Dáil Éireann debate -
Wednesday, 17 Oct 2001

Vol. 542 No. 3

Written Answers. - Electricity Market.

John Perry

Question:

25 Mr. Perry asked the Minister for Public Enterprise if she will make a statement on her responsibilities on the power purchase agreement and public electricity supplies in respect of pricing levels, price methodology, break clauses, and treatment of green certificates. [24056/01]

Denis Naughten

Question:

45 Mr. Naughten asked the Minister for Public Enterprise the progress with her plans to introduce further deregulation for the electricity sector. [21864/01]

Minister for Public Enterprise (Mrs. O'Rourke)

I propose to take Questions Nos. 25 and 45 together.

As a result of the Electricity Regulation Act, 1999, sponsored by me, approximately 31% of the electricity market is now open to competition, subject to the oversight of the independent Commission for Electricity Regulation. Ireland has already gone beyond the minimum requirements of market opening set down in the electricity directive. In addition, both the markets for "green" energy and for combined heat and power have been fully liberalised.

Independent power producers and suppliers have shown considerable interest in entering the Irish electricity market. In that regard, it is worth noting that the Commission for Electricity Regulation considers the opening of the market has been a success, on balance, with more than 50% of eligible customers moving to licensed suppliers and almost 6,000 customers to "green" suppliers.

I am fully committed to the phased liberalisation of the electricity industry in Ireland. Market opening is being accelerated but not rushed. In Ireland, we are moving from a monopoly situation to a competitive market in an industry with relatively long lead times for investment. Such change needs to be conceived and effected in an orderly and measured manner to ensure the benefits are lasting and long-term.

In February 2002, market opening will increase to 40%. Arrangements are under way to obtain the necessary positive resolution of both this House and of the Seanad prior to my signing the eligible customer order, under section 27 of the Electricity Regulation Act, to provide for this next phase of market opening. Following this, as previously announced, we will move to full market opening in 2005 when every single electricity consumer will be eligible to choose their electricity supplier. Consideration is also being given to the possibility of an interim step of 66% market opening prior to that date, in line with current proposals from the EU Commission.

The opening of the electricity market has meant that to create a level playing field between all market participants, the Government's public service requirements need to be transparently identified and costed. These public service obligations relate to the use of peat-fired generation and renewable or alternative generation, for reasons of security of supply and environmental protection respectively.

Therefore, to ensure the Government's energy policy objectives are met, I propose, subject to EU Commission approval, to introduce a Public Service Obligation – PSO – order in the near future.

The PSO order, which will be underpinned by power purchase agreements, is intended to lead to the construction of two new peat stations by ESB by 2005, in line with the orderly closure of existing peat stations. The new peat stations will be in addition to the peat station at Edenderry built by Fortum, which came into commercial operation in December 2000.

The PSO order will also cover the purchase by ESB of the output of certain renewable, sustainable and alternative generators which were successful under previous Government sponsored alternative energy requirement, AER and EU competitions.

Green certificates or green credits are alternative support measures unique to the renewable energy based electricity market. They are an alternative means of supporting the production of electricity from renewable energy technologies. There is no provision in national law at this time for green credits or green certificates. However, I understand some questions have been raised with the Minister of State about trading in such products and legal advice is awaited on the issue.

In relation to the question of public electricity supplies in respect of pricing levels, price methodology and break clauses, I should point out that I have no function in relation to this matter. Under regulation 31 of the European Communities (Internal Market in Electricity) Regulations, 2000 made by me, the Commission for Electricity Regulation has been given the function of examining charges, and the costs underlying such charges, for electricity supplied by ESB to franchise customers, that is, those who are not supplied by the competitive market. The regulations also give the commission the power, following such an examination, to issue directions to both the nature and the amount of any such charge.

The commission has also been given the function, under Regulation 31, of facilitating arrangements, approved by it, to apply until 19 February 2005, which have the effect of securing that the ESB is able to satisfy demand for electricity from final customers, who are not supplied independently, in the first instance from generating stations currently owned by the board.