I propose to take Questions Nos. 37 and 62 together.
The Energy (Miscellaneous Provisions) Act, 1995 provides a framework for the introduction of third party access to the Bord Gáis gas network. The Act provides that disputes arising between a person seeking third party access and Bord Gáis in relation to the reasonableness of terms on which the board has made an offer, shall be referred to the Minister for Public Enterprise is, therefore, in effect the regulator for the purposes of third party access to the BGE network.
An EU Directive on common rules for the internal rules in natural gas was recently adopted by the Council of Energy Ministers. One of the major effects of the directive will be the introduction of further competition for the gas industry in the form of third party access to gas networks throughout the European Union. Member states are required to adopt the necessary implementation measures within a period of two years. In the context of preparing legislation to implement the EU Directive, it is my intention to extend to the gas sector the remit of the regulatory authority being proposed for electricity. The 1995 Act empowers the Minister for Public Enterprise to give Bord Gáis general directives concerning the transmission and pricing aspects of third party access. In March 1998 I published two such draft directives and invited comments thereon. Comments were received from a number of persons and bodies. On 28 May 1998 officials of my Department met with those persons and bodies to discuss the various comments that had been submitted. My officials are now examining the various comments and I will finalise the directives as soon as possible.
The proposed formula for calculating access charges in relation to third party access and the depreciation policy were published in the draft directives. The principal features of the price formula are as follows: postalised capacity and volume charges, ten year cash flow model to determine revenue requirements, opening asset value, computed on the basis of historic costs, adjusted for changes in the consumer price index since acquisition and net of cumulative straight line depreciation and a real rate of return of 7.5 per cent.
With regard to transparency, I propose to appoint consultants to carry out an audit of BGE's relevant assets and cash flow projections to verify the validity of BGE's computations of proposed access charges for third party access. In addition I am considering to what extent details of the basis of BGE's proposed charges can be published having regard to commercial confidentiality constraints. Charges will be subject to an annual review initially, pending the introduction of the provisions of the EU gas directive.
