l move: "That the Bill be now read a Second Time."
Before I begin my contribution I must inform my Opposition colleagues that when I have concluded I will be going—
Vol. 499 No. 4
l move: "That the Bill be now read a Second Time."
Before I begin my contribution I must inform my Opposition colleagues that when I have concluded I will be going—
The Minister is always going.
—but it is not from any lack of interest in the electricity regulation. The Secretary of State for Northern Ireland is coming to meet me and the arrangement had already been made. We thought the debate would have commenced yesterday evening.
On a point of order, there is no rush in respect of this Bill. It has been unduly rushed and if the Minister is not available I suggest we postpone the debate until she is available.
I am available.
It is outrageous for the Minister to be absent for the primary debate on the Bill.
Will the Minister be back?
Of course I will be back.
Will the Minister proceed with her contribution?
I am here to make my opening contribution. I was merely being polite. Most Ministers leave the Chamber and have somebody here to take their place.
No, not in a Second Stage debate.
It is in order and I have explained to the House the reason I will be leaving when I conclude my contribution. Unless somebody has something to add to that, I ask Members to accept my reason.
This is a complex Bill and in relation to our difficulty in drafting amendments I ask the Minister to take careful note of the questions raised by the Opposition spokespersons. I have a number of detailed questions. The Minister's absence is not satisfactory but I appreciate it would be a discourtesy to the Secretary of State not to turn up for the meeting.
I thank Deputy Yates for accepting my reason in that fashion. Detailed notes will be taken of the various points Members put forward but I hope the debate will not end today. I understand it will continue this week and into next week, if the Whips so arrange.
The Bill I am introducing today is the first vital step in the process of liberalisation of the electricity sector which begins to take effect from February 2000. From that date, 28 per cent of the Irish market will be open to competition. It will herald a new dawn for Ireland as we face into the next century. Electricity forms such a vital component of our overall energy needs – how we manage the sector and cope with dramatic growth will have a major bearing on our future prosperity and development.
The Bill complements the major changes which have taken place within the ESB and the wider European electricity market over recent years. It will establish a stable regulatory regime for the future development of this economically vital sector.
The Electricity Regulation Bill, 1998, is a first vital step in the process of liberalisation. The picture emerging is one of liberalisation leading to a progressive opening up of the electricity market to competition; increased efficiency; downward pressure on prices; strong independent but accountable regulation in both the electricity and gas sectors; and increased use of sustainable energy resources. The Bill will be the most important item of legislation in relation to the electricity industry in Ireland since the Electricity (Supply) Act, 1927, which established the ESB.
The purpose of the Bill is to establish a new regulatory body in Ireland which will be grandly called the Commission for Electricity Regulation – I would prefer to call the person the regulator. This follows EU Directive 96/92, under which Ireland is scheduled to introduce competition in the electricity industry by February 2000. There will be one commissioner initially, but the Bill will enable the commission to be expanded to whatever is required in due course.
The commission, which will be funded by the industry, will exercise its functions under a range of primary and secondary duties, focusing on the protection of the interests of final customers and ensuring non-discrimination between electricity undertakings. These duties will include promoting competition; securing that all reasonable demands for electricity are met; promoting safety, efficiency and economy by electricity undertakings; and taking account of the protection of the environment. The commission will also be given the power, currently resting with the ESB, to licence the generation and supply of electricity, and to authorise the construction of electricity generating stations.
The Civil Service Commission recently completed the open competition for the post of commissioner and I inform the House that the commission recommended Mr. Tom Reeves, an assistant secretary in my Department, for appointment as commissioner. I will be formally appointing Tom Reeves as soon as the Bill has been enacted. He is in waiting to be the regulator. Tom Reeves has already started the preparatory work necessary for the speedy commencement of the commission's functions. I wish him well in his new role. He has served the country well in another guise as a public servant and will now be the regulator for the industry.
I would like to look back briefly at the proud history of the ESB, a company that has served, and continues to serve, this country with distinction. We have come a long way since the first electric light was switched on at Prince's Street in Dublin in 1880. It was only with the advent of the Shannon-Ardnacrusha scheme – then one of the most advanced in the world – that we had enough power for everyone. We had three times the generating capacity demanded at the time. This was mainly because demand in Ireland was so low, much lower than comparable European levels.
Men of vision shaped the development and expansion of the electricity sector. We were fortunate in having some of the most determined, vigorous and able minds at our disposal in the persons of Dr. Thomas McLoughlin, a young Irish engineer working in Germany who later became Chairman of the board, and the then Minister for Industry and Commerce, Patrick McGilligan.
After the establishment of the ESB in 1927, progress followed quickly. New generating capacity was provided by a plant in Cork and the Liffey in Dublin and the development by Bord na Mona of our bogs provided increased generating capacity.
One of the largest tasks facing the ESB was rural electrification. The first rural consumer was switched on in Killsallaghan in 1946 and the scheme was finally completed in the mid-1970s. The famous book about that, The Gentle Revolution, described how the men toiled in adverse conditions, as they still do. The task of climbing poles in all weathers is still the same and it is undertaken with commitment and a sense of purpose by ESB workers. During the winter storms and for the second year in succession, the crews were unable to celebrate Christmas and the new year because they were working. The innovative and inspired scheme of rural electrification transformed the country and laid the foundations for much of today's economic growth. As the economy expanded, the demand for electricity increased. In meeting this demand, the ESB was constantly at the forefront of economic development in Ireland.
The establishment of the ESB as a publicly controlled monopoly in 1927 was seen at the time as the most pragmatic approach in the prevailing circumstances. However, the world has not stood still, not that anyone would want it to. The circumstances in which we now find ourselves are those of rapid change, competition, market forces and European law. It is clear the electricity industry must change to meet the challenges of these new circumstances. Current market and global developments mean the introduction of competition, and independent regulation in the electricity industry is inevitable. From the ESB's point of view, its history has shown it to be more than willing and capable of meeting this challenge head on and of succeeding.
The onset of competition is not just for the ESB, nor is it just a challenge. It is also a huge opportunity. The ESB will be able to compete in the entire EU market for the generation and supply of electricity. Its experience from competing for consultancies through ESB International and its involvement in the liberalised telecommunications sector through Ocean will prove valuable in this regard. I noted Deputy Yates's comment at a recent committee meeting that the ESB was interested in competition in the telecommunications market. I am pleased it has chosen to grasp the concept of change and competition with both hands. The ESB's latest annual report states that the company is "...pursuing a focused growth strategy...designed to ensure that ESB is fully prepared for open competition in the home market...and...in expanding its horizons".
Competition has been successfully introduced into two areas where State-owned companies had a monopoly: the aviation and telecommunications sectors. Deputy Stagg introduced the legislation allowing Telecom Éireann to have a strategic partner and the Fianna Fáil-Labour coalition Government introduced the legislation for Aer Lingus. There is no doubt that Telecom Éireann and Aer Lingus underwent a certain amount of trauma in the transition to a more market-driven business. However, no one would doubt that it has proven beneficial to both companies and, more importantly, to consumers.
It is clear the ESB has always had a very forward-looking and progressive view of both its own development and that of the electricity industry. It has involved itself heavily in consultancy work and there is no country on the globe which has not been touched by the work of ESB International. It has tendered for and won consultancies in both wealthy countries and those which are struggling to develop and create a more modern regime. I pay a huge tribute to its work. Clearly it has had an effect on the main range of ESB activities in that it promotes a sense of adventure. Adventure lay at the core of the establishment of the ESB. Thomas McLoughlin, Patrick McGilligan and others in the then Cabinet were men of vision and adventure. If that spirit of adventure could be grasped and developed, the ESB would be second to none in the competitive environment.
We are also aware of the ESB's innovative approach to industrial relations and its recent involvement with British Telecom, to which I referred earlier. I was interested when it became involved with BT in Ocean, which seems to be forging ahead, because at the time the strategy was announced, I was having a series of meetings with the ESB and the groups of unions. While I was pleased to hear about it, I found it difficult to talk about competition when clearly there was resistance to it at the time, even though the same company was involving itself in competition in another sphere of activity.
The ESB has always had regard to the needs of its customers. The rural electrification scheme is a good example, to which I referred earlier, into which the ESB put the full weight of its resources bringing the most far-flung and remote areas in the country into the electricity system. This task was undertaken despite the fact that it would cost a great deal of money, manpower and effort. In doing so, the ESB and successive Governments, the first being the Cumann na nGaedhal Government, saw the enormous joy and comfort electricity brought to those citizens who were being included for the first time in a new, modern Ireland. It was interesting the Department of Finance had its usual mantra of "no, no, no" when the money was sought by the first Government for expansion and development of the electrification scheme. Plus ça change. The ESB's commitment to customers continues today. The company's new customer charter is indicative of its customer focus. It sets out goals and targets for the ESB to meet.
The drive to prepare the ESB for the competitive market continues as a top priority and the cost and competitiveness review is a vital part of this process. It is on target in terms of cost savings and staff reductions. It provides for a 5 per cent employee shareholding scheme in return for changes and savings set out. The shareholding is not being offered for cash but in exchange for change under the CCR. The options for the best structure for the ESB in the new competitive era are under review. They are not formally under review but in terms of a State company thinking about its future. There is no shortage of possible options – strategic alliances, further employee share ownership, public share offerings, disposal, public-private partnership or a combination of those. I will only consider what is best for the ESB, the industry and the consumer, and will not be driven by any specific ideology.
When the ESB was established, it was on the most pragmatic and practical basis and the same principle will be used now to determine its future development. The CCR demonstrates the ability of the ESB to develop and carry out a major process of change. While it does not seem like anything new today, at the time it was devised it was revolutionary, and that is not so long ago. It came about because the ESB, unions and Government of the day decided to come together knowing that in the future lay competition and the opening up of the market. They were moving to put their house in order. It was a co-operative process which worked satisfactorily.
A significant milestone in electricity generation in Ireland has been the involvement of the Finnish energy group, IVO, in the building of the 120 mw generating station in the east midlands. This welcome development is the first indication of the advent of competition in the electricity generation market in Ireland. Not only will the station be a major boost for employment opportunities, the new plant will bring a major and welcome improvement in the efficiencies of using peat in generating electricity. The electricity sector and the ESB in particular, is strong, vibrant, and well positioned for the challenges of the new era of competition which lies ahead. I know the ESB will face up to this new era with the same spirit and determination it has shown in the past.
I will give some background to this Bill. The electricity sector is growing by about 6 per cent each year. Indications are that this will continue for some years. To meet demand, the Government has set out, as one of its key priorities, the development of a competitive electricity sector in line with the European Union Electricity Directive 96/92/EC concerning common rules for an internal market in electricity which came into force on 19 February 1997. The position agreed between all member states followed several years of protracted negotiations, was difficult to achieve given the different requirements of the various member states. Ireland secured a derogation of one year and is scheduled to implement the directive in February 2000. I am pleased we are now in a position to implement part of the directive a year earlier by setting up the regulator.
The directive will allow independent electricity generators to contract directly with eligible customers for the supply of electricity. Eligible customers will be those who will be free to shop around and to choose their electricity supplier in the competitive market. It also provides for the gradual opening up of the electricity market to competition over a six year period with minimum thresholds which will initially cover approximately one quarter of the European market and finally result in one third of the total 45 billion ecu market being compulsorily liberalised.
This 32 per cent market opening by 2003 is the minimum level that all member states must respect. The Commission encourages member states to open up their markets even further. A clear majority of member states will go beyond the minimum market opening provided for in the directive. Germany, Sweden, Finland, the UK, the Netherlands and Spain either have or are planning a 100 per cent market opening. Denmark will have almost 90 per cent market opening, while Austria will have 50 per cent opening.
It is evident that at least 60 per cent of the EU electricity demand will be liberalised by the end of 1999. This highlights that the necessity for a liberalised electricity market is widely recognised. The directive requires the Commission to reconsider the directive in the light of the experience gained in due time to permit further measures for market opening to take effect, if necessary.
Sections 1 to 3 contain standard provisions in legislation, i.e., short title, interpretations and laying of orders before the Houses of the Oireachtas. Section 4 provides for the mechanism by which any notices to be served or given under this Bill shall be addressed to the person concerned. Sections 5 and 6 provide for the prosecution of offences.
Sections 7 to 9 provide for the establishment of the Commission for Electricity Regulation and for the assignment to the commission of its functions, powers and duties. Detailed provisions relating to the commission are contained in the First Schedule to the Bill. Section 9 gives the Minister the power to give directions to the regulator until the scheduled implementation date of the EU Electricity Directive. Sections 10 and 11 provide for the appointment of authorised officers. Section 12 provides for a prohibition on unauthorised disclosure of information obtained by any person while performing his or her duties for the commission.
Section 13 provides for the commission to grant licences to the ESB or to other electricity undertakings to generate and supply electricity to eligible customers. This section effectively introduces the competition.
Section 14 provides that any person who has been granted a permit after 1 September 1998 by the ESB to generate, distribute and supply electricity shall apply to the regulator within three months of the enactment of this Bill. Any existing permits granted by the ESB after 1 September 1998 will then expire 12 months after enactment of this Bill. Any applications for such permits which are still with the ESB shall be deemed to be an application to the commission.
Section 15 provides for the granting of plant authorisations by the commission. An undertaking would not be permitted to build a generating station without such authorisation. Section 16 makes provision for applications for authorisations. Section 17 gives the Minister the power to specify the criteria for the granting of authorisations. These criteria may relate to the safety and security of the electricity system, protection of the environment, public service obligations, energy efficiency and other matters.
Sections 18 and 19 allow the regulator to modify any licences or plant authorisations it has granted. Where such modifications are not agreed they can be imposed subject to minimum notice and certain conditions. The regulator may decide to hold a public hearing before reaching its decision. There is also recourse to the appeals procedure.
Sections 20 and 21 set out the way in which the commission may hold public hearings where it considers that representations or objections to proposed modifications to licences or authoris ations raise matters of sufficient public interest. These sections define the terms under which reports of such hearings will be prepared and how concerned companies or individuals will be informed of the outcome of the hearing.
Sections 22 to 25 give the commission powers to enforce by direction the conditions of licences or authorisations. The regulator may apply to the High Court for an order to ensure compliance with any direction.
Sections 26 and 27 define those customers who will be eligible to choose their supplier of electricity from February 2000. Those customers are defined by the level of their electricity usage. This level is set to introduce competition to 28 per cent of the market, increasing to 32 per cent. In line with the Government decision of April 1996, all electricity customers will be entitled to purchase electricity which is produced using a renewable or alternative form of energy as its primary source. The policy decision to change the level of market opening above and beyond that required by the EU directive will remain with the Minister.
Sections 28 to 31 provide for the appeals mechanism. Appeal panels may be established to hear and determine appeals regarding applications and modifications. The Minister will determine the membership of appeal panels.
Section 32 provides that the ESB shall prepare a grid code or a distribution code for the operation of the electricity transmission and distribution systems, for the approval of the regulator. These codes will set out the technical aspects relating to connection to and operation of the transmission and distribution systems, for use by licence or authorisation holders. Section 33 provides that the ESB shall offer to enter into agreement with any licence or authorisation holder or eligible customer.
Section 34 provides that the ESB shall prepare a statement setting out the basis for the level of system charges for connection to and use of the transmission or distribution systems. That statement will be available to licence and authorisation holders so that they may estimate and plan for the charges to which they would be liable. Section 35 provides for the approval by the regulator of the statement of charges.
Section 36 provides that the regulator may grant permission for the construction of direct lines for the transmission or distribution of electricity from licence or authorisation holders to eligible customers, where access is refused on the basis of a lack of capacity in the existing transmission or distribution system. Section 37 provides that the ESB will prepare a statement for the approval of the regulator setting out estimates of future generation and transmission requirements.
Section 38 provides that the Minister, following consultation with the Minister for the Environment and Local Government, may make an order directing the regulator to impose public service obligations on the board or other licence or authorisation holders, in the general economic interest. These obligations may relate to security of supply, regulatory, quality and price of supplies, environmental protection and use of indigenous energy sources. The cost of these obligations would be recovered from all electricity users.
Section 39 provides that the Minister may by order provide for the recovery from consumers of electricity of specified costs or revenue relating to generating stations constructed before 19 February 1997, which the ESB may be unable to recover as a result of the implementation of the EU directive. We will dwell on that issue later.
I do not expect to make orders under either of those sections until the electricity directive is fully implemented. The enabling powers set out in those sections will ensure that anyone who is issued a licence by the regulator will be aware that a public service obligation regime and a transitional levy will be part of the implementation of the electricity directive as a whole.
I will use the public service obligation provision to ensure the continued use of peat fired power stations subject to certain conditions and the promotion of renewable and alternative energy. It is also my intention that there will be a transitional regime, probably for a period of five years, which will ensure that certain ESB stations, which are effectively State investment, do not become "stranded" or unable to operate because of the introduction of competition. The detailed work to provide the basis and foundation for these measures will be done over the coming year.
Sections 40 to 45 contain repeals and amendments of the Electricity (Supply) Act, 1927, and an amendment to the Freedom of Information Act, 1997, to include the Commission for Electricity Regulation. The principal repeals are those of sections 36 and 37 of the 1927 Act. This power will now be vested in the regulator.
Section 46 provides that the power to make a special order to compulsorily acquire land for the purposes of constructing or reconstructing a power station shall be transferred from the ESB to the regulator. Sections 47 to 50 provide that certain powers relating to the laying and use of electric lines, currently resting with the ESB, may, with the consent of the regulator, be exercised by holders of plant authorisations.
Sections 51 to 53 provide that certain regulations already made by the ESB shall also apply to other electricity undertakings and eligible customers.
The First Schedule sets out in detail the functions, powers and duties of the Commission for Electricity Regulation, and sets out the basic terms and conditions of employment for members of the commission. It provides that the costs of running it shall be recovered by a levy. It also states that the regulator will be accountable to the Minister, a joint committee of the Oireachtas, and the Comptroller and Auditor General, as appropriate, regarding its costs and the various functions which it carries out.
As stated earlier, the larger directive must be implemented in Ireland by February 2000. The Department has engaged in a wide-ranging consultation process with the industry. The first part of that was the consultation paper issued by the previous Government in May 1997. There was a discussion forum in January 1998. There then followed an intensive series of bilateral discussions with industry interests, and the consultation paper issued in May 1998 on which some 60 sets of comments were received. In tandem, on numerous occasions I met the ESB board, the combined trade unions of the ESB, IBEC and consumer groups, and all the potential applicants for authorisations who sought to meet me.
The Attorney General has advised me that while full implementation of the directive is due by February 2000, it is essential that a key part of it, relating to the establishment of an independent regulatory body, be brought into force now. The function of the regulatory body will be to take over the licensing of generation and supply so as to eliminate the potential for conflict of interest. This is particularly important in view of the stated interest. Each one who came to see me said that they were going to enter the market. Obviously, each group must first seek authorisation and then planning permission and must go through all the proper steps. New generating capacity is likely to be needed by late 2001.
I stress both the independence and the accountability of the regulator. It is important for the development of open competition that there be confidence in the whole regulatory process. I have been careful to ensure that the Bill clearly provides that the regulator shall be independent in the performance of its functions but that it will be required to report in a democratic fashion.
Like the Deputies opposite and many others, I share an unease that, in ceding powers in line with European requirements by setting up of regulatory bodies, we do not go so far as to dismantle the democratic accountability which is clearly necessary. The idea that any country, large or small, could have a posse of regulators faithfully going about their duties but accountable to nobody is an absurd notion. As I stated, at the first opportunity I will introduce a Bill to amend the telecommunications industry regulator Act because, although that regulator has been before the committee on two occasions, in the beginning there was confusion in that she thought there was a vacuum about it in the Act. There is no point in us thinking so little of ourselves that we give up all our powers and then decide that the person to whom we have given them is not obliged to report to anybody. It would not be right in a democracy to give a body such as a regulator quite considerable powers and not make it accountable so there are clear provisions for that.
The Minister for Public Enterprise will retain the policy role regarding the electricity sector. This role will include the power to decide the level of market opening – I decided it will be 28 per cent which is the minimum in line with the directive – and to make orders relating to public service obligations, dealing with security of supply, regularity, quality and price, protection of the environment and use of indigenous resources. As I have already indicated, I do not envisage any such orders taking effect until after February 2000, when it is intended that all the required legislation will be in place to implement the EU directive. It is important that, first, we are proceeding with the provision of the regulator early and quickly before we get into the competitive regime. I am confident that this approach strikes the right balance between independence and accountability. This Bill will allow the Oireachtas to scrutinise closely the performance of the regulator, yet will allow it to be independent as it carries out its functions.
The effect of the Bill will be to give the power of granting licences to generate and supply, and the power to authorise the construction of plant to the new regulatory body. At present, the Electricity (Supply) Act, 1927, as amended, governs the electricity market. The ESB has regulatory powers under this legislation, including the power to licence other operators to generate, distribute and supply electricity. To date, the IVO plant in the midlands is the only substantial independent plant to be undertaken, with construction yet to start.
Therefore, it is necessary to introduce this primary legislation to give effect to a new industry structure and regulatory regime. Legislation to implement the balance of the directive will be introduced as soon as possible after the regulatory commission has been established. That legislation will also change the status of the ESB to a public limited company under the Companies Acts. It is our intention to have all structures in place to facilitate market opening in 2000. That will be the millennium project for the ESB.
I hope that the spirit of adventure which guided the first brave courageous men of vision who set out on the path to bring electricity to this country, will guide the men and women of the ESB and of all other potential entrants to the market as they set out on the wide open road of competition.
Incidentally, I will of course be back as soon as I have met Secretary of State Mowlam.
This is a fundamental and historic Bill because these are the most profound changes which have occurred in over 70 years of electricity generation in Ireland. I am unimpressed by the Minister's and the Department's execution of the obligation to implement this directive. We have had two years since February 1997 to get our act together in relation to the key questions. I have met all the potential IPPs, all the people who are interested in obtaining licences to set up electricity generating capacity in Ireland, and there is total uncertainty and confusion as to what will be the realities.
At the end of her speech the Minister stated that "Legislation to implement the balance of the directive will be introduced as soon as possible" and that new legislation for the ESB will be forthcoming. Therefore, this is only one of three legislative instalments and the key questions remain unanswered. This is not an academic or esoteric question because in 1996 a decision was made by the then Government that the green energy sector would be able to sell electricity to anybody but, because ESB never introduced a system of wheeling charges for access to the transmission and distribution system, that has never been implemented. It is unable to sell electricity and the ESB remains a monopoly.
It is not clear whether there will be one or ten power stations. As there is a timelag of two years in planning and construction, the target of February 2000 will not be met. The Minister has had two years to prepare the legislation required. I have fundamental questions about the public service obligation levy, the stranded capacity equations and the wheeling charges to which I cannot get straight answers. This legislation does not provide them. Because of the time span involved all the issues should have been dealt with by now.
The Department has been ultra slow and cautious. The Minister who is fully reliant on her civil servants does not appear to appreciate the details involved. This is one of the most complex areas I have had to deal with. We do not know the historic baggage for which the ESB will require compensation and for how long. The Minister should indicate the period involved in relation to the public service obligation and stranded capacity levies and the trading terms applicable to allow the companies involved make detailed submissions to their bankers and finance boards. They will not be in a position to do so until these questions are resolved.
I am advised by the ESB that competition will be introduced for customers whose electricity consumption is in excess of 4 gigawatt hours per annum. Of its 1.48 million customers, 320 will benefit from February 2000. It will then have to compete for the large customer – Aughinish Alumina, Intel and CRH. In the case of telecommunications, competition was introduced initially in respect of overseas calls only. There was tariff rebalancing in respect of domestic calls. Will the same apply in this case whereby householders will be required to pay an extra £17 million? The chief executive of the ESB, Mr. O'Hara, indicated recently that the revenues collected from domestic accounts are 10 per cent to 12 per cent below the actual cost reflective price. What this means is that those who are part of the franchise market will be required to pay a subsidy to allow the ESB compete for the large multinational. The ESB should be told to absorb the cost out of its £160 million profits in return for a concession of a five year transition period. I am advised by the ESB that, ostrich like, the Minister has her head in the sand and does not appear to understand or care about the issue. I do not want the bulk of ordinary consumers to be given a kick in the teeth. They will be required to pay more from February 2000.
On renewal energy, sections 8 and 27 set out the terms on which green energy producers will operate and sell electricity. We are legally obliged under the agreement reached at the Kyoto summit to stabilise CO2 emissions at 15 per cent above their 1990 level by 2010. The annual growth rate is well in excess of 6 per cent while energy growth has not been decoupled from GDP growth. Power stations account for 38 per cent of emissions. The age old Irish attitude is to seek a derogation and to trot along as if nothing has happened. We will table specific amendments to deal with these issues.
Green energy producers – I am talking principally about wind energy – have not secured the terms they require. It is not stated specifically that it shall be a function of the commission to promote green energy. This should be rectified by the insertion of an additional clause. As wind energy producers are in a position to meet 40 per cent of requirements only, there should be an obligation on brown goods suppliers of electricity to meet the balance.
A narrow definition of "final customer" has been inserted in the Bill. A figure of 4 gigawatt hours is mentioned. Banks, building societies, franchise operators, health boards and hospitals should be allowed to combine. This, in turn, would enable green energy producers to approach the Eastern or South-Eastern Health Board as a single buyer which would be of benefit to the taxpayer.
I have received disturbing reports about capacity and supply and demand. The ESB informed the relevant Oireachtas committee that power cuts would not be necessary until the winter of 2001. The Minister might confirm my understanding that over recent months there have been 14 amber alerts where the surge in demand for power was so great that power cuts were not too far away. If that is happening in the winter of 1998-99, the ESB may have underestimated the real growth in demand and there may be a critical urgency to commission new plant. How many amber alerts have there been and will the Department, independently of the ESB, assess the situation? The rule of thumb is that capacity should exceed peak demand by 30 per cent and I believe that ratio is in danger. There has been a reliance on the Northern Ireland connector to avoid power cuts this winter, although we have had very mild weather. We need 200 or 300 megawatts of new plant almost immediately and certainly before the year 2001. Everything should be done to accelerate the ESB's programme to increase their capacity, even if this means that at some future date some of that capacity must be put up for tender to the highest bidder in order to meet the competition objectives. I do not wish to see the Government or the regulator holding back the ESB in order to allow competition to develop if, in the meantime, we face the real threat of power cuts. There are other ways of overcoming that problem.
I am sorry the Minister is not in the House to hear some specific questions which I wish to put. We have some experience in dealing with Ms Etain Doyle, the Director of Telecommunications Regulation, who will appear before the Joint Committee on Public Enterprise and Transport tomorrow. There is not a robust system of accountability by the regulator. Either the resources of the committee are limited or the nature of the relationship is such that the system is inadequate. In the initial stages, Ms Doyle refused to accept that she had an obligation to appear before the committee. There is no system such as exists for Parliamentary Questions. It is clearly defined that the regulator must be independent of the Minister and, essentially, the regulator is accountable to no one. However, in this case there is provision for a series of directives. Because of the nature of the directives, we need clarification as to whether Mr. Reeves will be the puppet of the Minister or will actually be independent. This matter can be examined on Committee Stage but these directives and the circumstance of them need to be determined.
Perhaps the appeals panel rather than the regulator will have all the power. Will the panel include someone from the Competition Authority or will there be some qualifying criterion for members of the appeals panel? Will they be friends of the Minister, councillors from the Minister's party or political cronies or hacks?
That is below the belt.
I hear the Taoiseach is doing everything he can to persuade the Minister to become the next EU Commissioner, so she may not be dealing with this matter directly. We must have a clear system of accountability for the regulator. I understand the appeals panel will be appointed on a per case basis. Why can there not be a permanent appeals panel for a period of two years? An individual panel per case seems to be unusual. The qualifications for membership of the panel must be established and a role for the Competition Authority must be included.
The cost and competitiveness review agreement deals with a number of critical areas. I read the paper delivered by Paddy Reilly, secretary of the ESB group of unions, to one of the fora held by the Government in which he outlined the series of areas set out in the CCR: the ESB must remain in public ownership; the ESB must be allowed to compete freely; the nature of stranded and existing plant; the power purchase agreements; the transmission system operator and its relationship with the ESB. Can the Minister clarify, because this is a tripartite agreement, whether Article 24 of the EU directive allows for the full retention and implementation of the CCR? It strikes me that there may be a huge conflict in this area. It may be that the EU directive supersedes the CCR. We have already seen the Minister supersede the CCR with regard to price increase so I do not know how attached she is to it. In fairness to the ESB group of unions and others, we must have legal clarity with regard to the CCR in the implementation of this directive. If there is to be a breach of the CCR because of legal reasons we must have this matter clarified.
I could not find any consumer role for the commissioner or the commission in the Bill. People come to my clinic telling me that they have applied to the ESB to have a newly built house connected to the electricity supply and have received a bill for £3,500. When they point out to the ESB that they are only one pole away from the supply and that this seems expensive they get no satisfaction. There is no system of external, independent evaluation because the ESB has a monopoly and will continue to have a monopoly in the supply, distribution and connection of electricity.
I pay tribute to the ESB and to their staff for their dedicated ethos of public service over the past 70 years. This was demonstrated during the recent storms. They have done a very good job but in relation to customer complaints there is nowhere a dissatisfied customer can go. Recently the issue of white or brown goods bought from the ESB and added to the purchaser's electricity bill has been highlighted. The first bills paid in a household budget are the rent and the ESB bill. Is this an abuse of a dominant position? I am not impressed by the ESB spending £4 million per year on slick public relations to develop its corporate image when it has a monopoly of supply and direct distribution. Whether people think the ESB is good or not, they do not have the choice of getting their electricity supply from anywhere else. I would like to see that money put into a proper consumer complaints and customer care service which would be accountable to the commissioner.
I have met a number of people to discuss the question of potential operators as independent power procurers. All of them, including Meridian, Marathon, Canadian Utilities and so on, have indicated that if they are to apply for authorisation and licensing to build a plant it will be a gas-fired station. I understand that there is not enough gas to provide the needs of all the potential licence applicants. Irrespective of the electricity regulation licensing and authorisation procedure, access to gas will be a critical issue with regard to location and price. Only one 300 MW user can have the licence because no more gas than that is available, given existing commitments, the finite nature of the Kinsale field, the timelag in developing the western finds and the lack of a second pipeline. It is wrong to regulate electricity and not regulate gas in tandem. I understand Mr. Reeves is to be an overall energy regulator, including gas, but where is the legislation?
Bord Gáis Éireann has indicated that it is pur suing a joint venture to enter the electricity generating business. There is a real potential conflict of interest here. Can Bord Gáis Éireann, which has a monopoly of the supply and distribution of gas and effectively owns the gas fields, give itself preferential treatment with regard to the supply of gas for a gas-fired station and thereby preclude others? This is a critical issue and must draw one to the conclusion that whatever else the Minister does, she must arrange to construct, through the private or public sector, a second gas pipeline immediately. It is already somewhat late but if we are to implement a proper electricity liberalisation policy that issue must be dealt with.
This legislation could be compared to the telecommunications directive on liberalisation which Deputy Stagg had a direct role in bringing to this House. Telecom Éireann did not get anywhere with any case it put forward about stranded capacity and its historic costs. The growth in telecommunications is such that the analogy is not complete, but it seems the ESB will be able to have a strong pivotal position. In all such implementations the monopolist, whether in transport, telecommunications or the energy sector, retains at least 70 per cent of the market share thereafter. I have no fears about the ESB and I want it to be treated fairly, but critical questions must be asked. There is an inherent conflict that the author of this Bill is a shareholder in the ESB. We must be seen to be fair on this issue. It seems the ESB cannot be refused authorisation to build a station. Will it be prevented from selling below cost offers of electricity to large users to minimise market entry by competitors? Will there be a ban on below cost selling, and if so, how will it be operated and implemented? The experience and role of the Competition Authority must be included on the commission. Officials of the Competition Authority should have a direct role in the recruitment of staff and competition expertise should be provided on the Commission and on the appeals panel.
Someone put forward a scenario that the ESB could have a splurge of extra capacity and seek compensation under the Bill for its stranded assets. This would mean the consumer would be asked to compensate the ESB for its decisions. Essentially, this would be double counting and the consumer should not be exposed to such a threat. In all these areas the position is unclear. We will have to return to these questions during lengthy deliberations on Committee Stage. All the data I read, including the initial May 1997 consultation paper and the subsequent May 1998 consultation paper, referred to third party access versus the single buyer system. The original data referred to the single buyer system. Is it the case that we will pursue the single buyer system or only third party access? I note the officials indicate we will pursue third party access and that is what I assumed.
I have raised questions and made criticisms. I would like a clear objective set that there would be a five year transition period during which the ESB would deal with whatever problems it has, and that we would build two or three new stations, and I include the IVO Europeat in that. We should try to get that minimum level of competition as a pragmatic necessity. We do not want a splurge of extra capacity. We need a second gas pipeline and these stations to be put in place to ensure that over time there will be a real prospect of competition and that after five years there will be a commercial market whereby there will be a wholesale pool. The ESB could and would compete, but others would be able to sell their electricity. People have asked me if they sign up commercial customers to sell 60 or 80 per cent of their electricity what price would they get from the ESB to sell it back into the pool of the remaining electricity. The viability of such operations depends on this price. A reasonable price must be fixed. It would be cheaper than the ESB could supply it. That question needs to be dealt with.
The Great Island Power Station is in my constituency. The peat sector has been stitched up to ensure that, irrespective of the economics and CO2 emissions, we will continue to burn peat. I accept that political decision, but a more economic fuel in Tarbert and Great Island, an oil based station, is oil because those stations will pay the price for oil because it is more competitive than turf. What will be the power purchase agreements per plant and can the Minister give an assurance that the lifetime of these power stations will be protected?
I want a clear pro-customer bias in our objectives. Clear-cut objectives are not set out in the Bill. The Minster's speech also failed to set ultimate goals. Despite all the teething problems, everyone would agree that the aviation and telecommunications sectors and their consumers have undoubtedly benefited from competition. Electricity is more complex, more capital intensive and the effect of competition in Northern Ireland has been to push up prices in the short-term. We need orderly development to ensure that for a period of five years domestic consumers will not have to pay more for electricity and that the price for domestic and commercial consumers will be under the EU average and, ultimately, that they will be able to benefit from competition in an orderly way. I want to avoid a splurge of excess capacity, but I also want answers to questions about wheeling charges, PSO and stranded capacity levies to be dealt with now.
Before we conclude Report Stage I would like the ESB company legislation brought forward. I favour vertical separation of the ESB companies after a period of five years because I do not believe in Chinese walls although a moat might be necessary for the transitional period. I would like that legislation and all elements of the legislative effect of the directive brought forward. We can bring Dermot Reeves before the Oireachtas Committee to ascertain where we are going. If these very reputable companies which can provide competition cannot get straight answers to these questions, we cannot have de facto competition. We can put all the legislation in place and put forward all the theories, but we will not have competition. That is what we must have at a minimum level and we must not have a splurge of competition at the other end. My party will not oppose Second Stage, but I deplore the ad hoc nature of it and the slow pace at which this Bill has progressed.
If we were to talk about the importance of the electricity industry, we would be bound to understate the case. Electricity could be described as the life blood and engine of industry and commerce and the balm of domestic comfort. That paraphrases a speech on this issue written for me by a civil servant when I was in the Department. I cannot remember its detail and I did not bring it with me when I left the Department, but it was a gem that described the effect of electricity.
I remember life in rural Mayo before the arrival of electricity and the changes its arrival made to people's lives. I remember the day electricity was connected to our house. The electricians who were wiring the house asked if we wanted a plug as well as a light. My father said, "No, we do not need a plug. What would we need a plug for", but my mother said, "Put it in. You never know." There have been major changes since then. Many changes in the domestic area have benefited women in particular and have taken the drudgery out of housework. Our industry and commerce has blossomed from the arrival and development of the electricity industry.
We should be mindful that the workers in that industry had very tough jobs, particularly those who worked on rural electrification. They had to work very hard for very low rates in extreme conditions and gradually they built up their rights through their unions. The retention of these rights is very important.
They became highly skilled, efficient and effective. The last stage of their effectiveness was the arrival of the CCR agreement. They made very real sacrifices in that agreement. It was the first step in preparation for competition, because there is more to be done within the ESB structures to make them properly prepared for competition.
To answer the question posed by my colleague, there is no conflict between CCR and the EU directive on electricity, but there is great conflict between CCR and the Minister's proposals, which go far beyond the directive and take an interpretation of it that it is in conflict with CCR. That conflict will raise its head as a result of the Minister's proposals.
The industry is a very delicate and temperamental bird. The Minister should avoid unnecessary ruffling of its feathers at all costs. The generation, transmission and distribution of electricity was regarded, until recently, as a natural monopoly. With the arrival of new technology and capital, particularly international capital, gener ation is now seen as an area in which competition can be introduced. Transmission and distribution are still seen, by and large, as a natural monopoly – we do not want to have ten sets of wires for ten sets of producers. However, there is provision within the Bill for new generators to build their own lines.
The purpose of the Bill is to implement the EU directive on electricity and to change the law to allow for competition, in the first instance, up to the level of 28 per cent of the top of the market, growing to an automatic 32 per cent by 2003. The Bill also legislates for the regulation of competition. Those are the clearcut, visible purposes of the Bill and the Minister's intention.
However, there is also a hidden agenda, to which the Minister did not refer in her speech. I believe she is preparing through this Bill, and the Bill which is to follow, for the privatisation of the ESB. I would love the Minister to tell us, quite clearly, that is not the case. She has not declared any policy for the commercial State sector and has given no indication of what her Government intends to do with the resources which will arise from the sale of State companies. She seems to operate a policy of picking them off, one by one, when there is a convenient buyer or when she has convinced the workers in an industry that it is in their interests for it to be sold off. That will transfer power from the Minister to boardrooms in New York, Japan and Berlin and the Minister will have no control over what is an essential interest of Ireland.
The Minister had many options arising from the directive. The first imperative was to open the top 28 per cent to competition by 2000. How should this be achieved? It should be done in such a way that the security of the energy supply is not put at risk, the ownership of the industry remains, as far as possible, in Irish control, and a diversity of fuels is employed, such as gas, oil, coal, peat, hydro and wind. A heavy reliance on imported gas is obviously undesirable, even if it is cheaper in the short-term, from a security of supply point of view.
It should be done in such a way that maximum security is given to existing jobs and by avoiding making redundant existing electricity power stations. It should be done in such a way to maintain effective Irish Government control over the industry, which is vital to our economic well being, rather than vesting that power in foreign based multinationals, which will have only one interest in Ireland – to extract the maximum profit from Ireland and its people – and will serve their own interests rather than Ireland's. In the case of shortage or international disruption, I doubt if Ireland's interests would be primary with such people as we are now bringing to our country.
It should be done in such a way that there is clear democratic accountability by those responsible for policy and the regulation of the industry. Workers in the industry, and in the new companies to be introduced, should enjoy the hard won rights of existing employees, including the right to join a union of their choice and to have that union recognised. It should be done in such a way that domestic customers in rural and remote areas are guaranteed a supply of electricity at an affordable price. This should be clearly stated as a PSO. The cherry pickers will otherwise exclude them from a supply.
What is the Minister proposing? Given the wide range of choices available to her, it is nothing short of extraordinary that she has gone for the option that it likely to do most damage to the integrity of the industry, the workers in the industry and the final customers, both domestic and commercial.
The Minister's decision to open the generating market to all and sundry spells disaster for the ESB, its workers and, particularly, for domestic customers. Already, the vultures are lining up. At the last count, there were no fewer than eight separate conglomerates with definite proposals to build their own power stations. All proposals are for combined cycle gas turbines – a dangerous single fuel scenario. Of course, the vultures did not drop out of the sky. They were invited to come to Ireland by the Minister and her proposals.
Let us examine the likely effect of this policy and the consequent flood of proposals for new generating plants. Let us say each of the eight developers build a 200 megawatt power station or that four each build a 400 megawatt power station, which is more likely. That will result in a new capacity of 1,600 megawatts in total, and there are more to come – we are only at the beginning of the game. That represents 40 per cent of the total required capacity of 4,000 megawatts, and 55 per cent of the peak demand of 3,000 megawatts. All of these will be modern combined cycle gas turbine generators and will be able to seriously out price electricity generated from turf, oil and coal and from older stations. That is the reality.
These providers will, in the short-term, be confined to the top 28 per cent of the market. The Minister must explain what will be done with the excess capacity of these new entrants to the market. She cannot say the regulator will deal with that issue – it is a matter for political decision.
Does the Minister not accept there will be inevitable and irresistible pressure to open the market further and earlier to allow other commercial users access to this new cheap energy? Does she not see this must lead to large scale closures of existing ESB plants – that the oil burning stations at Tarbert in Kerry and Great Island in Wexford will be forced to close and that the turf burning stations at Ferbane, Rhode, Lanesboro, Shannonbridge and Cahirciveen, despite a temporary reprieve, will be forced to close? In the "in speak" that we now have on this issue, they will be redundant or stalled capacity.
There is no possibility that these stations will be able to compete in an open market, in the way in which the Minister is proposing to open it. That we have PSOs on a temporary basis to protect them will be just that – temporary. The Minister will be gone – she will have worked herself out of a job because she will have sold everything she has responsibility for if she lasts her full term – and so will the power stations about which we are talking. Does the Minister not realise that the social and economic consequences of her policy on communities where these soon to be redundant power stations operate will be massive unemployment and social disruption? Does she realise that the major coal-burning station at Moneypoint, which represents nearly one third of the total capacity, will not be able to compete with new purpose-built stations, and faces cutbacks and closure? It will certainly solve the environmental problem that Deputy Yates talked about. Does the Minister accept that, arising from investment restrictions imposed by this and previous Administrations, the ESB was prevented from replacing its old stations with modern efficient ones and as a result it will be priced out of the market?
I was privileged to have taken part in the negotiations at the EU Council of Ministers which produced the directive on electricity. The main concern of Ministers was how to avoid redundant or stalled capacity in the existing power companies when competition was introduced in electricity generation. It was unanimously agreed that to avoid redundant capacity – i.e. the closure of existing power plants – a long and gradual lead-in time to competition was required. The previous Government wisely decided to implement the directive by running competitions for the additional capacity that would arise. I am glad the former Minister, Deputy Dukes, has joined us. He was instrumental in that matter.
While all who qualified could compete, including the ESB, the floodgates would not be opened and the dam not be breached, but new players and competition would be introduced. Existing generating stations, workers and their communities would be protected and would be afforded time and an opportunity to meet the competition. The same experts who advised the Government in 1994 and 1996 and who arrived at this sane and planned scheme for the introduction of competition also advised the present Minister. However, the Minister has rejected that advice and has thrown out the previous Government's proposals. In what can only be described as a right wing ideological decision, the Minister has rejected the spirit and careful balance of the electricity directive and has imposed her own political "private is good, public is bad" credo on the people and the energy industry.
She could not wait or bide her time before offering the Irish electricity industry to the international predators she has now invited into our country. These powerful and ruthless organisations have been applying pressure on the Minister, not for the 28 per cent but for all they can extract a profit from. That is all they are interested in. I can only conclude that the international predators had a ready listener in the Minister, Deputy O'Rourke. Indeed, she told us she met them all.
This Bill will have catastrophic and dangerous consequences if it is not amended in a fundamental way. It is bad for Ireland Incorporated and for the customers and could well spell the death-knell of the ESB and Bord na Móna. Maybe that is the object of the exercise and the Minister's intention.
To the unions in the ESB and Bord na Móna I would say that there are serious dangers in the Bill for their members. I will seek by argument and persuasion, as far as I can, to change the Bill. However, the Minister commands a majority in the House at present and I do not have the muscle to force the necessary changes. The organised unions will have to decide what action is appropriate for them to take to protect their members.
Private sector provision of utility services is not new. This is our second time around the block on the issue. In the 19th century and early 20th century, private sector provision was the norm. Services were nationalised and developed to a point where there was a close to universal service because the private sector was unwilling and unable to provide it. In modern times, New York city is at a stage of development beyond where we are now. It privatised its electricity service some decades ago and has a multiplicity of providers. However, these privateers have failed to give a satisfactory service to the people of New York who experience daily or weekly power cuts. The burghers of that city – and they are certainly not socialists – have now decided to get rid of the privateers and establish one municipal company to replace them. Surely, there are lessons to be learned by all of us in that.
I will now deal with the area of regulation. When the European Union decided to legally require member states to introduce competition where none existed, it was also decided that to ensure fair play for all competitors an independent regulator should be put in place to oversee the market and competition therein. The regulator's independence refers to independence from the owners or participants in the competition. The position up to now in Ireland was that the Minister was the owner and the regulator. The EU electricity directive and directives in other areas mean that the Minister cannot be both the owner and regulator, and must choose between one or the other.
If the Minister were to retain the power to regulate then she would be obliged to divest herself of the ownership of the company – the ESB, in this case. It is assumed that would automatically mean the company would be privatised. That, of course, is one option and one that, I suspect, the Minister, her Government colleagues and probably my colleague in Fine Gael, would favour.
I am just going on what the Deputy said, although I am not putting words into his mouth. There are many other options, for example, worker shareholding or ownership; transfer of company's shares to another ministry, which is the French model – they seemingly can implement the directive in that way; transfer of share ownership to a specialist management agency – the National Treasury Management Agency in Ireland – to manage the shares for the Government.
If any of these models were adopted the Minister could retain the powers of regulation. However, the Minister has decided to adopt the previously used Telecom Éireann model whereby the regulator will be appointed as an independent agent and the Minister will, for the time being at least, retain ownership of the ESB.
If her experience with Telecom Éireann is anything to go by, the Minister will sell off the ESB at the earliest possible date. If she gets her way, by the time her term is up she will go down in history as the last Minister for Public Enterprise, as she will have sold off all public enterprise in Ireland to the multinationals. Despite her determination –"sell and be damned" seems to be her attitude – she has failed to state what her policy for the public enterprise area is, or what the Government wishes to do with the proceeds of her sales. It seems clear that her policy is to pick them off one by one while assuring those remaining that they are safe for the time being.
To turn to the matter of regulation as dealt with in the Bill, I would refer the House to a paper presented to the Law Society in UCD by the Attorney General, Mr. David Byrne, SC, on 12 November 1998, entitled "Who regulates the regulators?" In this paper, the Attorney General argues that those who are given a mandate by the people have no right to transfer that mandate to another body or person. If a transfer of mandate or power occurs, the person or body to whom that power is transferred must be accountable to those who granted the original mandate, i.e. the people.
I am sure the Attorney General hates non-legal persons like myself paraphrasing what he has to say, but I think that is the gist of the case he made – I hope I have interpreted it correctly. I certainly welcome what I see as a clear definition of the role of this House and the need to hasten slowly in transferring our role to those outside the democratically accountable arena. I regret that this clear advice was not available when we first tested the water on regulation.
It fell to me by default to bring the first regulatory legislation through this House. I tried to ensure accountability and to reduce democratic deficit in that Act, but the Act fell in that regard at the very first fence when the director of telecommunications regulation refused to attend the Committee on Public Enterprise and Transport. I would welcome the inclusion of an amendment by the Minister to bring the telecom regulator in line with the thinking outlined by the Attorney General in his paper.
The Attorney General laid it on the line. It is the task of the House to lay down in legislation a clear and unambiguous policy which the regulator is to implement and by which his or her decisions are to be guided. The concluding section of the Attorney General's paper states:
So we return to the question which was posed at the outset: who regulates the regulators? It is clear there are a number of ways in which regulators can be required to render account for their activities and decisions. These methods have a varying level of efficacy and do not always meet the exacting standards of the principles of democracy and political accountability. The courts provide a valuable means of ensuring procedural regularity and can address decisions which are outside the statutory remit of regulators. However, they cannot and should not be required to turn their minds to issues of political accountability. As I stated earlier, their role does not necessarily satisfy the public's demand for accountability.
It is my view that the greatest responsibility in this area falls to the Legislature. The process of appointing bodies to undertake responsibility for defined sectors or issues of public concern must, as it were, come full circle. Delegation of authority must be done in a detailed and precise manner. The exact remit of any regulator must be clear and obvious to all those who will be affected by their activities. A coherent policy framework, formulated by the Executive and the Legislature within which the regulator is required to make decisions, must be set out. Most importantly, a comprehensive statutory system must be devised through which the regulators are required to render account to the Legislature and ultimately to the people.
The mechanisms chosen in each individual case should be agreed at the outset and disclosed to the public. Anything less represents an erosion of the principles of democracy and political accountability and weakens the democratically elected branches of Government, the Legislature and the Executive. Legislators, Ministers, Deputies and Senators should not stand over any system which takes away the right of citizens to hold to account individuals who make decisions that affect their everyday life.
Regarding regulation by independent bodies, the House has transferred large chunks of its authority to outside bodies that are not accountable to the people. There are many examples, including the National Roads Authority and An Bord Pleanála. A practical example arose in the case of the super dump in Kill. The county manager, who is not elected, made the original decision to refuse permission. An Bord Pleanála, which is not elected, reversed that decision and granted permission. The courts, which are not elected, adjudicated on the decision by An Bord Pleanála. The European Court, which is not elected, will make the final decision.
Local, national and international bodies have been involved. However, at no stage in the proceedings were any public representatives involved in making decisions at local, national and European levels. The public could not and would not believe that the people they elected and to whom they gave a mandate were powerless in all stages of the saga. Legislation is introduced in the House on an almost daily basis to transfer power from this Chamber to outside bodies which we cannot subsequently question.
We should take the Attorney General's advice to heart and consider the detail of the Bill as it affects regulation to ensure that it complies with the principles he laid down. It falls well short of the standards he gave. It is unique that we as Members of the House, who are elected to represent the public and given great powers and authority, would give that power away without a fight. I have not read in history about groups of people who had power and authority who gave it to others without putting up a fight. We appear to be doing so blindfolded with our hands tied behind our backs.
I welcome the provisions with regard to alternative energy, but I am mindful of earlier attempts to promote and advance alternative energy and to provide the right to those so minded to purchase green energy supplies directly. These efforts were frustrated only by the ESB. The Bill needs to be amended to ensure that position will not continue or be repeated. I will put the case in detail on this matter on Committee Stage.
The Bill will have long lasting and far reaching effects on every man, woman and child in the country. If it is passed without amendment, it will have dire consequences for the ESB and its workers. It will undermine a long standing policy on diversity of fuel for security of supply and will hand over to foreign interests essential control of our vital energy production. I ask the Minister and her departmental experts to take on board the unnecessary dangers for Ireland on the road she has chosen and to look to the alternatives I have outlined which were well researched by the previous Administration. Considerable time will be required between now and Committee Stage to adequately consider these matters.
The Minister has recognised the importance of the process of liberalisation. She has correctly identified that this is not an instant condition and the process will continue for a period. The Bill is the first in a series of measures in that regard. The Minister correctly recognises where we should head and what we should seek to achieve in the future. Many changes must be made and many Bills will be necessary.
In this Bill, which was first published in December 1998, the Minister seeks to establish a director of electricity regulation to oversee generation and competition in the market. She will retain control over policy and responsibility for the electricity sector. It is important to recognise that. The Bill was published after a detailed consultation process which involved the unions, management, the Department and others. Tribute must be paid to the unions and management for engaging in that process and for their special and significant input into what some may consider cataclysmic changes given that the ESB has had a monopoly. In fairness to the company, despite that position, it has functioned exceedingly well. It has been conscious of the importance of providing a stable and sound service, ensuring that reasonably priced electricity is available and ensuring stability of supply.
In the course of the consultative process, I understand that more than 60 separate submissions were made to the Department of Public Enterprise following the production of the consultation document. This is a significant number of submissions which made a particularly important input to the evaluations and examination in terms of the production of the legislation.
The directive came into force in 1997 and it requires that 28 per cent of the electricity market be open to competition by February 2000, increasing to 32 per cent by 2003. This will not be the only Bill in this process. It is important to pay tribute to the staff of the ESB. The company is almost as old as the State. It has been in existence for 70 years and it employs 9,000 people. The ESB has assets totalling more than £2 billion and its turnover is in the region of £1,200 million. In 1997, it had a £160 million surplus. Taking into account that it has 1.5 million customers, the ESB has been central to the development of the State and economy. That must be acknowledged as must the contribution of ESB staff who have given a most commendable service over the years, particular in times of difficulty when natural disasters occurred. Over the Christmas period, many ESB employees left the warmth of their homes and families to provide service in atrocious weather conditions. Members of this House thank them for that.
The ESB must consider what is likely to be demanded of it in the future and what will be essential to ensure continued and increased economic growth. While a stable regime has pertained in this area in the past, the ESB must now face up to new competition and consider customer demands for a decrease in prices. It must also be conscious that the ability to guarantee supply will be more important than ever in the future. The independent regulator must be seen to be independent and must be accountable to a number of other bodies.
The ESB must recognise the necessity for change. Its current capacity is in the region of 4,500 megawatts. That will increase by 2001 when the new peat fired station comes on stream. The available margin for the purposes of carrying out essential maintenance and improvement works will be relatively narrow – the ESB estimates it is in the region of 950 megawatts. We are walking a pretty tight rope. Given the necessity to meet ever increasing demand, we must plan ahead. That is what the process in which we are currently engaged seeks to do.
A number of matters must be considered in the context of that preparation. We must realise that between now and 2010, in the region of 2,000 additional megawatts will be required and ensure we are in a position to meet that demand and facilitate people who could meet it to do so in a manner which would acknowledge the importance of environmental protection. Wind farms, of which there are a number in north County Roscommon, are one of the obvious and most beneficial future electricity sources. The general response to them from the public is positive, recognising the existence of an alternative energy source which would do nil damage to the environment. The environment is under threat worldwide due to the persistence of certain practices in other countries and, to some degree, in this country. Wind farms represent an opportunity to make a real contribution. Environmental protection is a central consideration in the development of alternative energy sources in order that we continue to enjoy a good quality of life. The quality of food production, the tourism industry, people's health and of our daily lives all rely on that.
This Bill provides us with an opportunity to develop clean energy production methods in a number of locations. Although we must consider what might constitute an acceptable proliferation of wind farms, ultimately we must recognise that the common good will be served by their development. I understand in regard to alternative production methods, there are a number of suitable sites off the west coast; they should be given urgent consideration.
One of the difficulties I frequently hear raised in regard to the development of alternative energy sources relates to so-called 'wheeling charges'. Providers wish to know in advance what the cost of selling into the ESB network will be and what production costs will be involved. Initially, it is envisaged that alternative energy producers will cater to the top 28 per cent of the market, representing in the region of 300 or 350 consumers. If one looked in the Golden Pages, one could probably identify those 300 or 350 consumers quite easily. This legislation seeks to allow suppliers to supply renewable energy through the ESB and they must be given some idea of what the costs will be in order that they can be competitive and offer the desired results to their customers. It has been suggested in some quarters that by February 2000, there may be as many as 500 suppliers of alternative energy. A technical description indicates that if suppliers provide four million units of electricity or more per annum, they become eligible to purchase supply from anyone.
In the past, the ESB attempted to enter into certain arrangements with particular consumers and was found to be in breach of the law by Europe. Some people have entered into contracts with the ESB and may well wish to continue with those arrangements. I can see what the ESB was attempting to do although some might describe it as sharp practice. Nevertheless, we must ensure that alternative energy providers will be given a fair opportunity to get into the marketplace. The market will be such that a new provider will build a source of energy production with the intention of supplying customers across the ESB distribution and transmission network. They are not aware of what costs will be involved and that is what has given risen to the so-called 'wheeling charges'.
I understand the regulator has been appointed and I wish him well. One of his first tasks must be to request the ESB to provide information on wheeling charges. The ESB has the opportunity to slow down the process of liberalisation by stipulating too high a wheeling charge or by playing games with the Government or others. There needs to be discussion sooner rather than later if we are to get a smoothly running competitive system in place as soon as possible. I have made inquiries from a number of interested sources whose view is that these charges and the criteria for them must take account of such factors as the cost of developing the system, annual operation and maintenance charges, future connection costs, future system reinforcements and improvements, losses in the system – as much as 6 per cent of energy production disappears in the form of heat – constraints in and on the system, frequency of control and fault levels. Some of these areas are easily quantifiable. If persons participating in the production of low-cost energy are to be competitively placed in the marketplace, it is essential that we take account of the necessity to be fair and equitable to these people and that they know in advance what they want to achieve.
On the appointment of a regulator, we must be fully conscious of the necessity for accountability, responsibility and openness. Deputy Stagg, who was involved in producing similar legislation in another area, pointed to the necessity for answerability to the commission, the Minister and the Committee of Public Accounts. That must be a feature of this legislation. I am glad the Minister referred to the desirability of that and the needs that will be met if it is put in place. The commission will commence with one member and increase to three as time goes by. It is essential that it be answerable to this House and to the Minister. The independence of the regulator is also essential. He must be seen to be acting in a fair and transparent manner that will leave no doubt or suspicion about his function.
The Bill has taken cognisance of the electricity directive. It will begin the process of overseeing the introduction of competition in the electricity sector. Up to now, the function of licensing, generating and supplying electricity belonged to the ESB. Since new operators will now be required to seek such licences from the commission, the independence and transparency of the com mission is vital. Persons who were granted a permit after 1 September 1998 by the ESB to generate and supply electricity should apply to the commission within three months of the enactment of this Bill. That is an important change that affords an opportunity for persons who are already contracted.
The Commission of Electricity Regulation will be funded by the industry. The legislation will provide for the monitoring and provision of information about access through the transmission and distribution systems. It is necessary also to set down clearly the criteria for the charges. The commission will issue the authorisations for the construction of generating stations and will report to the Minister. The Minister may direct the commission to impose public service obligations on the board or other licence or authorisation holders in the general economic interest. These obligations may relate to the following: environmental protection, security of supply and use of indigenous fuels.
This is the initial part of a process of legislation that will go on for some time. I want to see fairness of opportunity, a downward spiralling of prices, stability and guarantee of supply. At the same time I acknowledge and appreciate the service of the ESB to this nation's affairs and the fact that it rightly acknowledges that it has an important public responsibility to the taxpayer which is acknowledged constantly in its investment in the infrastructure, plant and machinery that it manages, controls and owns.
I am glad to see an Electricity Regulation Bill coming before the House because, although it may seem on the surface to be a contradiction in terms, regulation in this context means liberalisation. I am delighted that we are participating in a process of liberalisation which, we should remind ourselves, has been largely driven by the European Union and by a concern to liberalise markets and give people who are active in markets an opportunity to get the benefits of competition. This has been pushed by the European Union. The process has shown its worth. It has proved its value in air transport and in telecommunications. I have no doubt that it will prove its value in other sectors which so far we have not touched. We have gone a good deal less down this road than many of our fellow members of the European Union. One of the curious things is that we have gone less far than a number of the states applying to join the European Union. Hungary, for example, has achieved far more in liberalisation than we have. We have nothing to pat ourselves on the back about, nothing of which to be particularly proud. We have been rather tardy in taking the necessary steps.
In this Bill and other legislation that will come before us, we are merely bringing what are or were previously State monopolies into the area where they have to compete in markets. It is important that we should bell that cat and state clearly what we intend to do. I have never seen a State monopoly engaged in a market sector that did not have the effect of restricting competition, restricting the quality and level of service available to customers and increasing prices above the levels at which that service or product could be provided. That is not a criticism of the intentions of people working in State monopolies. It is in the nature of State monopolies that they do that. State monopolies in this regard are no more and no less to be suspected of such conduct than private monopolies. In many ways they act in very much the same character.
This Bill has been preceded by a very substantial consultation procedure which has proved its worth. Undoubtedly more consultation will be needed as we go through this process. I see more consultations are already programmed on some of the issues which remain unresolved in the Bill. I look forward to the continuance of that process of consultation.
I commend the Minister on circulating an information note with her speech on Second Stage. This is a useful development. The information note, together with the explanatory memorandum, help us focus on some of the important issues which arise. The information note is frank, stating clearly that "the draft Bill contains the minimum necessary provisions as advised by the Attorney General to achieve the essential legislative change". Why does the Bill contain only the minimum legislative provisions? I know the process of regulation, as it is termed in the Bill, and of liberalisation is fairly involved and complex and there is a view that we should carry it out one piece at a time. However, in case it is overlooked, I wish to make the point that there is another view, namely, that we should do the whole job at the same time, what I call the big bang approach. There is a very strong argument for doing it this way, something which was put to me strongly in a more complex context in 1990 by the then Minister for Finance in Poland who is a good friend of mine. We talked about the difficulties of making a transition to a market economy. He was in favour of the big bang approach as he said he had to deal with a currency which was not a currency as it was not convertible at the time, a market which was not a market as there was no free formation of prices at the time and demand which was not demand as Poland had a command economy. He said all that had to be changed quickly and not piece by piece. When asked why he firmly believed this, he gave a simple example, saying one cannot start with buses if a decision is taken to drive on the right hand side rather than the left hand side of the road. It seems this Bill is in danger of starting with the buses and that other essential parts of the system are not being put in place.
Deputy Yates has raised questions about a number of areas which are either not dealt with in the Bill or not dealt with clearly and I do not intend to go over that same ground. However, there are some other points I wish to raise. One of the consultations which took place was on the basis of a consultation paper published in May 1997 entitled Proposals for the Electricity Supply Industry Ireland, which Deputy Stagg and I remember very well as we authorised its publication. At the beginning of it we set out the features of the EU directive with which we would have to deal. These included separation of accounts for the different parts of the business; the institution of an independent transmission system operator; the specification as eligible customers of those who are to have choice; access to the system for producers, supply undertakings and eligible customers either inside or outside the territory; the construction of new generating capacity and the recognition of public service obligations. At least two of these essential features are not dealt with in the Bill, the separation of accounts for the different parts of the business and the institution of an independent transmission system operator. Unless the Minister has a compelling argument, the process we establish here and the commission to regulate the industry will have its hands tied behind its back if we do not have separation of accounts for different parts of the business and an independent transmission system operator. In replying, I would like the Minister to tell me exactly what is in mind in relation to these two important features of the task to be undertaken. I may have misunderstood the Bill and, if so, the Minister can correct me. I am not clear as to whether it provides access to the system for supply undertakings, producers and eligible customers outside the territory. If they are not covered in the Bill, why not, as it seems there should be no conceptual difficulty in making such provision?
A number of colleagues have commented on the fact that the commission is being funded by the industry it serves. This is a laudable principle which should be followed in all other areas where we undertake this type of regulation, otherwise known as liberalisation.
There are some aspects of the Bill which give me cause for worry, not so much in relation to generating, transmitting and supplying electricity, as in the way generation of electricity will be regulated. Section 17 in Part III deals with licences and authorisations and states that the Minister will specify the criteria by which authorisations to generate supply are to be determined. Quite properly those criteria relate to the safety and security of the electricity system, protection of the environment, public service obligations, energy efficiency and other matters. That is fine, but I would like to know why the word "may" is used in this connection as it seems these are matters to which the Minister must have regard when setting criteria.
I am concerned about the provisions in sections 18 and 19 and my understanding of how these will work. These sections give the commission the power to decide who gets a licence or authorisation, what conditions will attach to it, what monitoring will apply, etc. As it is not clear from the Bill, I would like to know if I am correct in my understanding that the powers of the new commission supplant or substitute the powers that would normally be given to our planning authorities, the Environmental Protection Agency and other bodies which normally regulate planning matters. If this procedure operates separately, independently of and without regard for the planning procedure we normally apply to all other undertakings, there is a case which has not been made. It would be highly undesirable to have installations for the generation of electricity, which of their nature are bound to be intrusive though necessary, being planned, authorised and operated under monitoring procedures without regard to our planning authorities. I would like some clarity on this matter as I would be worried if this was segregated and dealt with separately.
The commission will also have the powers to modify licences or planned authorisations. The explanatory memorandum states that "where such modifications are not agreed, but still considered necessary by the commission, the modifications may be imposed, subject to minimum notice and certain conditions". In that context, one can understand that there has to be a point of decision somewhere in the process.
It goes on to say that the commission may decide to hold a public hearing before reaching its decision. Again, that word "may" worries me. It seems, almost by definition, that when this commission modifies a licence or plant authorisation it is a matter of legitimate and possibly serious concern to the public in the area around the plant and perhaps to others who may be affected down the line. It is not good enough in that context to say the commission may hold a public hearing before reaching its decision. Unless the matter is very trivial, in which case there is hardly likely to be a disagreement, there should be a public hearing so that all the interests legitimately concerned may have access to the process.
There is a set of provisions for an appeals mechanism in Part IV. If I understand it correctly, this mechanism comes into play where the commission either refuses a licence or an authorisation or refuses particular requests for modifications, or intends to impose modifications to licences or authorisation and there is a disagreement about it. Appeal panels may be established to hear and determine appeals regarding applications and shall have the powers, rights and privileges vested in the High Court or a High Court judge.
These appeal panels will be powerful bodies and will have substantial powers of decision over important matters. It may be a lack of application or understanding on my part but I do not see any role for the public or place for a consideration of the public interest. I see a consideration of the needs and requirements of electricity generation, transmission and supply. I also see room for the operators of generating plants, transmission sys tems and supply systems to have their interests taken into account. I do not see, however, a particular obligation to have regard to the public interest, the environment and how all these things will affect people around them. Unless I seriously misunderstand it, there is a planning, appeal and decision mechanism which leaves the public and concerns which are proper to the public completely to one side. If that is the case, this is not a desirable way to proceed.
Sections 22 to 25 give power to the commission, among other things, to protect public health, safety and the environment. If the commission is to do that, it will need advice about these matters and the best place to get advice about public health, safety and the environment is to consult the public, people who represent it or those who are mandated by the public to speak on its behalf. With the best will in the world, the operators of generation, transmission and supply systems or those who are charged with regulating how they do so are not necessarily the best people to do that.
Part V deals with access to transmission and distribution systems. Has the Minister had any second thoughts about it? Is there a new part to deal with the separation of accounts? Will the Minister explain why the separation of accounts is not provided for in the Bill because I cannot find where that requirement is made?
Section 34 provides for the preparation of a statement by the ESB setting out the basis for the level of system charges for connection to and the use of the transmission or the distribution system. That statement must be available to licence holders. Section 35 provides for the approval by the commission of such a statement. What are the ground rules? The ESB – it is the ESB which is specifically envisaged here – will prepare a statement of charges which it will submit to the commission. The commission, which looks at them, may do one of three things. It may accept the scale of charges, reject them or vary them in some way. All the Bill tells us is that the commission shall approve them. Is the commission completely sovereign in this regard? If the commission does not agree with the scale of charges proposed by the ESB, will the ESB have to accept the scale of charges sent back to it by the commission? It is important to know that because we need to know the function of the commission in respect of the general public interest.
The commission will also have powers to grant permission for the construction of direct lines for transmission or distribution systems. It will have the powers previously vested in the ESB to acquire land for the purpose of constructing or reconstructing a power station. I would like to make the following point clearly and I do not want anybody to misunderstand it. In the exercise of those powers, the question of attitude to and consideration of the public is very important. The ESB, no more than any other monopoly, has not been famed down through the years for its readiness to consider the feelings of people over whose lands transmission lines would go or beside whose land generation stations would be built. It seems to be a feature of State monopolies that although they act on behalf of the State, they are not very citizen friendly in these matters. I would like to be assured that the commission will have a rather more open and compassionate approach to these matters than that which we have sometimes seen in the past from the ESB and other State monopolies. I want to make it clear that I am not making a specific criticism of any person or persons in the ESB, but institutions of that sort quickly lose touch with the reality of the people with whom they deal.
Those are some of the questions which arise in relation to this Bill. I would like to see in section 38 a more specific and explicit reference in the context of public service obligations to considerations of consumer interests and, a phrase which fell out of the documentation on the way to this Bill, consideration of the regularity, quality and price of supplies in addition to the security of supplies.
I support the Minister for Public Enterprise on the introduction of this Bill which follows a detailed consultation process during which I understand 60 submissions were made to the Department. It must be introduced so we may comply with the EU directive on the generation and supply of electricity. This directive clearly states that 28 per cent of the market must be open to competition by February 2000. This will increase to 32 per cent by 2003. There will be independent regulation to oversee the electricity industry and, in particular, the standards and performance of the ESB's monopoly business. It will establish a transparent authorisation regime permitting open market entry. I understand all persons granted a permit by the ESB to generate, distribute and supply electricity must now apply to the commission within three months of the enactment of the Bill and that all new operators must seek licences directly from the commission. The balance of the provisions of the directive will be dealt with in further legislation to enable the above deadlines to be met.
The main purpose of the Bill is to provide a regulatory framework for the introduction of competition in this field in Ireland. All competitors will have open access to the ESB's network. It will involve the operation of the ESBs national grid transmission system separate and independent of the ESB by an independent system operator. I expect the ESB will be provided with fair and adequate compensation for the use of its lines and network it has built up over the past 70 years. We will have a wholesale trading mechanism which should be sufficient to promote entry to serve eligible customers in direct competition with existing ESB generation or to serve new growth.
Market arrangements should be consistent with the vesting transition arrangements and should underpin these. Where the market arrangements oblige an individual player to supply electricity to third parties, it should also allow that player to adequately recover his costs. Where market arrangements oblige an individual operator to purchase electricity for third parties, it should not result in increased costs to that operator. Market arrangements should promote industry efficiency and security of supply and should not discriminate between persons or classes of persons. Operators coming into this market should not engage in a cherry-picking exercise where they supply only certain elements of the market and not the ordinary customers living in rural areas. They may not want the hassle of servicing those type of customers.
We must have revenue security for existing generation investments as part of the transition regime. We must provide price security and stability for customers, delivering assured prices and avoiding damaging price instability during the establishment phase of the competitive market.
I am happy the Minister will retain overall policy responsibility for the electricity industry. The Commission for Electricity Regulation will award licences to the ESB and others to generate and supply electricity. It will, in effect, perform the function that has been handled superbly by ESB management and staff for more than seven decades. The commission will have full control over the provision of electricity services in the State. It will be totally independent and will hire its own staff. It faces a daunting task in measuring up to the precedent set by the ESB in the control and supply of electricity over the past 70 years.
In complying with the EU directive, it is vitally important that we do not lose sight of the high standards we have taken for granted over many years. We must ensure that those who seek licences are capable of delivering a first class service at the same price level. The commission will have the power to authorise the construction of generating stations and will be responsible for the provision of information about access to the transmission and distribution system and the related changes.
The Bill will bring about many changes. It signals an end to an era. The Electricity Supply Board has enjoyed a monopoly in the field of electricity for over 70 years but it has not abused its position during that time. It has been operated efficiently and successfully over 70 years and has grown into one of the largest commercial entities in the State. It enjoys a world-wide reputation for high standards which has resulted in its being employed as the recognised consultant in many countries setting up new generating stations and networks.
I had the opportunity of visiting Malaysia some years ago and I was delighted to learn from business people and others there that the ESB was well respected for the important work it carried out in electrifying Malaysia and for its work on other important projects in the country. That work has been replicated in other countries throughout the world.
The words I would use to describe my experience of the ESB service, as a homeowner and a businessman, are efficiency, reliability and reasonable cost. We are all aware that the ESB staff did not remain on holiday during the emergencies that arose this Christmas and the previous one. They worked extremely hard for their customers in responding to these emergencies. Will the competitors coming into the country offer the same service or will they cherry-pick their customers?
The ESB has set a standard which is second to none in Europe. Its price structure is below the European level and I am advised it is approximately 20 per cent lower for domestic customers and 4 per cent cheaper for industry. The ESB deserves all the praise it has been given by myself and others. It is important that we bear in mind the necessity of continuing this excellence of service under the proposed new regulations which will allow open competition in the electricity generation market. We must not sacrifice service and low pricing structures as we enter the new millennium. We must ensure that anything which complements or partly replaces the existing service runs to the current high standards so rightly demanded.
We have seen change abroad when national bodies were privatised. Privatisation of the electricity industry in the UK has brought about price structures that are approximately 12 per cent higher for the domestic consumer. There have been increased water and rail costs in the UK following privatisation. We have read about water shortages in a country where there is an abundance of water but there is no inter-connecting network between the independent water boards. This is an aspect of a multiplicity of suppliers that concerns me. We read of an increasingly inefficient rail service in the UK which is experiencing many problems with the maintenance of its infrastructure and the associated travelling delays. None of the services are noted for their reliability or efficiency.
When we lease out the national grid from the ESB – the chairman will be interested in this – we must seriously consider upgrading our rail structure, as we have done with the roads structure. I am sure that question will be debated in the near future.
The inefficiency to which I referred in the UK dates from the time those companies were taken out of state ownership. There have been many critics of the standards of maintenance since this occurred. I am not suggesting all State bodies should remain in State ownership but that they should be examined on an individual basis.
Another aspect of the proposal that concerns me is that we have had a single body delivering an excellent service. It was accountable to the State and to its customers. Under the new set-up, however, the control structure or accountability will not be as clearcut. Many people will compete with each other to deliver a service to the busi ness and domestic sectors. We must ensure that this competition operates on a level playing pitch and that the new companies do not gain a preferred position in the existing electricity generation body, the ESB. We must set levels that will ensure all competitors deliver a standard of service that has become commonplace and accepted by the public for many years. They will demand the continuation of those high standards set by the ESB. Those standards must be maintained.
There are strict standards of safety in the current electricity system. Those standards must be matched by our competitors. It is imperative that we do not go beyond the terms of the EU directive and that we bear in mind the sterling service given to us by our native industry during its many years in operation. The ESB is a State asset of great value and enormous potential. It was developed by the State and its operations have been paid for by the people. It is their company and it has grown with the new State. It is synonymous with our progress and the many advances in society. It has been fundamental to the effective function of the country's economic and social development. It is part and parcel of the history of Ireland and in supporting the Bill I ask that the points I have made be taken into account by the Minister. I am confident she will do so. I should have said at the outset that I wished to share time with Deputy Collins.
Is that agreed? Agreed.
I take this opportunity to speak briefly about the merits of deregulating various energy and telecommunications sectors. The regulations certainly worked in the telecommunications sector in terms of price reductions. However, the Government and our European counterparts must not consider the option of deregulating the postal system. I will deal with the Bill first and analyse these issues later.
The Bill provides for the establishment of an independent commission for electricity regulation which will license and regulate the generation and supply of electricity and authorise the construction of a new generating plant. The commission will oversee the introduction of competition into the electricity sector in accordance with the EU electricity directive. This states that competition in the electricity sector must be introduced by February 2000. Some 28 per cent of the sector must be open to competition by this date and will be increased to 32 per cent by 2003. Further legislation will be introduced next year which will fully implement the balance of the provisions of the directive before the deadline of February 2000.
The Commission for Electricity Regulation will also issue authorisations for the construction of generating stations in addition to overseeing the provision of information about access to transmission and distribution systems and related charges. The Bill provides that the commission will be funded by the industry it serves and will be accountable to the Minister for Public Enterprise, the Comptroller and Auditor General and to an Oireachtas Joint Committee. The commission will be independent in the performance of its functions and will be able to hire its own staff, subject to the normal conditions which apply to State bodies.
It is clear the new commission has teeth. It controls the licensing arrangements for electricity undertakings, which should result in competition and price reductions in the cost of electricity in due course. Section 14 provides that any person granted a permit after 1 September 1998 by the ESB to generate, distribute and supply electricity under section 37 of the Electricity (Supply) Act, 1927, shall apply to the commission within three months of the enactment of the Bill. Any existing permits granted by the ESB after 1 September 1998 will expire 12 months after the enactment of the Bill. Any applications for such permits which are still with the ESB shall be deemed to be an application to the commission. This is a sensible provision which deals with the transition period as the new commission becomes legally operative.
Another example of how the commission is being given power lies in section 15, which provides for the granting of plant authorisations by the commission. This means the issuing of authorisations for the construction of generating stations. The Minister for Public Enterprise will specify the criteria by which authorisations to generate and supply are to be determined. These criteria may relate to the safety and security of the electricity system, protection of the environment, public service obligations, energy efficiency and other matters. The commission will be entitled to modify licences or plant authorisations it has granted. Where such modifications are not agreed but are still considered necessary by the commission, the modifications may be imposed subject to minimum notice and certain conditions.
The issue of where a particular generating station is to be located can, at times, be contentious and can be a possible source of local discontent due to the size of such structures. Sections 20 and 21 deal with such circumstances. These provisions set out the way in which the commission may hold public hearings where it considers representations or objections to proposed modifications to licences or authorisations raise matters of sufficient public interest. These sections also define the terms under which reports of such hearings will be prepared and how the concerned companies or individuals will be informed of the outcome of the hearing.
Sections 26 and 27 define those customers who will be eligible to choose their supplier of electricity from February 2000 next. They are defined by the level of their electricity usage. This level is set to introduce competition up to 28 per cent of the market initially, and this figure will be increased to 32 per cent by 2003. In line with the Government decision of April 1996, all electricity customers will be entitled to purchase electricity which is produced using a renewable or alternative form of energy as its primary source.
I welcome the fact that the legislation establishes an appeals panel to deal with cases where applications for licences or authorisations are refused by the commission or where modifications to them are not agreed. The appeals panel may be established to hear and determine appeals regarding applications and modifications to licences or authorisations and shall have the power, rights and privilege vested in the High Court or a High Court judge.
Part V relates to how access to transmission and distribution systems will be given to individual licence or authorisation holders. At present, the ESB has the monopoly in electricity supply. For private operators to gain access to such a supply would require ensuring that ESB facilities in terms of distribution and transmission would be made open to them. Sections 32 and 33 deal with such circumstances. These sections provide that the ESB shall prepare a grid and distribution code for the operation of the electricity transmission and distribution systems to the approval of the commission. These codes will set out the technical aspects related to connection to an operation of the transmission and distribution systems for use by licence or authorisation holders. The ESB shall offer to enter the agreement with any licence or authorisation holder or eligible customer regarding connection to and use of the transmission and distribution systems. The commission may give directions to the ESB as to the matters to be covered in the context of such agreements. The ESB shall also prepare a statement setting out the basis for the level of system charges for connection to and use of the transmission and distribution systems. The commission may also grant permission for the construction of direct lines for the transmission and distribution of electricity from licence or authorisation holders to eligible customers where access is refused on the basis of a lack of capacity in the existing transmission or distribution system.
Part VI of the Bill deals with the public service obligations of the new commission. The Minister will be entitled to make an order directing the commission to impose public service obligations on licence or authorisation holders in the general economic interest. These matters may relate, among other things, to matters such as environmental protection, security of supply and use of indigenous fuels. The cost of those obligations would be recovered by electricity users. Environmental concerns must be taken on board by the commission at all times. European Union legislation in recent years requires that large-scale projects, before being given the appropriate go-ahead, must have an environmental impact assessment carried out to ensure compliance with all EU environmental legislation.
Is mian liom roinnt mhaith rudaí a rá mar gheall ar an mBille um Rialáil Leictreachais. Tosóidh mé ar an bpointe seo. Breis is bliain ó shin, fuair mé cuireadh ón Aire freastal ar chruinniú sa Davenport Hotel i mBaile Átha Cliath, áit a raibh roinnt grúpaí bailithe le chéile chun an cheist seo a phlé. Ina measc bhí na ceardchumainn, IBEC, an ESB féin, Marathon Power Company, Earthwatch agus an Director of Consumer Affairs. Ina dhiaidh sin, bhuail mé leis an ESB ina aonar agus le roinnt mhaith grúpaí eile. Tríd is tríd, bhí siad ag féachaint ar an bpíosa ghnó a bhí faoi bhagairt acu siúd. Is mian liom inniu tús a chur leis an díospóireacht sa méad a bheidh le rá agam trína rá go bhfuil an-chuid rudaí i bhfad níos mó ná sin, go bhfuil ceisteanna níos mó ná leictreachas féin mar chuid den Bhille seo, mar shampla, ceisteanna ar an méad fuinnimh a úsáideann muid mar shochaí agus ceist nár leor a rá, environmental protection. Táimid ag caint mar gheall ar sustainability of activities.