216,000 to €520,000.

Dr. Brian Motherway

As the Secretary General indicated, 2009 was a year of significant growth, particularly in the context of the establishment of the home energy saving scheme as a national programme and the very considerable increase in the budget relating to the warmer homes scheme. Some of the agency and contract staff to which the expenditure relates were temporarily employed to assist with the initial set-up in respect of new schemes. They were involved in establishing IT systems, designing technical codes, and so on. The amount to which the Deputy refers is something of a once-off fixed cost associated with the growth of those main programmes.

I presume approval was obtained from the Department of Finance in this regard.

Dr. Brian Motherway

Yes.

I presume the number of agency or contract staff decreased this year.

Dr. Brian Motherway

Unfortunately, I do not have the figure for 2010 with me. However, the cost associated with those fixed phases of initiating and growing programmes will certainly have diminished.

Mr. Aidan Dunning

Obviously, the permanent schemes have been ramped up and this warranted the appointment of additional staff. They will remain in place. I refer here to the slight increase in the number of staff at the SEAI to which the Deputy initially referred. As Dr. Motherway stated, the once-off increase should not carry through into the figures for 2010.

That is fine. Why was the name of the authority changed to the Sustainable Energy Authority of Ireland from Sustainable Energy Ireland? On two occasions at this meeting Mr. Dunning referred to it as the Sustainable Energy Authority of Ireland. I cannot understand why bodies change their titles slightly for no valid reason. There are costs associated with such name changes. Why was this done and how much did it cost?

Mr. Aidan Dunning

I will ask Professor Lewis to deal with that matter. However, I cannot see how costs of any significant nature would be associated with such a change.

Professor J. Owen Lewis

The change arose because the legislation under which the authority was established refers, in the main, to the Sustainable Energy Authority of Ireland. When our previous strategic plan expired, we, along with the board, drew up a new plan to cover the period 2010 to 2015. When we were publishing it we regularised the name of the authority. In that context, we brought the name in common usage into line with that which the Legislature bestowed upon us in the 2002 Act.

That is not a valid reason for the change. This has happened not just in the case of the authority but in other agencies. I cannot understand why such name changes have to be made. What was the cost associated with the change?

To clarify the position, under the legislation there was a requirement that the name be changed.

I did not realise that.

The authority had no choice in the matter.

Professor J. Owen Lewis

I am not sure if that-----

Mr. John Buckley

Section 4 of the Sustainable Energy Act 2002 states:

There shall stand established, on the establishment day, a body to be known as Fuinneamh Inmharthana Éireann — Údarás Fuinnimh Inmharthana na hÉireann or in the English language Sustainable Energy Ireland — The Sustainable Energy Authority of Ireland (in this Act referred to as the "Authority") ...

The authority was, therefore, given that formal name in the legislation under which it was established.

Professor J. Owen Lewis

I assure the committee that the costs involved were minimal. We did not scrap any literature or anything of that nature. As new material appeared, we simply phased in the correct name. There was no extravagance in this.

The authority had no control over it and had no choice.

Professor J. Owen Lewis

I am not sure if anyone would have pulled us up if we had continued to use it but it seemed like an appropriate time to regularise the situation.

Broadband has exercised many committees for a long time. The Department's remit is to promote high quality telecommunications infrastructure, especially broadband. How much has been spent on that of late? How successful has it been? Are we getting a return on the investment?

Mr. Aidan Dunning

With regard to broadband infrastructure policy, the Minister issued an important policy document in June 2009. The main focus of investment is with the private sector. We estimate that approximately €600 million is invested by the private sector in broadband infrastructure. As the Deputy will be aware, we do not have any State telecommunications company. The State intervenes in areas of market failure and has done so in several areas. Metropolitan areas networks are one, which we discussed in detail here last year, where approximately €170 million over a number of years has been spent in putting top of the range fibre optic cables in place, particularly in significant urban areas to help them as a magnet for industrial development.

We have also intervened through the national broadband scheme, NBS, to ensure, particularly in rural areas, that infrastructure is available to people and premises that did not have access. That is an important economic and social intervention. The total gross cost to the State of that is €79 million of which we will recoup €40 million from the European Regional Development Fund, ERDF. For a net cost of approximately €40 million, more than 230,000 premises in the State will get access to broadband services that they did not have before. By any standard, that is extremely good value for money and a hugely important intervention.

We have also intervened in regard to international connectivity with Global Crossing a few years ago and, more recently, with the Project Kelvin scheme that provides connectivity for the north west and the Border counties, in particular, which were lagging behind in this area, with markets in the UK and the US through submarine cables. The cost was quite small. It was ERDF funded. The net cost did not run to much more than €11 million if my recollection is correct.

In the context of nurturing digital skills for the future workforce, which is a particular priority of the Minister, we have put in place for 78 secondary schools 100 mb broadband connectivity, which is a pilot project and on which it is intended to build to roll out to all secondary schools eventually, subject to resources being available. That will certainly enable the pupils in those schools to become much more digitally literate and to have access to top of the range broadband connectivity. That is important in the context of the knowledge society to which we all aspire. Our interventions are not large. Our total spending is between €40 million and €50 million, which is not huge, but it is well targeted at areas of market failure primarily.

What is the coverage nationally now?

Mr. Aidan Dunning

We have almost 100% but not quite. The NBS was targeted at those areas that did not have broadband coverage. It is just about completed now. All the more than 1,000 electoral districts have been enabled for broadband and that is combined with what is provided by all the other various service providers in the private sector throughout the country which are in strong competition with each other. The costs of communication of broadband have gone one way over a five to seven year period compared to the consumer price index, which has gone up.

The EU target is for universal coverage by 2013 but we are almost there with the NBS in place and there are proposals to augment the scheme with a scheme called the rural broadband scheme. There are a number of premises, which for various technical reasons, just cannot get broadband, whether it is line of sight or whatever. In cases where it is not possible to provide wireless broadband it is our intention to target those houses. This is a difficult scheme to put together because the houses are peppered all over the country and we are trying to put a broadband scheme in place. Again we have secured a promise of EU rural development funding to co-fund that project. It is in the course of preparation and it will be submitted to government shortly and we hope to be in a position to launch. When that is done, we will effectively have 100% coverage before the EU requirement period of 2013. We cannot guarantee that everybody will take it up but at least we will know the infrastructure is in place.

So we will meet the 2013 target?

Mr. Aidan Dunning

Yes.

I thank the Chairman for his indulgence.

We may have coverage but the quality dips considerably when demand increases is certain areas. What assurances can Mr. Dunning give about the quality of the broadband service?

Mr. Aidan Dunning

This is area is dynamic in terms of technological advances. Quality is very much dependent on bandwidth and speed and our figures show that there has been a significant improvement in terms of people's broadband speed availability. For instance, in quarter 1 2008 the numbers in 2 mb to 10 mb were 52% whereas two years later it was 79%. In the 1mb to 2 mb category, which I acknowledge is more basic, that has reduced from 43.4% to 14%. What we are seeing is a ratcheting up of the broadband speeds available to the 1.6 million users who have Internet access at this juncture, which is an increase from 900,000 in 2005.

Because 40% of the country is rural, reliance will primarily be on wireless broadband. As I understand it, exciting technological developments are taking place. For instance, under the NBS, the company we have contracted, 3, is required to upscale the speed of broadband under the contract and will do that. There is talk of moving to fourth generation mobile broadband, which I expect we will see in Ireland in the reasonably near future.

The Chairman is right. In some parts of the country because of contention ratios or because of the quality of the broadband, speeds and the response times are slower than we would like but compared to where we were a few years ago, the position has improved exponentially in regard to fixed line and mobile broadband.

RTE was mentioned in the submission. State funding of €204 million was provided to the organisation in 2009. How does the Department ensure this money is properly spent?

Mr. Aidan Dunning

The legislation makes the position quite clear regarding broadcasting revenue fees. RTE gets the lion's share of it. Some of it goes to the broadcasting fund of Ireland, which is administered by the Broadcasting Authority of Ireland, BAI, to encourage independent producers and some goes to An Post for administrative costs. We have had a system with RTE whereby it has had to report to us each year by reference to a template regarding its performance by reference to commitments set out each year. We have reviewed that with its representatives and, in general, we have been happy and satisfied that they met the targets.

Things have changed with the enactment of the Broadcasting Bill 2008. The BAI now has responsibility for oversight of RTE's performance. It has only recently come into being and will be responsible for liaising with RTE, assessing its performance and reporting to the Minister with its recommendations. The payments do go to RTE with whom we have up to now had in place a system which has allowed us to evaluate its performance by reference to commitments it set out. In general, it has met those commitments.

Will there be a saving into the future in terms of payments to RTE based on the recent cap of €250,000 on the salaries of State and semi-State employees as introduced by the Minister for Finance in the budget? For instance, a newspaper reported yesterday that salaries for the heads of various semi-State organisations would, when new contracts are issued, be capped at €250,000. Mr. Cathal Goan, who is due to retire, was mentioned. Does this mean other RTE employees, some of whom we have heard earn large salaries, will also have their salaries capped at €250,000, resulting in a saving to the Exchequer?

Mr. Aidan Dunning

By way of background, the issue in the budget from a broadcasting point of view was the decision that TG4 will in future receive €10 million of broadcasting licence fees from RTE. As such RTE's share of broadcasting licence fees will decrease by €10 million. This money is being diverted to TG4 which means the Exchequer contribution to it will be reduced, which is part of the overall fiscal adjustment. We are a small Department but that is part of our contribution.

On the specific point mentioned by the Deputy, all I can do is refer him to what the Minister for Finance said in his budget speech, namely, that the maximum salary rate of €250,000 should be applied in the public sector, which encompasses commercial state bodies. The Minister did point out that there were issues in regard to the contractual position of incumbent post holders. The Minister went on to say that he believed his position as shareholder in these companies could be used to enforce the objective of maximum salary within a reasonable timeframe.

On RTE, many people at the top of the scale, to whom the Deputy referred, are in a different category again in that they have established themselves as self-employed companies. It would be an operational matter between RTE and the individuals concerned as to the implications of the directive from the Minister for Finance in regard to what should be maximum salary rate in the public sector. I cannot give a definite answer at this stage as to what would be the implications of this in regard to RTE employees.

Self-employed status is only a device to get around various decisions. Is RTE independent enough to be able to enter into arrangements like that without the approval of Department or Minister? If one follows what Mr. Dunning said through to its logical conclusion, then the director general of RTE could set himself or herself up as being self-employed and as a result get a higher salary.

Mr. Aidan Dunning

Under corporate governance the director general will always be an employee of RTE and his or her remuneration is set out in general accounts. We do not get involved in day-to-day operation matters of RTE and how its deals with its staff, nor does the Minister. That is the position.

It would be a matter for the Minister.

Mr. Aidan Dunning

No, it would not. It is a matter for RTE management.

Mr. Dunning is saying that even if the Minister decides to apply the €250,000 salary cap, RTE can get around it.

Mr. Aidan Dunning

The Minister for Finance indicated in his statement that legal issues arise in regard to existing contractual positions.

I accept that they cannot be touched. I am asking what will be the position when these contracts come up for renewal.

Mr. Aidan Dunning

Up to now, neither the Department of Communications, Energy and Natural Resources nor the Department of Finance has had a role in regard to the contracts RTE has with particular individuals. We have not had any role in that regard.

RTE is able, therefore, to get around what the Minister for Finance is trying to achieve.

Mr. Aidan Dunning

The new policy direction being set in this area obviously will have to be elaborated on. As of now, this is a matter for RTE and the individuals in question.

Okay. I have one other question in regard to broadcasting licence fees which accounted for €226,000 in 2009. What percentage of people do not have a television licence and how is collection being addressed within the Department?

Mr. Aidan Dunning

An Post is the statutory body required-----

Does the Department not have oversight in this regard?

Mr. Aidan Dunning

We do. We have a contract with An Post.

The Department must ensure An Post is carrying out its contract properly.

Mr. Aidan Dunning

Yes. We are in the throes of signing a new contract with An Post. The last contract included particular incentives to encourage An Post to cut down on the level of evasion of television licence fees. It is difficult to calculate the level of evasion. A study carried out by the Comptroller and Auditor General a few years ago indicated, based on census figures, that the evasion rate in terms of television licences could be approximately 12%. We liaise at all times with An Post and have tried through contracts and so on to get it to ensure vigilance in regard to tackling evasion. It is not easy. People move house, which has been particularly evident now that our economy is in recession. It has not been easy for An Post to detect evasion because of this.

An Post is paid commission in respect of the collection of television licence fees. We have presented a new contract to An Post. It provides recompense through direct costs. It also ensures An Post is encouraged to achieve maximum savings. A significant aspect of the terms of this contract is the requirement for An Post to reduce the evasion rate by a minimum of 1% each year. That is the target we have set for An Post in the new contract.

What is the current evasion rate?

Mr. Aidan Dunning

It is difficult to say. A crude estimate of 12% to 15% was given some time ago.

If the estimate is crude, how then does the Department know if An Post is reducing the rate of evasion by 1% every year?

Mr. Aidan Dunning

As I stated, it is difficult to put a specific figure in place. The contract places a requirement on An Post to reduce the rate of evasion by 1% each year. We will have to include in the contract a baseline figure against which we can seek a 1% reduction. An Post returns a particular amount of sales each year and we will be looking for a reduction. The estimated evasion rate at end 2006 was 13.91% and at end of 2007 and 2008 it was 12.9%. These are the figure given to us by An Post. An Post has indicated that there has been a 1% reduction in the evasion rate. I accept it is a difficult area and one which the Department will have to re-examine in terms of identifying a system we can put in place to incentivise An Post to reduce the evasion rate. There may come a time when we will have to consider other ways of collecting the television licence fee. The figures I have given are significant in terms of the overall yield from the television licence. RTE and TG4 will be depending on this revenue. They are under a lot of pressure because their commercial revenue has decreased. I take the Deputy's point that there is an onus on the Department and An Post to do better in this area.

I will now move on to questions relating to fishing, which while only a small area for the Department is an important area for me. The payments from subhead F2 came to €4.6 million. How much of that was on payments under the salmon hardship fund? What commitments have been made for ongoing payments from this fund? How many beneficiaries are there of the scheme? What is the average payment? I was unhappy with the whole way this fund was administered but that is not Mr. Dunning's fault.

Mr. Aidan Dunning

The total payment of €4.2 million in 2009 would have been compensation under the salmon conservation scheme. Subhead F2 relates to the salmon hardship scheme. A community support scheme was also put in place to assist those who had to stop drift-net fishing which was administered by partnership groups in the area. Some of the money would have been given to those groups to assist those fishermen who could no longer engage in draft fishing. The rest of the money would have been direct payments given to the grant applicants who ceased drift-net fishing.

Of the €1.694 million paid out under the salmon hardship scheme in 2009, €200,000 related to payments to beneficiaries in 2009 and €1.19 million related to payments to beneficiaries which fell due in early 2010. This was an administrative arrangement with Bord Iascaigh Mhara.

The total amount allocated to the scheme was approximately €25 million over several years. There was a good reason behind this. Scientific evidence put forward by the then Central Fisheries Board adduced the huge decline in salmon stocks particularly to drift-net fishing that was going on in certain areas. Accordingly, a compensation scheme was put in place to the value of €25 million, complemented by a smaller scheme of €5 million, to assist those affected by the ban on this fishing practice and to allow them establish alternative work or enterprises. It was for good scientific reasons.

I know there was much local controversy about it in some areas. Inland Fisheries Ireland is evaluating the impact of the ban on the wild salmon population. I understand it has been able to re-open two rivers owing to the subsequent rise in salmon stock. I am not claiming it is directly attributable to the ban because I have not got the proof on that. It is a matter I can take up with Inland Fisheries Ireland on the Deputy's behalf, if he so wishes.

Does the Department administer the whole salmon hardship fund? Some of the compensation was paid to riverine fishermen while some to marine fishermen, yet the latter category comes under the remit of the Department of Agriculture, Fisheries and Food.

Mr. Aidan Dunning

In 2006, the Government adopted the recommendations of the National Salmon Commission. Its key recommendation was the establishment of a €25 million compensation scheme for banning drift-net salmon fishing. The scheme was administered by Bord Iascaigh Mhara and the regional fisheries board on behalf of the Department of Communications, Energy and Natural Resources.

Accordingly, all the money involved in the scheme comes from the Department.

Mr. Aidan Dunning

Yes, it comes from the Department's Vote, funded by the taxpayer.

Yes, but some of those in receipt of this compensation are not fishing in waters that come under the Department's remit.

Mr. Aidan Dunning

The primary thrust of the scheme related to the impact a ban on such fishing would have on salmon conservation in inland fisheries. That comes under our Department's remit. Bord Iascaigh Mhara administered it, which comes under the remit of the Department of Agriculture, Fisheries and Food, while the Department of Communications, Energy and Natural Resources funded it. I am not sure whether additional moneys were made available through the Department of Agriculture, Fisheries and Food. The support scheme was administered by Leader companies in the areas in question.

What was the average payment made and what was the highest?

Mr. Aidan Dunning

I do not have the exact details. The average repayment was not that high. There were one or two reasonably high payments. I would have to come back to the Deputy with the details.

Yes, I would appreciate that. Has the subsuming of the regional fisheries boards into the Central Fisheries Board been completed?

Mr. Aidan Dunning

Yes, it has. Legislation was enacted and became effective from 1 July. The seven regional fisheries boards and the Central Fisheries Board have now been amalgamated into one body, Inland Fisheries Ireland.

What funding is the Department providing for the installation of fish counters? I recall six years ago various commitments were given to provide fish counters by bodies such as the Marine Institute. No proper data on salmon stocks can be compiled without the fish counters, a fact acknowledged by scientists in this area. Has the Department made any provision for fish counters?

Mr. Aidan Dunning

The Department would not get involved in this. Moneys for such purposes are devolved to Inland Fisheries Ireland.

Does that mean the Department would not fund the provision of fish counters?

Mr. Aidan Dunning

Inland Fisheries Ireland would fund it.

The Department funds Inland Fisheries Ireland.

Mr. Aidan Dunning

Yes, but it is an agency established to oversee certain functions.

Yes, but the agency does not attend this committee, so we cannot ask these questions. Mr. Dunning is the Accounting Officer.

Mr. Aidan Dunning

I accept that but I am afraid I do not have information on the number of fish counters put in place. I will get the information for the Deputy later.

Will Mr. Dunning also provide a schedule of funding for fish counters that will be put in place?

Mr. Aidan Dunning

Yes, I will.

Inland Fisheries Ireland can be brought before the committee. It might be an idea to invite the agency on the next occasion Mr. Dunning has to attend the committee.

Why was the surplus surrendered from the 2009 appropriation accounts so high at €30 million?

Mr. Aidan Dunning

The main reason it was so high was due to the energy efficiency schemes area, especially the home energy efficiency saving scheme. This demand-led scheme is generally available to people who wish to upgrade their homes. It was established as a pilot in 2008 in several areas to see if it would be effective and was evaluated as such.

There is a major uptake.

Mr. Aidan Dunning

Absolutely, and we will spend the full allocation, close to €50 million this year, with the total number of homes being upgraded, cumulatively, being 60,000. Obviously, while we did not spend the money fully in 2009, by the end of that year we had a very high level of commitments that were waiting to be paid, and they are being paid in 2010. That just gives an indication that these schemes are being ramped up, and this is now operating very effectively.

That was the main reason for the saving mentioned by the Deputy, as regards the Vote for 2009.

It is good to see that it is being taken up, and is there funding for 2011 as well?

Mr. Aidan Dunning

Yes, there is. We were allowed to carry over some of that capital saving into 2010, for spending in that year.

I shall leave it at that.

The Deputy may come in again, if he so wishes. Before I invite Deputy D'Arcy to contribute I just want to ask about the Kinsale and Corrib gas fields. What revenue is the State getting from sales of gas from the Kinsale gas field, what arrangement will be in place for revenue generation from Corrib and when does Mr. Dunning foresee the Mayo gas field coming online?

Mr. Aidan Dunning

Kinsale is almost exhausted at this stage, so the revenue is very small, quite frankly.

What revenue are we getting from it?

Mr. Aidan Dunning

This would not come into our Vote, but rather into the Central Fund. The revenue in the Central Fund is distinct from our Vote.

Who negotiates it?

Mr. Aidan Dunning

This would refer to a lease going back to the 1970s or earlier.

Does the Department of Finance know?

Ms Stephanie O’Donnell

I do not have the figure, but I can get the details on the royalty figure when it comes in, because we account for it at the end of every year. It is produced in the finance accounts which I do not have with me, but I can forward the figure to the Chairman.

Mr. Aidan Dunning

It would be very small at this stage, but we will get the figure for the Chairman. In relation to the Corrib gas field, tax will be paid at the special rate of 25%, but there is no royalty. That was in line with the provision put in place in the late 1980s whereby the producer would pay double the corporation tax rate, equivalent to 25%. That was amended recently, in 2007, but will only affect licences post-2007, whereby the tax rate will be 40% on profits from gas fields in the future.

On when Corrib gas will come onshore and be available, obviously the consent procedure process has not yet been completed. As the Chairman knows, the developer has submitted a new application to An Bord Pleanála after the original one was not accepted in November 2009. The Department also has a consent procedure to put through in terms of safety issues, and we are advancing that. There is also the matter of a foreshore licence that will be required. If all that goes according to plan, bearing in mind that the application to An Bord Pleanála requires tunnelling in north-west Mayo, which will be a major job, it will be a couple of years before the first gas comes onshore, if everything goes well.

On the regulation of the energy market and value for money for domestic and business consumers, is Mr. Dunning happy that this is working in the consumer's best interests? On the purchase of electricity for State or national needs, what is the tendering process with different suppliers to ensure we are getting the best value possible for the taxpayer?

Mr. Aidan Dunning

We have a tendering process. At the moment there are several different supply companies, unlike the position a few years ago. At the moment we have ESB, Energia, Airtricity and Bord Gáis, which recently entered the market, and so there is choice. In our case we are seeing a reduction in energy costs over recent years in the order of 9% to 10% per annum. Much of that is due to energy efficiency measures that we are putting in place which is reasonable since this is the Department with responsibility for energy. Most Departments and State agencies, I imagine, are putting a tendering process in place for electricity and-----

Has Mr. Dunning any evidence for that, since he said, "I imagine"?

Mr. Aidan Dunning

It is obvious that they would. They would be required to do it, particularly given that administrative and all budgets are tight and where there are a number of suppliers. I would be very surprised if that is not the case. Procurement requirements would stipulate that this should be the case.

More generally on electricity prices, the market is working very well. We have seen much more competition in recent years. On electricity prices, there is much talk about how Ireland stands relative to the EU average. Based on EUROSTAT figures, which are definitive for Europe as a whole, particularly in the business area, Ireland is now significantly below the EU, mostly for small to medium-sized businesses, and particularly for large multinationals which are so important here in terms of employment. The very large enterprises, for instance, as of June 2010 worked out at 73% of the EU average in terms of electricity prices, as compared to a position of 149% in July 2007. That is a reflection of what the market has achieved and the competition that has taken place.

Turning to the domestic situation, it is not as strongly positive but nonetheless in terms of the areas of greatest usage, we are exactly at the EU average now, compared to 117% in July 2007. The same story applies in relation to gas and I can let the committee have the figures on that as well. Competition is working and the advent of new entrants to the market along with the ESB is proving to be very fruitful, with one caveat, which is always an issue one must be aware of, namely, that we are very dependent on imported gas for electricity generation, and are a price taker in that regard. We have to ensure we do everything we can with regard to everything within our control.

One of the things CER is doing in its new network review is putting very strong targets in place for cost reductions in the ESB and BGE. In other words it will not allow them this revenue unless they make their reductions. That is important in terms of eking out efficiencies from both utilities. More than 16% of our electricity is generated from gas. Much of it is from coal, from Moneypoint, which again is imported. We do not have any control over the price of this. That means it is so important to continue with the very good progress in the energy we produce, that is, renewable energy, including wind energy, which is now up to 15% in line with the targets.

Arising from the point made by Mr. Dunning on the 40% for the Corrib gas field, is that the only area where there is such a high rate?

Mr. Aidan Dunning

To the best of my knowledge it is, but obviously corporate taxes in general are a matter for the Department of Finance. It was 25%, as the Chairman knows. However, Corrib will not pay 40% because as its lease predates the 2007 change, it will pay 25%.

Who will be paying 40%?

Mr. Aidan Dunning

New leases issued from 2007 will pay the 40% rate. If oil and gas finds are made by those with leases signed post-2007, the profits on these finds will be 40%.

Do the officials from the Department of Finance know if there are other areas where the 40% rate is applied?

Ms Stephanie O’Donnell

I am not aware of other areas where there is a 40% corporation tax rate. I can check that. The regime for oil and gas is very specific and the 25% rate which the secretary general, Mr. Dunning, mentioned is itself unusual. As he said, there is a step up to that rate, but as far as I am aware, it is specific to gas and oil exploration.

I will develop the point made by the Chairman. Am I correct that there is no tax rate on the quantity of gas extracted?

Mr. Aidan Dunning

Sorry?

There is no tax per cubic metre.

Mr. Aidan Dunning

No royalty?

Mr. Aidan Dunning

There is no royalty.

Could there be a royalty?

Mr. Aidan Dunning

There could be a royalty, but at the moment there is no provision for a royalty.

I am asking if there could be a royalty, as there was in the past.

Mr. Aidan Dunning

Not under the current law.

Can a royalty be put in place?

Mr. Aidan Dunning

If a lease is being signed on a certain basis-----

I am talking about the situation in the future.

Mr. Aidan Dunning

Anything can change in the future.

The 25% rate, which has increased to 40%, could be 40% plus a royalty.

Mr. Aidan Dunning

If that is the decision that is taken.

I am trying to make the point that while a 40% tax rate might seem high, if there is a gas or oil field in the Atlantic Ocean the size of those in Dubai, effectively the only yield we get is the taxation. There is no yield to the State via a royalty route.

That is a valid point, but it is a policy issue.

Mr. Aidan Dunning

That is quite a high tax rate by international standards.

There is a provision for €3.5 million for the national seabed survey. Excuse my ignorance, but what is the national seabed survey?

Mr. Aidan Dunning

The national seabed survey is being undertaken in co-operation with the Marine Institute under the auspices of the Geological Survey of Ireland. It is basically to try to explore the sea bed in terms of issues such as exposure to pollution, hazards to shipping and marine traffic, and potential for fisheries. It incorporates all that as well as being important in the geological sense and giving early indications as to the prospects for offshore exploration. It is a long-term project.

Is it an annual fee?

Mr. Aidan Dunning

It is.

I would welcome Mr. Dunning's view on the retrofitting of the homes of the working poor under the warmer homes scheme. There is competition for funds. Some people get nothing. If one is working one gets practically nothing from the State. Is there a proposal in 2011 to expand the schemes? Has this point been covered in my absence?

Yes, it has.

Mr. Aidan Dunning

It is a fair point. We are all operating within the constraints on capital resources but will operate the scheme with the available resources. This issue will be covered in the energy affordability strategy. I must underline the point that we are in a constrained situation on the capital budget.

Chairman, I apologise if I raise areas that have been covered. I wish to question the new name of the organisation that we knew as Sustainable Energy Ireland, SEI.

We have discussed that.

I will turn to the 2009 income and expenditure figure of SEAI on page 7. Has the energy performance buildings directive been discussed? The figure of 4,367-----

Mr. Aidan Dunning

Is the Deputy referring to the €4.36 million?

That has risen from €950,000 in 2008 to €4.36 million in 2009.

Mr. Aidan Dunning

I might ask my colleagues from SEAI to comment on that.

Dr. Brian Motherway

That is the fee income relating to the building energy rating certificates. When an assessor lodges a certificate on the national database, we charge an administration fee. The growth in the fee relates to the growth in the scheme. In 2008 it was starting and 2009 was the first year when many thousands of BER certificates were lodged and therefore the income went up.

What is the administration fee for lodging a BER certificate?

Dr. Brian Motherway

It is typically €25 to lodge a certificate on the database.

On page 16 there is a figure for the SEAI of €3.764 million.

Dr. Brian Motherway

That is the same scheme. The income pays for the operation of the BER scheme.

There is a fairly substantial sum for income over expenditure.

Dr. Brian Motherway

Yes, but to the degree there are fluctuations each year, the balance is not always struck. SI 666 of 2007 sets out that the income generated from the registration fees is directly linked to the operation and promotion of the scheme. Each year there is slight fluctuation in terms of how much money was spent on systems and promotion and such things.

BER is a measurement tool to determine the energy efficiency of a building. Is Dr. Motherway satisfied the cost of €4 million or thereabouts for the measurement of the energy efficiency of buildings is good value for money? As well as the cost of measuring the energy efficiency, one has the cost of insulating the building.

Dr. Brian Motherway

As the Deputy mentioned, this is driven by the energy performance of buildings directive. It is our view that it works very well as an information tool for driving behaviour change and, in particular, in the grants we offer to people to upgrade their insulation. It is typically the case that people use the BER as a tool for understanding the state of their home today, the savings opportunity and the financial savings they will make if they invest in insulation. We believe this is working well.

Chairman, was the issue of departmental salaries covered?

No, we have not covered that.

I am assuming that-----

Is that the ESB?

No, the Department. I am assuming the numbers within the Department have reduced between 2008 and 2009.

Mr. Aidan Dunning

As I said in my original statement, we have seen a very significant reduction of 21% in numbers in the Department since the end of 2007. We have gone from 340 staff to 270. We have also seen the administrative budget reduced by 36%.

Salaries have not been reduced by much.

Mr. Aidan Dunning

Over that period, there would have been some increases in salary because there was some carryover in 2007. Our salary will be held at the same level next year as this year.

I am perplexed. If the numbers are being reduced and if we assume the Department has lost some lower grade administrative staff along with some higher grade staff, then why have the salaries-----

Mr. Aidan Dunning

The salaries have reduced as well over that period. In 2008, salaries were estimated at €17.3 million whereas in 2010 the estimate is €16.2 million. In 2008, the outturn figures came to €18.3 million, €18 million in 2009 and €16.25 million in 2010. I would argue that these are reasonably significant reductions.

I would not argue that the reductions between 2008 and 2009 are significant.

Mr. Aidan Dunning

No. It was from 2009 onwards that we really saw significant reductions. The figures I have given reflect the reality of the situation.

What is Mr. Dunning's view on payments towards semi-State bodies under the remit of his Department, such as the ESB, Bord Gáis and others? It is a real slap in the face for people who are on very small incomes and seeing their wages being reduced to see people earning hundreds of thousands, a multiple of what the Taoiseach and the Secretary General of the Department earn. What is Mr. Dunning's view on that?

Mr. Aidan Dunning

This has arisen tangentially. All I can do is refer to what the Minister for Finance said in his Budget Statement which indicated it was his policy from now on that a cap of €250,000 would be put in place in the public sector. He acknowledged that there were contractual issues that needed to be examined for existing incumbents. I cannot really say any more than that at this stage.

Has Mr. Dunning been given an instruction from the Department of Finance, following the Minister's speech, to the effect that this cap is immediate? There may be contracts currently being negotiated. Has the axe fallen on them? Has it come down that this is the price and that is the end of the discussion?

Mr. Aidan Dunning

We have not received any formal instructions at this stage from the Department of Finance in respect of the implementation of that. In fairness, the Minister did signal that further consideration of existing contracts would be required. However, he signalled strongly his determination to do that. Clearly, the Department will implement it.

I appreciate what Mr. Dunning is saying about existing contracts. It is quite possible that there are agencies or semi-States under his remit that are in the process of negotiating contracts. I do not know if there are, but there could be.

Mr. Aidan Dunning

That is a fair point. Any contract must be approved by our Minister and by the Minister for Finance. I expect that would reflect the new policy.

I do not want to labour the point too much, but was the Department in negotiations before the Minister's speech with people in employment in the semi-State companies who were looking for more than €250,000? The ground has changed since the Minister's speech.

Mr. Aidan Dunning

There are no vacancies at chief executive level, apart from the position of director general of RTE who has indicated he is retiring soon. There will be negotiation on that vacancy.

Deputy D'Arcy is asking a question that could be asked a different way. Was there anyone monitoring the madness that went on whereby people were getting a salary of more than €500,000? Did anyone ever express a concern that this was getting out of control? We are trying to come to grips with costs at the moment. We asked Mr. McDonagh from NAMA last week the salary scales of people within his organisation. He told us that they would be in the annual report and we said we were entitled to get that information. We got a letter this week which we are publishing today and which effectively told us to get stuffed. We were not going to be made aware of the salaries. We do not want to personalise things but we should be in a position to get the range of salaries from NAMA and other organisations whose employees are being paid from the public purse. We do not expect to be told that Mr. Murphy or whoever is receiving €400,000, but at least we should be given the range of salaries being paid from the taxpayers' purse. We are taking legal advice at the moment on our rights to get this information. We are not accepting the type of letter we got from Mr. McDonagh in recent days.

Mr. Aidan Dunning

It was correctly stated that there are many commercial State bodies under the aegis of our Department. The full remuneration of the chief executive is set out in the annual account. There was a particular system of pay determination that had been approved and put in place in respect of chief executives of the commercial State bodies which depended on the particular category of the organisation and was based on a particular range. That primarily came from an independent study which was then considered by the Department of Finance and was then sent on through us to the individual State bodies. The contract would then have been negotiated between the board and the individual in question, but it would have been subject to the approval of the Minister and of the Minister for Finance. That is the history of the situation.

Apart from basic pay, these contracts provided for other things such as performance related pay and other pension benefits that were within the norms that were accepted. Perhaps we can argue about the amounts but they were allowed within the overall template that was in operation at the time. This template arose from an independent study. Department of Finance officials may wish to add to what I have had to say on this. It was within those parameters that the pay of chief executives was decided.

I know what Mr. Dunning is saying. In the case of NAMA, however, we are being told it is sensitive, commercial, and a contract between the individual and the organisation. However, we have heard all this before with the banks and the madness that went on there. Someone must come to grips with it. The committee is endeavouring to do so and has taken a very poor review of the type of letter we received from NAMA. It appears as though no lessons have been learned from people who are there to do a job on behalf of the taxpayer. While Mr. Dunning cannot comment on that matter, my point is that the committee will not accept the type of answers it has been getting from other people.

Mr. Aidan Dunning

As I stated, chief executive officer pay in each case is set out in detail in the annual report.

We will leave it at that.

Mr. Aidan Dunning

Contracts below that are negotiated within the company.

I am a former member of the Joint Committee on Communications, Energy and Natural Resources, whose members have been told that details regarding the top earners in RTE are commercially sensitive. Everything is commercially sensitive if one wishes to throw out that line. Who drew up the independent report mentioned by Mr. Dunning?

Mr. Aidan Dunning

It would not have been conducted under the aegis of my Department.

I assume the Department of Finance would have done so.

Mr. Aidan Dunning

As I recall, it would have been independent consultants.

Mr. Aidan Dunning

I think it was the Hay Group.

Ms Stephanie O’Donnell

Those banding arrangements are known as the Hay scales.

Hay and not straw.

Ms Stephanie O’Donnell

Yes, they were called the Hay scales.

When was that report drawn up?

Ms Stephanie O’Donnell

I do not know. While it is not my area of expertise, it was some years ago. It is a system of pay determination informed by an independent report.

It was some years ago. Was it three, five or seven years ago?

Ms Stephanie O’Donnell

I cannot commit to anything in particular. I think it was more than five years ago.

Ms O'Donnell should please find this out for the committee.

Ms Stephanie O’Donnell

It dates from previously.

Ms O'Donnell might obtain this information for members.

Ms Stephanie O’Donnell

Yes.

The point I am trying to make is that I assume the aforementioned report was drawn up in a different era. We have entered an era that is different to that in which I assume the report was requested.

I will turn to more bread and butter issues. What analysis has there been of the three programmes for the Sustainable Energy Authority of Ireland, SEAI? I refer to the warmer homes and greener homes programmes. Has there been independent analysis?

If Deputy D'Arcy has concluded, I wish to ask a question regarding the Department's decentralisation programme. Was Cavan to be the Department's destination?

Mr. Aidan Dunning

Yes, Cavan was our destination. As the Chairman is aware, that was put on hold in 2008. There is to be a review next year and as matters stand, we have an advance office in Cavan with 50 employees based there who perform various functions. That was set up not long after the decision was taken.

Fifty employees out of how many staff?

Mr. Aidan Dunning

It is 50 out of 269 staff.

Where are they accommodated and what arrangements were made to accommodate them?

Mr. Aidan Dunning

They are in leased accommodation in Cavan. Did the Chairman mean their physical location?

Mr. Aidan Dunning

They are in leased accommodation, which is being leased by the Office of Public Works, OPW, on our behalf.

How much does that cost?

Mr. Aidan Dunning

It is not hugely expensive. I apologise that I do not have the precise figure to hand.

Perhaps someone will obtain it for the committee.

Mr. Aidan Dunning

They share the building with other enterprises. There may be some other local authority offices or something like that there.

That is very vague.

Mr. Aidan Dunning

I apologise.

Perhaps this information will be supplied to members before this meeting concludes.

Mr. Aidan Dunning

We will.

Does Mr. Dunning think the arrangement is working efficiently?

Mr. Aidan Dunning

Yes, it is. Some important functions are located there, such as our salaries, finance and corporate services functions. We find that we have excellent communications with them and video-conferencing works quite well. Obviously there are times when one can be a bit frustrated that one cannot meet in person but that is part and parcel of it. With due respect, the core policy functions, namely, energy, communications, broadcasting and natural resources, remain in Dublin.

Do the people who work in Cavan now live there or do they commute?

Mr. Aidan Dunning

They mainly live in the Cavan region.

Consequently, there is a bonus for the local area.

Mr. Aidan Dunning

Yes.

Looking at the accounts, under heading 6.2 on commissions and inquiries, it is stated "€458,147 was paid in respect of various expenses arising out of the Department's involvement in the Moriarty Tribunal." Is it possible to get a cumulative figure on the costs paid to date by the Department? Is there a liability in respect of legal fees? Is the Department awaiting a decision from the tribunal as to what fees might be payable by it?

Mr. Aidan Dunning

The Deputy is correct. The figure to which he refers relates to 2009. If the Deputy will bear with me, I have to hand another figure. The total legal cost of this module of the tribunal, which deals with the GSM licence that was awarded in 1996, to the Department to date has been €2,511,283.

Approximately €2.5 million.

Mr. Aidan Dunning

Yes. Other costs of €434,000 have arisen.

So the figure of €458,000 includes legal and-----

Mr. Aidan Dunning

It primarily is legal.

It has cost the Department approximately €3 million to date.

Mr. Aidan Dunning

Yes.

Are other liabilities coming down the track of which Mr. Dunning is aware?

Mr. Aidan Dunning

We obviously still are involved in the tribunal. We have a legal team and its costs must be met.

Is the Department's legal team paid up to date?

Mr. Aidan Dunning

Effectively, yes.

No huge shock to the system awaits the Department.

Mr. Aidan Dunning

No. Clearly, the issues are important from the Department's point of view and from those of the witnesses who are involved in the tribunal in respect of its final outcome. Consequently, it has been incumbent on us to ensure that we are legally represented at it and put forward a position. Obviously, I am reluctant to discuss the tribunal because it still is sitting.

I understand that and we will stick to the figures.

Mr. Aidan Dunning

These are the figures.

I thank Mr. Dunning.

I will be a little parochial in respect of my final question. I refer to the flooding of parts of Cork city that occurred just over 12 months ago, which happened as a result of the release of water by the ESB. Mr. Dunning might set out what the Department of Communications, Energy and Natural Resources has done to satisfy itself that the ESB acted properly with regard to water management at the dam. What steps has the Department taken to ensure that in future, the ESB will have adequate or satisfactory water level management at the dam to avoid a recurrence of the problem?

Mr. Aidan Dunning

We have relied very much on the advice we received from the ESB in that regard. We are not in a position to second-guess the ESB technically in respect of what actions it felt it was obliged to take on that occasion. I understand that more recently, it has been in discussions with the OPW and the local authority regarding the management of that dam. Moreover, although I am not fully familiar with this matter, I understand there are issues regarding work that must be carried out within the city itself by the OPW. Although I am not exactly sure what is involved, I believe it relates to the river and drainage works. In any discussions it has had with the local authorities and perhaps before Oireachtas joint committees, the ESB has strongly asserted that the action it took on that occasion was proportionate and correct. If action had not been taken, the situation might have been worse. This is very much a-----

The Secretary General has stated he did not want to second guess it, but it is not exactly an independent body in this affair.

Mr. Aidan Dunning

No, but this is primarily an engineering issue.

It is a management issue.

Mr. Aidan Dunning

One must take the advice of engineers. My Department does not comprise technical personnel. I have one technical adviser on the energy side who deals with a wider range of issues.

The Department did not examine the matter to a point where it could be satisfied that the ESB had acted properly at all times.

Mr. Aidan Dunning

We were kept informed at all times.

By a body which was not independent, since it was involved in the incident.

Mr. Aidan Dunning

Yes. It reported to the Department.

Did the Department appoint an expert or consultant to satisfy it that everything had been done properly?

Mr. Aidan Dunning

We did not see that as being within our remit. Our understanding was that, had these actions not been taken, circumstances might have been worse. The ESB has been in continuous contact with the local authority and other relevant bodies on the matter. It was an unfortunate incident at a time when there was heavy flooding and bad weather. The Department's main concern was to ensure we were aware of what was happening.

The issue was not one of flooding but the management of water levels ahead of the rainy season.

Mr. Aidan Dunning

Yes.

I am amazed that the Department did nothing to check to ensure the ESB had acted properly and that it accepted the ESB's word on everything.

Mr. Aidan Dunning

We were not in a position to check. To do as the Chairman suggests, we would have needed to engage external consultants.

Surely that is what people deserved. Their businesses and homes were destroyed.

Mr. Aidan Dunning

The strong opinion of the ESB which has a track record in this regard was that it had acted in a responsible way.

That remains to be seen. Nobody seems to be doing anything to-----

Mr. Aidan Dunning

I understand some work was done recently to lower the level of water as a contingency measure.

That is the point. The ESB could have done that last year. The committee won the battle, but I am disappointed that the ESB's word about there being adequate and proper water level management prior to the incident had been accepted. I am also disappointed that the Department, the ESB's parent Department, has done nothing to deal with the issue.

Mr. Aidan Dunning

The Department is not responsible for flood relief or flood management programmes. We liaised with and were kept informed by the ESB on the issue and were aware of the work being done by the local authority and the OPW. We did not have the competence to indicate at what level the water should have been. It was an engineering matter.

We could argue this question all day and will agree to differ.

Mr. Aidan Dunning

I can appreciate how bad the situation on the ground must have been.

In trying to get answers it seems no Department is grasping the nettle and there is a need for an independent inquiry into what occurred.

Mr. Aidan Dunning

I understand the Department of the Environment, Heritage and Local Government instituted an inquiry. I might have seen something about it, although I was not a party to it.

There has been no independent inquiry. The issue is being passed around Departments and Government agencies and people are still waiting for some action to be taken. However, we will leave it there.

It has been reported in the newspapers that €40 million is being paid to AIB staff in bonuses.

That has nothing to do with us today.

May I raise it under the heading of any other business?

No. We have no function in respect of that issue.

Mr. John Buckley

There are two points I wish to clarify. First, the main costs of the Moriarty tribunal will be borne by Roinn an Taoisigh, a separate Department. Second, we remarked on the need for an evaluation. Clearly, as with everything else in the public service, an evaluation must be cost justified. The issue that arose in the report had to do with the extent to which an external evaluation should be carried out. The important factor is that the evaluation should be external to the scheme function, not necessarily to the organisation. From the point of view of achieving value for money and ensuring organisations have systems and procedures in place and practices that enable them to evaluate their operations, we need to see a rigorous review process, culminating in a public report that will be sufficient to demonstrate the effectiveness of the measures taken by reference to their objectives and results and to position the Department for the next round of policy formation. That is what we had in mind when we made the remarks.

I thank Mr. Buckley. I also thank all of the witnesses, including Mr. Dunning and his staff, Professor Lewis and the officials from the Department of Finance, for their attendance. Is it agreed that we should note Vote 30? Agreed. Is it agreed that we should dispose of chapter 26? Agreed.

Next week we will resume our consideration of chapter 37 on the SKILL programme. The committee has agreed to invite Mr. William Atlee, chairman of SIPTU's management committee, to the meeting.

The witnesses withdrew.

The committee adjourned at 12.20 p.m. until 10 a.m. on Thursday, 16 December 2010.